Procedural Posture

Procedural Posture

Appellant insured sought review of the judgment of the Superior Court of Ventura County (California), which granted nonsuit in favor of respondent insurer in appellant’s action based on allegations of respondent’s bad faith denials of claims under an insurance contract.

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Overview

Appellant insureds sought damages from respondent insurer for declaratory relief, breach of contract, breach of the covenant of good faith and fair dealing, fraud, intentional and negligent infliction of emotional distress, and charges of unfair practices under Cal. Ins. Code § 790.03, when respondent failed to pay claims. In another action, appellants were awarded a judgment for emotional distress from the tortfeasor. The trial court held that appellants had obtained full recovery of their general damages and compensation for all mental distress. On appeal, the court reversed and held that respondent was not a joint tortfeasor because its malfeasance arose from the breach of its fiduciary duties owed appellants under the insurance contract and not due to the accident, and that the collateral source rule applied. Respondent waived the affirmative defense of breach of the subrogation clause when it failed to allege it. The court held that it would be inequitable to preclude appellants from filing suit for damages not paid, when the stipulation established that respondent had committed fraud and tortiously breached its covenant of good faith and fair dealing with appellants.

Outcome

The court reversed the judgment of nonsuit and held that appellant insureds’ judgment in the personal injury action did not preclude them from seeking damages against respondent insurer on their complaint. The court awarded appellants costs on appeal.