holding that where 9 undisputed evidence showed that the insurer failed to properly investigate the insured’s 10 claim, the court properly held that a breach of the implied covenant was established as a 11 matter of law
How later courts described this case
- holding that where 9 undisputed evidence showed that the insurer failed to properly investigate the insured’s 10 claim, the court properly held that a breach of the implied covenant was established as a 11 matter of law
- holding “that an 6 insurer may breach the covenant of good faith and fair dealing when it fails to properly 7 investigate its insured’s claim”
- holding that punitive 3 damages could be awarded against an insurance company based on the tortious acts 4 of its claims representatives
- describing the duty of insurers to “take the public’s interest seriously, where necessary placing it before their interest in maximizing gains and limiting disbursements”
Written by the judges who cited it.
The opinion
RICHARDSON, J.,
Concurring and Dissenting. — I concur in the judgment. For the reasons well expressed in Justice Clark’s concurring and dissenting opinion, however, I disagree with the majority’s conclusion that punitive damages are recoverable under the circumstances presented in this case. As Justice Clark explains, the careless, negligent conduct of claims agents McEachen and Segal would not constitute that form of “oppression, fraud, or malice” required by section 3294 of the Civil Code for imposition of exemplary damages. Moreover, it is doubtful that the conduct of these persons should be imputed to their employer, under the evidence adduced in this case.
Unlike Justice Clark, however, I would not absolutely preclude an award of punitive damages in every case involving a breach by an insurer of the implied covenant of good faith and fair dealing. We have previously held that such a breach sounds in both contract and tort (e.g., Gruenberg v. Aetna Ins. Co. (1973) 9 Cal.3d 566, 573-575 [ 108 Cal.Rptr. 480 , 510 P.2d 1032 ]), and that punitive damages are recoverable for an *835 aggravated breach of the implied covenant, so long as the insurer has acted “ ‘with the intent to vex, injure, or annoy, or with a conscious disregard of the plaintiff’s rights.’ ” (Neal v. Farmers Insurance Exchange (1978) 21 Cal.3d 910, 922 [ 148 Cal.Rptr. 389 , 582 P.2d 980 ], quoting from Silberg v. California Life Ins. Co. (1974) 11 Cal.3d 452, 462 [ 113 Cal.Rptr. 711 , 521 P.2d 1103 ].) My dissent from the majority opinion in Neal was directed at entirely different issues from that relating to the above principle.
The Neal majority, for example, deemed an award of punitive damages justified by evidence that the insurer was pursuing a conscious policy to utilize the insured’s exigent financial circumstances as a lever to force a settlement more favorable to the insurer than the facts otherwise would have warranted. (Id., at p. 923.)
Thus, I would not eliminate the possibility of a punitive damages award in an appropriate case, where the acts of the insurer demonstrate actual malice, fraud or oppression. As Justice Clark observes, it is true that the insurer may simply pass on the punitive award to its customers in the form of increased premiums. Yet as the Neal majority explained, increased premiums thereby charged may permit the insurer’s competitors to obtain a competitive advantage, thus promoting, to a degree at least, the object of deterrence which underlies an award of punitive damages, and “resulting in an ultimate benefit to insurance consumers as a whole.” (Id., at p. 929, fn. 14.)
The petitions of appellant Mutual of Omaha and respondent for a rehearing were denied October 11, 1979. Clark, J., and Richardson, J., were of the opinion that the petitions should be granted.