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A Video Revealing The Birth of the Tort of Bad Faith in Comunale 

https://zalma.com/blog

The California supreme court in Comunale v. Traders & General Ins.  Co. (1958) 50 Cal.2d 654, 328 P.2d 198, held the insurer liable for  amounts over the policy limit because of its wrongful refusal to settle  the underlying action. 

The opinion distinguishes the consequences of a  wrongful refusal to settle and a wrongful refusal to defend, pointing  out that as to the latter, the liability of the insurer is ordinarily  limited to the amount of the policy plus attorneys' fees and costs.  Mr. and Mrs. Comunale were struck in a marked pedestrian crosswalk by a  truck driven by Percy Sloan. Mr. Comunale was seriously injured, and his  wife suffered minor injuries. Sloan was insured by defendant Traders  & General Insurance Company under a policy that contained limits of  liability in the sum of $10,000 for each person injured and $20,000 for  each accident. He notified Traders of the accident and was told that the  policy did not provide coverage because he was driving a truck that did  not belong to him. When the Comunales filed suit against Sloan, Traders  refused to defend the action, and Sloan employed competent counsel to  represent him. On the second day of the trial Sloan informed Traders  that the Comunales would compromise the case for $4,000, that he did not  have enough money to effect the settlement, and that it was highly  probable the jury would return a verdict in excess of the policy limits.  Traders was obligated to defend any personal injury suit covered by the  policy, but it was given the right to make such settlement as it might  deem expedient. Sloan demanded that Traders assume the defense and  settlement of the case. Traders refused, and the trial proceeded to  judgment in favor of Mr. Comunale for $25,000 and Mrs. Comunale for  $1,250.  

The decisive factor in fixing the extent of Traders' liability is not  the refusal to defend; it is the refusal to accept an offer of  settlement within the policy limits. Where there is no opportunity to  compromise the claim and the only wrongful act of the insurer is the  refusal to defend, the liability of the insurer is ordinarily limited to  the amount of the policy plus attorneys' fees and costs.  Comunale v. Traders & General Ins. Co., 328 P.2d 198, 50 Cal.2d 654,  68 A.L.R.2d 883 (Cal. 1958)  The Video covers the full text of the California Supreme Court decision.  ZALMA OPINION  This is the first case that created the tort of bad faith and allowed a  person to obtain both contract and tort damages as a result of a bad  faith refusal to defend and or settle a claim within policy limits. It  us imperative that everyone interested in insurance claims know the full  text of the case that started the creation of the tort of bad faith.  

\xa9 2021 \u2013 Barry Zalma