Procedural Posture
Plaintiff insureds sought review of an order by the Superior Court of Los Angeles County (California), which granted summary judgment in favor of defendant insurer in an action for tortious breach of contract and intentional infliction of emotional distress.
Overview: labor code 225.5
Following a fire at an insured premises, plaintiff insureds were prosecuted for arson. Although defendant insurer suspected plaintiffs might not have been guilty, defendant deferred resolution of plaintiffs’ claim until they were acquitted. Plaintiffs filed suit against defendant for tortious breach of contract and alleged that defendant acted in bad faith. On appeal, the court affirmed the trial court’s award of summary judgment in favor of defendant. The court held that defendant’s decision to defer action on plaintiffs’ claim until the resolution of the pending prosecution was reasonable because it was based on the prosecutorial arm of the state, which had formidable hurdles that had to be cleared in order to instigate and pursue a criminal action. The court held that it was irrelevant that defendant had suspected that acquittal was likely. In addition, the court held that deferral of plaintiffs’ claim was not only reasonable, but was the only course that satisfied the policy expressed in Cal. Ins. Code § 533, which relieved an insurer from liability for a loss caused by the wilful act of the insured. Thus, plaintiffs’ claim of bad faith was properly rejected.
Outcome
The court affirmed the award of summary judgment in favor of defendant insurer, because defendant’s decision to defer action on plaintiff insureds’ claim until the resolution of a pending prosecution for intentionally having caused the damage on which the claim was based was reasonable under the circumstances and did not constitute bad faith.
Her Campus 