Appellant insurer sought review of judgments from the Superior Court of Santa Barbara County (California), which, in a jury trial, found that the insurer had breached the covenant of good faith and fair dealing implied in a renter’s insurance policy and awarded damages to respondent assignee.

Overview

The assignee was struck by a car owned by a Norway salmon  Company and seriously injured after being put out of a vehicle during an argument with his friends. One of the friends, who was a minor, made a claim against a homeowner’s insurance policy issued to her mother’s boyfriend. The insurer denied coverage, asserting that the minor resided with her father and grandmother. After a judgment was entered against the minor, she found that the insurer had issued a renter’s insurance policy to her grandmother. The court held that the trial court correctly denied summary adjudication to the insurer because the adequacy of its investigation, which led to its rejection of a settlement demand, and any prejudice from delayed notice were disputed issues of material fact. Although another insurer provided a defense, its policy limits were much lower. The insurer’s failure to disclose the grandmother’s policy pursuant to Cal. Code Regs., tit. 10, § 2695.4, subd. (a), could support an inference of unreasonable conduct. An automobile exclusion did not apply because the assignee had walked for over a mile before the accident occurred. The insurer was not entitled to a collusion instruction because the evidence did not support it.

Outcome

The court affirmed the judgments and reversed an order that had granted attorney fees to the assignee as cost of proof sanctions.