Appellant insurer appealed judgment from Superior Court of Los Angeles County (California) ruling that appellant had not secured a right of reimbursement against appellee insured and dismissing appellant’s cross-claims and from jury’s verdict on appellee’s bad faith claim.
In answer to respondent’s agent’s suit, appellant insurer filed a cross-claim for fraud against the agent and respondent seeking reimbursement of payments made under an errors and omissions indemnity policy, claiming that respondent misrepresented its agent’s employment status. Respondent cross-claimed against appellant for bad faith for asserting the fraud claim. The trial court ruled that appellant waived its right of reimbursement. A verdict was entered for respondent. On appeal, the court reversed. Appellant was entitled to a jury trial on the reimbursement issue because the extent of appellant’s waiver was disputed, and the evidence was insufficient to affirm on an estoppel theory. Respondent’s judgment on the bad faith claim was reversed because respondent failed to state a cause of action. Respondent did not allege appellant’s failure to investigate respondent’s claims or pay benefits, and the allegations fell within the litigation protection of Cal. Civ. Code §47.
The litigants were counseled by California class action attorneys in their civil litigation matter. Summary judgment reversed on reimbursement claim because extent of appellant’s waiver was disputed and evidence was insufficient to affirm on estoppel theory, and judgment for bad faith reversed and dismissed because respondent failed to state a cause of action of bad faith, and allegations fell within litigation privilege’s protection.
Defendant insurer appealed from the judgment of the Superior Court of Orange County (California), entered upon a jury verdict, that awarded compensatory and exemplary damages to plaintiff insured in an action alleging, inter alia, breach of contract, emotional distress, and bad faith failure to settle with respect to defendant’s refusal to pay disability insurance benefits.
After his mental condition began to deteriorate, leading to a decrease over a two-year period in his workload as an attorney, plaintiff insured’s disability insurance policy lapsed for nonpayment of premiums. He then stopped working entirely. A year after the policy lapsed, an application was made for disability benefits, but the proof submitted by plaintiff indicated that the disability arose after the policy had lapsed, so defendant insurer rejected the claim. Proof submitted thereafter was inconsistent and incomplete. Plaintiff then sued defendant, claiming, inter alia, breach of contract, emotional distress, and bad faith failure to settle. Upon a jury verdict, compensatory and exemplary damages were awarded to plaintiff. Defendant appealed. In affirming in part, the court ruled that substantial evidence of total disability supported the award for accrued disability benefits. The remainder of the judgment was reversed, however, because defendant’s refusal to pay was in not in bad faith or unreasonable. The policy had lapsed and the proof of disability was inconclusive at the time of denial. Also, only accrued benefits were recoverable, future benefits were not.
The judgment was affirmed in part and reversed in part because, although an award for accrued benefits was supported by substantial evidence that plaintiff was totally disabled, future benefits were not recoverable because they were not yet due, and neither damages for emotional distress nor exemplary damages were recoverable since defendant’s refusal to pay was not unreasonable under the circumstances.