66 Cal.2d 425, S.F. 22433, Crisci v. The Security Ins. Co. of New Haven, Connecticut

Docket Nº:S.F. 22433.
Citation:66 Cal.2d 425, 426 P.2d 173, 58 Cal.Rptr. 13
Opinion Judge:PETERS, Justice.
Party Name:Rosina CRISCI, Plaintiff and Respondent, v. The SECURITY INSURANCE COMPANY OF NEW HAVEN, CONNECTICUT, Defendant and Appellant.
Attorney:Bishop, Murray & Barry and Cyril Viadro, San Francisco, for defendant and appellant. Lewis & Stein, Marvin E. Lewis and Pierce N. Stein, San Francisco, for plaintiff and respondent. Edward I. Pollock, Theodore A. Horn, Los Angeles, Robert G. Beloud, Upland, and Leonard Sacks, Los Angeles, as amic...
Judge Panel:TRAYNOR, C.J., and McCOMB, TOBRINER, MOSK and BURKE, JJ., concur.
Case Date:April 21, 1967
Court:Supreme Court of California
 
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Page 425

66 Cal.2d 425

426 P.2d 173, 58 Cal.Rptr. 13

Rosina CRISCI, Plaintiff and Respondent,

v.

The SECURITY INSURANCE COMPANY OF NEW HAVEN, CONNECTICUT, Defendant and Appellant.

S.F. 22433.

Supreme Court of California, In Bank.

April 21, 1967

Page 426

[Copyrighted Material Omitted]

Page 427

COUNSEL

[426 P.2d 175] [58 Cal.Rptr. 15]Bishop, Murray & Barry and Cyril Viadro, San Francisco, for defendant and appellant.

Lewis & Stein, Marvin E. Lewis and Pierce N. Stein, San Francisco, for plaintiff and respondent.

Edward I. Pollock, Theodore A. Horn, Los Angeles, Robert G. Beloud, Upland, and Leonard Sacks, Los Angeles, as amici curiae on behalf of plaintiff and respondent.

Edward L. Lascher, Ventura, as amicus curiae.

OPINION

PETERS, Justice.

In an action against The Security Insurance Company of New Haven, Connecticut, the trial court awarded Rosina Crisci $91, 000 (plus interest) because she suffered a judgment in a personal injury action after Security, her insurer, refused to settle the claim. Mrs. Crisci was also awarded $25, 000 for mental suffering. Security has appealed.

June DiMare and her husband were tenants in an apartment building owned by Rosina Crisci. Mrs. DiMare was descending the apartment's outside wooden staircase when a tread gave way. She fell through the resulting opening up to her waist and was left hanging 15 feet above the ground. Mrs. DiMare suffered physical injuries and developed a very severe psychosis. In a suit brought against Mrs. Crisci the DiMares alleged that the step broke because Mrs. Crisci was negligent in inspecting and maintaining the stairs. They contended that Mrs. DiMare's mental condition was caused by the accident,

Page 428

and they asked for $400, 000 as compensation for physical and mental injuries and medical expenses.

Mrs. Crisci had $10, 000 of insurance coverage under a general liability policy issued by Security. The policy obligated Security to defend the suit against Mrs. Crisci and authorized the company to make any settlement it deemed expedient.1 Security hired an experienced lawyer, Mr. Healy, to handle the case. Both he and defendant's claims manager believed that unless evidence was discovered showing that Mrs. DiMare had a prior mental illness, a jury would probably find that the accident precipitated Mrs. DiMare's psychosis. And both men believed that if the jury felt that the fall triggered the psychosis, a verdict of not less than $100, 000 would be returned.

An extensive search turned up no evidence that Mrs. DiMare had any prior mental abnormality. As a teenager Mrs. DiMare had been in a Washington mental hospital, but only to have an abortion. Both Mrs. DiMare and Mrs. Crisci found psychiatrists who would testify that the accident caused Mrs. DiMare's illness, and the insurance company knew of this testimony. Among those who felt the psychosis was not related to the accident were the doctors at the state mental hospital where Mrs. DiMare had been committed following the accident. All the psychiatrists agreed, however, that a psychosis could be triggered by a sudden fear of falling to one's death.

The exact chronology of settlement offers is not established by the record. However, by the time the DiMares' attorney reduced his settlement demands to $10, 000, Security had doctors prepared to support its position and was only willing to pay $3, 000 for Mrs. DiMare's physical injuries. Security was unwilling to pay one cent for the possibility of a plaintiff's verdict on the mental illness issue. This conclusion was based on the assumption that the jury would believe all of the defendant's psychiatric evidence and none of the plaintiff's. Security also rejected a $9, 000 settlement demand [58 Cal.Rptr. 16] [426 P.2d 176] at a time when Mrs. Crisci offered to pay $2, 500 of the settlement.

A jury awarded Mrs. DiMare $100, 000 and her husband $1, 000. After an appeal (DiMare v. Cresci, 2 58 Cal.2d 292, 23 Cal.Rptr. 772, 373 P.2d 860) the insurance company paid

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$10, 000 of this amount, the amount of its policy. The DiMares then sought to collect the balance from Mrs. Crisci. A settlement was arranged by which the DiMares received $22, 000, a 40 percent interest in Mrs. Crisci's claim to a particular piece of property, and an assignment of Mrs. Crisci's cause of action against Security. Mrs. Crisci, an immigrant widow of 70, became indigent. She worked as a babysitter, and her grandchildren paid her rent. The change in her financial condition was accompanied by a decline in physical health, hysteria, and suicide attempts. Mrs. Crisci then brought this action.

The liability of an insurer in excess of its policy limits for failure to accept a settlement offer within those limits was considered by this court in Comunale v. Traders & General Ins. Co., 50 Cal.2d 654, 328 P.2d 198, 68 A.L.R.2d 883. It was there reasoned that in every contract, including policies of insurance, there is an implied covenant of good faith and fair dealing that neither party will do anything which will injure the right of the other to receive the benefits of the agreement; that it is common knowledge that one of the usual methods by which an insured receives protection under a liability insurance policy is by settlement of claims without litigation; that the implied obligation of good faith and fair dealing requires the insurer to settle in an appropriate case although...

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