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Keywords

lawsuitdamagesattorneynegligenceliabilityappealtrialverdictmotiontrustbankruptcycompensatory damagesgood faithbad faith
damagesattorneynegligenceliabilityappealtrialverdictmotiontrustbankruptcycompensatory damagesgood faithbad faith

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Purdy v. Pacific Automobile Ins. Co., 157 Cal.App.3d 59, 203 Cal.Rptr. 524

Facts

David E. Purdy and his bankruptcy trustee filed a complaint against Pacific Automobile Insurance Company and its attorney, Roger W. Roberts, alleging bad faith refusal to settle a liability claim stemming from a motorcycle accident. The accident resulted in severe injuries to another party, Marion 'Buck' Partin, leading to a lawsuit against Purdy. Despite evidence suggesting that Purdy was likely at fault, Pacific refused to settle within policy limits, resulting in a substantial judgment against Purdy. Following the judgment, Purdy filed for bankruptcy, and the trustee pursued claims against the insurer and its attorney for damages.

David E. Purdy and his bankruptcy trustee filed a complaint against Pacific Automobile Insurance Company and its attorney, Roger W. Roberts, alleging bad faith refusal to settle a liability claim stemming from a motorcycle accident.

Issue

The main legal issues were whether the bankruptcy trustee had standing to sue the insurer for bad faith refusal to settle and whether the claims against the insurer's attorney for professional negligence were valid.

The main legal issues were whether the bankruptcy trustee had standing to sue the insurer for bad faith refusal to settle and whether the claims against the insurer's attorney for professional negligence were valid.

Rule

The court applied the principle that an insurer has an implied duty of good faith and fair dealing, which includes the obligation to settle claims within policy limits when there is a substantial likelihood of recovery in excess of those limits.

The court applied the principle that an insurer has an implied duty of good faith and fair dealing, which includes the obligation to settle claims within policy limits when there is a substantial likelihood of recovery in excess of those limits.

Analysis

The court found that Purdy had an existing, transferable property right in the cause of action for failure to settle, which was assumed by the trustee and properly prosecuted. The court also determined that the insurer was not prejudiced by the alleged misconduct of the trustee's counsel and that the claims against the attorney were defective due to a lack of proximate causation. The court emphasized that the emotional distress claim was not time-barred and that the insurer's refusal to settle was unreasonable given the evidence available at the time.

The court found that Purdy had an existing, transferable property right in the cause of action for failure to settle, which was assumed by the trustee and properly prosecuted.

Conclusion

The Court of Appeal affirmed the jury's verdict awarding $225,000 in compensatory damages to the trustee and reversed the trial court's dismissal of the emotional distress claim against the insurer.

The Court of Appeal affirmed the jury's verdict awarding $225,000 in compensatory damages to the trustee and reversed the trial court's dismissal of the emotional distress claim against the insurer.

Who won?

The prevailing party was the bankruptcy trustee, who successfully argued that the insurer's refusal to settle constituted bad faith, leading to significant damages.

The prevailing party was the bankruptcy trustee, who successfully argued that the insurer's refusal to settle constituted bad faith, leading to significant damages.

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