On November 23, 2010, the California Supreme Court declined review of the First Appellate District’s decision in Howard v. American National Fire Insurance Co., 187 Cal. App. 4th 498 (2010).  As I noted in a prior blog postHoward provides powerful, additional support for policyholders demanding that their liability insurer fund a settlement.

In Howard, the Court of Appeal considered whether an insurer can be held liable for bad faith breach of its duty to settle if it rejects a settlement offer that is within the total available limits of all the insurers’ policies, but which exceeds the limits of its own individual policy.  In the first clear statement of California law on this issue, the First Appellate District concluded that in a “multiple insurer case, the law cannot excuse one insurer for refusing to tender its policy limits simply because other insurers likewise acted in bad faith.  If this were not the case, insurers on the risk could simply all act in bad faith, thus immunizing themselves from bad faith liability.”  The Court of Appeal went on to find that an excess judgment is not necessarily required in order to support a finding of bad faith failure to settle, particularly where the insured also sustains consequential damages arising out of the insurer’s conduct.

California policyholders and their counsel frequently face the situation presented in Howard:  a loss giving rise to a potential for coverage under multiple policies.  Before the Howard decision, each insurer would often take the position that it had no duty to settle unless the plaintiff’s settlement demand was within the limits of its own individual policy.  The First Appellate District clearly rejected this premise, holding that each such insurer faces bad faith exposure if it rejects a reasonable settlement demand that is within the combined indemnity limits of all triggered policies.  Now, the California Supreme Court has both denied review and denied the defendant insurer’s depublication request.  Thus, Howard remains a citable authority on which policyholders can rely to demonstrate that their insurer has a present duty to fund settlement.