Safeway Stores, Inc. (Safeway) (defendant) had three levels of liability insurance. Travelers Insurance Company and Travelers Indemnity Company, (defendants) insured Safeway for the first $50,000 of liability. Safeway was self-insured for liability between $50,000 and $100,000. Commercial Union Assurance Companies and Mission Insurance Company (plaintiffs) insured Safeway for liability greater than $100,000 and up to $20 million. Safeway was sued in state court. The court entered a $125,000 judgment against Safeway. The plaintiffs were responsible for $25,000 of that judgment. The plaintiffs sued the defendants claiming that the defendants could have settled for less than $100,000. The plaintiffs’ complaint alleged negligence and breach of the duty of good faith and fair dealing. Safeway demurred the plaintiffs’ complaint based on a failure to state a cause of action. The trial court sustained the demurrer but gave the plaintiffs 20 days to amend the complaint. The plaintiffs did not amend the complaint, and thus the action was dismissed. The plaintiffs appealed. The Supreme Court of California granted a hearing to resolve a conflict between this case and another case.