Gruenberg v. Aetna Insurance Co.

Facts

Gruenberg (plaintiff) owned a restaurant. Gruenberg obtained $35,000 worth of fire insurance for the restaurant from Aetna Insurance Co. (Aetna) (defendant). On November 9, 1969, a fired occurred at Gruenberg’s restaurant. On November 10, 1969, Aetna dispatched P.E. Brown and Company (Brown) (defendant), a claims adjuster, to the scene of Gruenberg’s restaurant fire for the purpose of inspecting the premises and determining the extent of fire insurance coverage available to Gruenberg. While inspecting the premises, Brown stated that he believed Gruenberg had obtained excessive fire insurance for the restaurant and suspected foul play by Gruenberg in the incident. On November 13, 1969, Gruenberg was charged with the felonies of arson and conspiracy to defraud an insurance company. While Gruenberg’s criminal charges were pending, Aetna requested that Gruenberg appear and submit to an examination relating to the determination of his insurance benefits after the fire. Gruenberg refused to appear to discuss his insurance coverage until the resolution of his criminal charges, and informed Aetna of this fact. Aetna refused to accept Gruenberg’s failure to appear and informed Gruenberg that his claim for insurance benefits for the fire was denied. Gruenberg’s criminal charges were ultimately dismissed. Following this dismissal, Gruenberg brought suit in California state court against Aetna and Brown. Gruenberg alleged that Aetna and Brown breached their implied obligation of good faith in considering whether to provide insurance coverage to Gruenberg following the fire in his restaurant. Additionally, Gruenberg alleged that as a result of the bad faith of Aetna and Brown, he suffered “severe economic damage,” “severe emotional upset and distress,” loss of earnings and various special damages. The trial court dismissed Gruenberg’s complaint, and Gruenberg appealed.

Rule of Law

Issue

Holding and Reasoning (Sullivan, J.)