Murphy v. Allstate Insurance Company

17 Cal. 3d 937, 132 Cal. Rptr. 424, 553 P.2d 584 (1976)

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Murphy v. Allstate Insurance Company

California Supreme Court
17 Cal. 3d 937, 132 Cal. Rptr. 424, 553 P.2d 584 (1976)

Facts

Murphy (plaintiff) sued Pollard for the wrongful death of her nine-year-old son following a car accident. Pollard had insurance through Allstate Insurance Company (defendant) that covered up to $25,000 in damages to injured motorists. Allstate defended Pollard in the suit and rejected Murphy’s offers to settle her claim for $23,500 and $25,000. Following a jury trial, Murphy was awarded $85,000 in damages but agreed to a reduced judgment of $42,000. After the judgment was entered, Allstate advised Murphy that it would only pay the policy’s limit of $25,000. Murphy rejected Allstate’s post-judgment offer, and Allstate appealed the judgment. In the meantime, Allstate paid Murphy in excess of $27,000 to satisfy the judgment. However, in a supplemental proceeding, Allstate denied owing Pollard or Murphy anything. Murphy then sued Allstate in a separate action, claiming that Allstate had breached its duty of good faith and fair dealing by refusing to settle within Pollard’s policy limits. Pollard had not assigned the cause of action to Murphy. Allstate moved for judgment on the pleadings, arguing that it owed Murphy no duty to settle and was not indebted to Murphy because it had paid her Pollard’s policy limit. Allstate’s motion was granted, and Murphy appealed.

Rule of Law

Issue

Holding and Reasoning (Clark, J.)

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