Opinion ID: 1160051
Heading Depth: 3
Heading Rank: 4

Heading: Violations of Insurance Code provision.

Text: (12) Finally, plaintiffs contend that their present action can be sustained on the basis of the statutory provision we considered in Royal Globe, supra, 23 Cal.3d 880, asserting that Gulf's alleged conduct falls within the terms of Insurance Code section 790.03, subdivision (h)(5): Not attempting in good faith to effectuate prompt, fair, and equitable settlements of claims in which liability has become reasonably clear. [10] We cannot agree that this provision was intended to apply to the facts alleged here. To begin with, subdivision (h)(5) speaks of claims and claimants, and while those terms arguably could be stretched to include claims that have been reduced to judgment, other language in subdivision (h) suggests that is not what the Legislature had in mind. Subdivision (h)(10) describes as an unfair practice [m]aking known to insureds or claimants a practice of the insurer of appealing from arbitration awards in favor of insureds or claimants for the purpose of compelling them to accept settlements or compromises less than the amount awarded in arbitration. Subsection (10) is the only part of subdivision (h) that mentions appeals or awards. This suggests that subsection (5) was not intended to apply to judgments. In addition, and perhaps more importantly, the standard provided in subdivision (h)(5)  sanctioning an insurer for not attempting to effectuate settlements of claims in which liability has become reasonably clear  affords no meaningful guidance once judgment is entered. In almost every case it could be argued that liability is reasonably clear once a trial judgment is entered in favor of a claimant, but  in light of the fundamental nature of the right to appeal and the general considerations discussed at length in In re Marriage of Flaherty, supra ,  it appears quite unlikely that the Legislature intended to subject an insurer to the risk of a subsequent suit every time it exercised its right to appeal from an adverse judgment. Instead, we conclude that the more plausible interpretation of subdivision (h)(5) is that the provision was intended to apply only to prejudgment conduct.