Court Opinion

ID: 9695753
Source: CourtListenerOpinion
Date Created: 2023-08-25 18:28:41.935136+00
Date Added: 2024-06-11T18:20:16.096539
License: Public Domain

Archer, J.
We granted leave to appeal and cross-appeal to consider whether the trial court and the Court of Appeals correctly limited the nature and amount of damages that can be recovered by an insured when an insurer has breached its duty to settle a claim.
We hold that when an insurer has exhibited bad faith in failing to settle a claim on behalf of its insured, and a judgment in excess of the policy limits results, the insurer is liable for the excess without regard to whether the insured has the capacity to pay. Accordingly, we reverse the holding of the Court of Appeals and remand the case *529to the trial court for determination of damages in accordance with this opinion.
FACTS
On or about May 7, 1978, Joey Guy Boone was visiting his friend, Charles Keeley, at the residence of Charles’ mother, Mrs. Wilma Keeley. At some point during the day, Charles Keeley had placed his shotgun in open view in the living room. According to Joey’s statement to the police, Charles was "playing around with” the gun, the gun discharged, severely injuring Joey Boone. Joey Boone was rendered quadriplegic.
At the time of the shooting, Charles Keeley was insured with Frankenmuth Mutual Insurance Company.1 The policy provided coverage for Charles through his mother’s contract of insurance.
In an effort to avoid the initiation of a lawsuit, settlement negotiations were conducted between counsel for Mr. Boone and counsel for the Keeleys, but no agreement was reached. As a result, on June 8, 1979, Joey Boone filed a negligence action *530against Charles Keeley and his mother, Wilma, in Genesee Circuit Court.
On the same date, Frankenmuth sought a declaratory judgment that the injury to Mr. Boone was "expected or intended from the standpoint of the insured.”2 Frankenmuth asserted, therefore, that Charles Keeley’s shooting of Joey Guy Boone was not covered under the policy.3
Joey Boone and the Keeleys, having joined forces, counterclaimed, charging that the insurance company had refused, in bad faith, to settle the case, despite several oifers made by Joey Boone’s attorney to compromise for the policy limits, $50,000. They further alleged that Frankenmuth fraudulently and deceitfully represented to Boone’s attorney that the policy limit was only $25,000. The countercomplaint requested any damages deemed appropriate by the court._
*531On July 6, 1981, the circuit court determined that Frankenmuth was responsible under the policy provisions to defend and, if appropriate, settle on behalf of the Keeleys. Meanwhile, in the principal case, the jury found Charles Keeley and Joey Boone equally negligent with total damages equaling $500,000. Thus, a judgment was entered against Charles Keeley in the net amount of $250,000, plus interest and costs.
Thereafter, Joey Boone and the Keeleys initiated an action to have their counterclaims brought to trial. Frankenmuth responded with a motion for summary disposition regarding each of the claims.4 In resolving the motion, the court awarded Wilma Jean Keeley $4,152 in attorney fees. In so doing, the court simultaneously ruled that Frankenmuth exhibited bad faith in failing to settle the case.5 More importantly, however, the court held that *532any damages owing to Charles Keeley with respect to Frankenmuth’s breach of its duty to settle were necessarily limited to the amount that the injured party, Joey Boone, would have been able to recover from Charles Keeley absent the insurance coverage, i.e., the amount of Mr. Keeley’s assets not exempt from legal process.
The Court of Appeals, in a unanimous decision, affirmed the ruling of the lower court in all respects.6 However, the Court remanded the case for a determination of the extent of Charles Keeley’s assets not exempt from legal process, and for entry of judgment against Frankenmuth in that amount. We subsequently granted leave to appeal.7
i
The substantive issue brought before the Court by the appellant, Charles Keeley, was acknowledged in this state six decades ago. Wakefield v Globe Indemnity Co, 246 Mich 645; 225 NW 643 (1929), involved an action brought by the City of Wakefield against its liability insurer, Globe In*533demnity, for the company’s failure to exercise reasonable care in effecting the compromise of a tort claim brought against the city,8 and for the company’s bad faith in refusing settlement.9
With regard to the specific question whether Globe Indemnity had to pay the excess judgment, the Wakeñeld Court did not have the opportunity to directly answer. In dealing with the bad-faith issue first,10 the Court ruled that the insurer was *534not liable to its insured for refusal to settle unless refusal was in bad faith. Hence, because the Court did not view the actions of Globe Indemnity as constituting bad faith, it reversed the trial court, remanding for judgment in favor of Globe, leaving the damage issue substantively undecided.11
Nonetheless, within its text, Wakeñeld recognized the issue addressed in the case at bar:
The courts seem to be unanimous in the opinion, as expressed by direct ruling, recognition, or assumption, that the insurer is liable to the insured for an excess of judgment over the face of the policy when the insurer, having exclusive control of settlement, fraudulently or in bad faith refuses to compromise a claim for an amount within the policy limit. [Wakefield, supra at 648.]
In the years that followed, Wakefield supplied the standard upon which courts in Michigan relied when facing allegations of bad-faith failure to settle on the part of insurance companies. In Commercial Union Ins Co v Medical Protective Co, 426 Mich 109, 116; 393 NW2d 479 (1986), this Court cited Wakeñeld, reasoning:_
*535[A]n insurer is liable to its insured for a judgment exceeding policy limits when the insurer, who has exclusive control of defending and settling the suit, refuses to settle within policy limits in "bad faith.”[12]
ii
There are two schools of thought regarding the remedy for an insurer’s bad-faith breach of its duty to settle. The jurisdictional split is distinguished by the following doctrines: the prepayment rule and the judgment rule. The older prepayment rule is the doctrine, adopted by a minority of jurisdictions, which dictates that an insurer may be held liable in an "excess” case only if part or all of the judgment has been paid by the insured. The judgment rule, adopted by a majority of jurisdictions, commands an insurer to pay an excess judgment in instances of bad faith, so that the insured need not make any payment nor have the capacity to pay any part of the judgment in order to recover the excess amount from the insurer. See Carter v Pioneer Mutual Casualty Co, 67 Ohio St 2d 146; 423 NE2d 188 (1981).
The cases relied on by the appellants clearly reveal the vigorous dichotomy of the courts in their analyses of the doctrines. For example, in Wolfberg v Prudence Mutual Casualty Co, 98 Ill App 2d 190, 196; 240 NE2d 176 (1968), the Court recited:
The majority view in this country is represented by Jenkins v General Accident Fire & Life Assur*536anee Corp, 349 Mass 699 [703]; 212 NE2d 464, 467 (1965), which stated:
"Despite some conflict in earlier cases, the weight of authority is that it is not necessary for the insured to allege that he has paid or will pay a judgment in excess of the policy limits in an action against the insurer for breach of its duty to act in good faith . . . .”[13] [Citations omitted.]
The court in Purdy v Pacific Automobile Ins Co, 157 Cal App 3d 59, 74; 203 Cal Rptr 524 (1984), *537expressed the deterioration of the minority viewpoint:
The "prepayment rule” has in fact been relegated to the past in a majority of American jurisdictions, due primarily to the perceived inequity of an insurer’s being permitted to capitalize on the weakened financial condition of the insured .... In California, damages in the amount of the excess judgment are, without further demonstration, the measure of recovery for bad faith failure to settle.
In Dumas v State Farm Mutual Automobile Ins Co, 111 NH 43, 45; 274 A2d 781 (1971), the New Hampshire Supreme Court reasoned that the prepayment rule could no longer be considered fair or judicious:
A policy argument against our present rule is that it serves as a windfall to an insurer fortunate enough to have insured an insolvent. (Citation omitted.) In any event the statement that an insured has not been damaged because he cannot pay the excess judgment is based upon the fallacy that damaged credit and financial ruin are not injuries.[14]
*538Conversely, the United States Court of Appeals for the Second Circuit argued against the judgment rule and its accompanying theories in Harris v Standard Accident & Ins Co, 297 F2d 627 (CA 2, 1961). That court did not agree with the notion that insurers would receive a windfall upon a declaration of bankruptcy by its insured. The court opined that an insurer receiving premiums upon the face amount is subject to payment of that amount regardless of the insured’s financial condition. Further, the court attempted to rebut the notion that adoption of the prepayment rule would make insurers less responsive to its duty to settle (because the insurer could avoid liability when its insured was insolvent), by stating that only a very small percentage of cases unfold with such factual parameters. Primarily, the court did not construe the risk or actual burden of paying an excess judgment as a result of an insurer’s failure to settle as constituting actionable damages to the insured. Accordingly, the court declined to rule that the insurer was responsible for payment of an excess judgment. See also Dumas v Hartford Accident & Indemnity Co, 92 NH 140; 26 A2d 361 (1942); Universal Automobile Ins Co v Culberson, 126 Tex 282; 86 SW2d 727 (1935); Seguros Tepeyac v Bostrom, 347 F2d 168 (CA 5, 1965); Smith v Transit Casualty Co, 281 F Supp 661 (ED Tex, 1968).15

III

A
Insurance is an agreement whereby parties give *539valuable consideration for protection from and indemnification against loss, damage, injury or liability. As servants of the public, insurance companies are held to the universally high standard of "good faith.” See 7C Appleman, Insurance Law & Practice, § 4711. Anything less should not be tolerated. Accordingly, we adopt the rule which mandates that if an insurer engages in bad faith while failing to settle a claim, it must compensate the insured, regardless of financial status.
Although the prepayment rule allows for a recovery by the insured in instances of bad-faith failure to settle, the amount of the recovery is directly dependent upon the financial status of the insured, i.e., if an insured has no assets, the insurance company is not obligated to pay any part of an excess judgment. Thus, under this rule, an insurer is permitted to capitalize on the weakened financial condition of the insured. See Purdy, supra.
The major flaw in the prepayment rationale is the fact that when an insurer is "fortunate enough to have insured an insolvent,” Dumas, supra at 45, there is no consequence for its deliberate failure to meet the good-faith standard. The judgment rule eliminates the insurer’s ability to hide behind the financial status of its insured. Hence, adoption of the judgment rule is the most effective way to underscore our serious concern with bad-faith practices in the insurance industry.
B
We acknowledge that the potential injury to an insolvent insured is great. In the case at bar, *540Charles Keeley earns a weekly salary of $150,16 and is in no position to pay the $200,000 excess judgment against him. Despite the charge made in Harris, supra, that situations like the instant one are rare, Mr. Keeley’s position is neither presently nor prospectively uncommon.
As noted previously, a minority of courts has asserted that an insured suffers no actionable damages when an insurer breaches its duty of good faith in settling claims. We, however, are in express agreement with the majority of jurisdictions that has held that an insured person with little or no assets suffers injury when an excess judgment is obtained against him. Such a judgment will potentially impair his credit, force him into bankruptcy, diminish his reputation, subject his outright property to lien, and immediately subject any future earnings to possible garnishment. See, generally, Carter v Pioneer Mutual Casualty Co, supra. Such injuries do constitute actual damages in the most traditional sense.17
An insurer cannot be allowed to flagrantly neglect the interests of its insured without facing serious consequences. There is, in this case, a direct cause and effect relationship between the bad-faith failure to settle and the entry of the excess judgment. Therefore, the insurer is responsible for paying the excess.
Worthy of reemphasis is the premise set forth in Wakeñeld many years ago. When a liability in*541surer has sole power and control over the litigation of claims brought against its insured, which includes the obligation to compromise the claim if feasible, then counsel must proceed in good faith. This mandate of good faith does not encompass the notion that counsel should settle any and all claims, so that failure to do so is equivalent to bad faith, for
"[i]t is not bad faith if counsel for the insurer refuse settlement under the bona fide belief that they might defeat the action, or, in any event, can probably keep the verdict within the policy limit. ... A mistake of judgment is not bad faith.” [Wakefield, supra at 656.]
However, upon the determination that an insurer failed to settle in deliberate bad faith,18 such subterfuge cannot be rewarded by allowing the insurer to escape compensating its insured for this avoidable situation. Accordingly, as the measure of damages has been established by a majority of jurisdictions to be payment of the foreseeably resultant excess, we likewise adopt this judgment rule, as it serves to explain and extend previously existing precedent in our state.
iv
The appellee-insurer argues that this case should be governed by Stockdale v Jamison, 416 Mich 217; 330 NW2d 389 (1982). Stockdale involved an automobile accident between Mr. and Mrs. Stockdale and Wayne Jamison. Jamison was insured for $20,000 by Farm Bureau Insurance Group. The issue in the case involved whether the Stockdales could recover a $160,000 judgment from *542Jamison’s insurance company, as a result of its failure to defend the claim on his behalf. The Court’s principal holding was that "ordinarily an insurer’s liability for breach of its contractual duty to defend its insured is limited to an amount equal to the insured’s assets not exempt from legal process.” Id. at 228. As a result, the plaintiffs were denied recovery of the excess judgment.
The concern with this case lies within n 15 of the opinion:
Professor Keeton has suggested that this is an appropriate measure of damages for an insurer’s breach of its duty to settle. Keeton [Insurance Law], § 7.8(f), p 516. As Professor Keeton points out, this approach has the advantage to both parties of eliminating the need for the insured (and consequently, the plaintiff) to suffer the costs of a bankruptcy proceeding in order to establish the actual amount of loss.
See also Harris v Standard Accident & Ins Co [supra], (no recovery for bad faith failure to settle, where insured was insolvent before the entry of an excess judgment, and bankrupt afterwards); Dumas v Hartford Accident & Indemnity Co [supra], where the court said:
"The mere existence of an outstanding judgment, which may never be paid, is not a legal injury, for the essence of the injury in such a case is pecuniary loss. State Automobile Mutual Ins Co of Columbus, Ohio v York, 104 F2d 730, 734 (CA 4, 1939). What the plaintiff owes may reduce the appearance of his net worth on an accountant’s balance sheet, but unless he pays his debt he is not out of pocket.”
Professor Keeton did not discuss taking the same approach in the failure to defend context, possibly because he did not consider that an insurer might be liable above policy limits for a judgment against an insured who is unable to mitigate his damages by obtaining counsel. Keeton, supra, § 7.6(e), p 484. [Stockdale, supra at 228.]
*543The Stockdale Court’s inclusion of this footnote was not intended to be a perch beneath which several decades of precedent were to fall.19 The ampleness of Michigan case law preceding Stock-dale on this issue makes clear this jurisdiction’s preference for holding insurers liable for excess judgments in instances of bad-faith failure to settle.20 Stockdale addressed an insurance company’s failure to defend its insured, and any application of its findings should be applied solely to cases of failure to defend.21
*544CONCLUSION
In adopting the judgment rule, we hold that when an insurer has exhibited bad faith in failing to settle a claim on behalf of its insured and a judgment in excess of the policy limits results, the insurer must pay the excess judgment in its entirety without regard to whether the insured has the capacity to pay. Accordingly, we reverse the holding of the Court of Appeals and remand the case to the trial court for a determination of damages in accordance with this opinion.
Riley, C.J., concurred with Archer, J.

 Charles Keeley sought coverage under the following section of the policy:
Coverage E — Personal Liability.
This Company agrees to pay on behalf of the Insured all sums which the Insured shall become legally obligated to pay as damages because of bodily injury or property damage, to which this insurance applies, caused by an occurrence. This Company shall have the right and duty, at its own expense, to defend any suit against the Insured seeking damages on account of such bodily injury or property damage, even if any of the allegations of the suit are groundless, false or fraudulent, but may make such investigation and settlement of any claim or suit as it deems expedient. This Company shall not be obligated to pay any claim or judgment or to defend any suit after the applicable limit of this Company’s liability has been exhausted by payment of judgments or settlements.

 Apparently, the general basis for Frankenmuth’s declaratory judgment action was the ongoing police investigation against Charles Keeley for assault with intent to murder. Also bolstering Frankenmuth’s request for a declaration of noncoverage was Keeley’s alleged prior reputation and character and a police report featuring Joey Boone’s statement that Charles Keeley shot him intentionally. Specifically, the pertinent questions and answers in the statement were:
Q. Can you think of any reason why he [Charles Keeley] might have shot you?
A. I never really gave him any reason.
Q. You are not sure if he done [sic] this on purpose or not?
A. I don’t know. If he didn’t do it on purpose, I think you get the picture, a better spot to see me in. . . . He had said plenty times beforehand that he was going to shoot me, but I thought he was kidding me all the time. I guess I [was] wrong, he wasn’t kidding me.

 The language contained in this exclusion reads as follows:
This policy does not include loss:
1. Under Coverage E — Personal Liability
f. to bodily injury or property damage which is either expected or intended from the standpoint of the Insured.

 Wilma Keeley’s counterclaim was for attorney fees which were incurred as a result of Frankenmuth’s failure to settle. Joey Boone’s counterclaim dealt with his argument that the calculation of interest should apply to the entire judgment amount of $250,000, and not solely to the policy limit of $50,000. Paramount, however, was Charles Keeley’s counterclaim for damages from Frankenmuth as a result of its bad-faith breach of the duty to settle Boone’s tort action for the policy limits.

 Among other inferences drawn on the basis of circumstances surrounding Joey Boone’s attorney’s attempts to settle the case, as well as allegations that the policy limits were misrepresented by appellee Frankenmuth during these and subsequent settlement negotiations, the evidence that appears to have contributed most significantly to the trial court’s determination of had faith, was revealed in an "interoffice” memo from a supervisor at Frankenmuth to a subordinate. The memo itself was produced by Frankenmuth in discovery, and is dated more than a year after the shooting occurred. It reads, in pertinent part, as follows:
The file material available presents, in my opinion, a rather weak policy defense. While this insured is certainly guilty of extremely careless use of a firearm, there is very little indication as to whether or not his state of mind was such that a deliberate intentional shooting occurred. The police report indicates that when the officers arrived at the scene, both boys were covered with blood, suggesting and supporting the in*532sured’s position that he rendered aid, was in a confused state of mind, asked for instructions and was advised by the plaintiff to call an ambulance.
What concerns me is the complete lack of investigation on the part of our claim department. There are numerous unresolved areas that may clarify the all-important state of mind ....
As the file stands presently, I feel we have very little to justify our position. Apparently we are waiting for something to happen during the discovery process which will improve our position.
Notably, the trial court’s determination that bad faith existed is not before us.

 Frankenmuth Mutual Ins Co v Keeley, unpublished opinion per curiam of the Court of Appeals, decided August 19, 1987 (Docket No. 89615).

 Frankenmuth Mutual Ins Co v Keeley, 430 Mich 857 (1988).

 The underlying tort action in Wakefield, Borski v City of Wakefield, 239 Mich 656; 215 NW 19 (1927), involved the injury of Frank Borski while a passenger on one of the city’s buses. At the time of the injury, the city carried a liability policy with Globe Indemnity for $10,000. Borski brought suit for damages and Globe assumed the defense. However, when Borski recovered a judgment for over $15,000, the city filed a claim against Globe for the excess judgment for its failure to settle the case.

 In addition to the claims mentioned, the City of Wakefield also charged negligent defense of the underlying suit. However, because the instant appellants did not raise an adequacy of defense issue in this appeal, it is not addressed here.

 Commercial Union Ins Co v Liberty Mutual Ins Co, 426 Mich 127, 138-139; 393 NW2d 161 (1986), has since defined bad-faith failure to settle on the part of an insurance company utilizing the following factors:
1) failure to keep the insured fully informed of all developments in the claim or suit that could reasonably affect the interests of the insured,
2) failure to inform the insured of all settlement offers that do not fall within the policy limits,
3) failure to solicit a settlement offer or initiate settlement negotiations when warranted under the circumstances,
4) failure to accept a reasonable compromise offer of settlement when the facts of the case or claim indicate obvious liability and serious injury,
5) rejection of a reasonable offer of settlement within the policy limits,
6) undue delay in accepting a reasonable offer to settle a potentially dangerous case within the policy limits where the verdict potential is high,
7) an attempt by the insurer to coerce or obtain an involuntary contribution from the insured in order to settle within the policy limits,
8) failure to make a proper investigation of the claim prior to refusing an offer of settlement within the policy limits,
9) disregarding the advice or recommendations of an adjuster or attorney,
*53410) serious and recurrent negligence by the insurer,
11) refusal to settle a case within the policy limits following an excessive verdict when the chances of reversal on appeal are slight or doubtful, and
12) failure to take an appeal following a verdict in excess of the policy limits where there are reasonable grounds for such an appeal, especially where trial counsel so recommended.
Although Commercial Union dealt primarily with the issue of liability between excess insurers and primary insurers, many of the factors can be uniformly analyzed and applied with reference solely to primary insurers, as in the case at bar. More importantly, however, is the fact that the instant appeal does not concern the issue whether Frankenmuth acted in bad faith. This determination was made by the trial court and is not before us. Hence, the inclusion of this note merely serves to amplify clearly established Michigan law and not to provide comment on the lower court ruling here.

 See Wakefield, supra at 658-659.

 The United States Court of Appeals for the Sixth Circuit and the United States District Court for the Eastern District of Michigan have also relied on Wakefield in rendering decisions on this issue. See Valentine v Liberty Mutual Ins Co, 620 F2d 583 (CA 6, 1980); Jones v Nat’l Emblem Ins Co, 436 F Supp 1119 (ED Mich, 1977); Noshey v American Automobile Ins Co, 68 F2d 808 (CA 6, 1934).

 The premise presented here was also discussed in 7C Appleman, Insurance Law & Practice, § 4712, pp 426-430:
Many cases . . . were prone to make the test of possible excess liability that of fraud or bad faith — that is, if the insurer either fraudulently or in bad faith failed to effect a settlement within the policy limits, it must discharge the full judgment even in excess of those limits. If it was not so guilty, then excess liability would not be imposed. To recover, the insured must produce evidence of bad faith and [a] causal connection between the bad faith and the damage sustained. The cause of action arises when the insured is required to pay a judgment that is in excess of his policy limits.
If the insurer did not fulfill his contractual obligation or was guilty of bad faith or negligence in failing to negotiate and bring about a settlement, the damage to the insured generally is the amount for which the insured becomes charged in excess of his policy coverage. [Id. at § 4711, p 414.]
For cases applying this theory, see Smith v State Farm Mutual Automobile Ins Co, 278 F Supp 405 (ED Tenn, 1968); Davis v Nat’l Grange Ins Co, 281 F Supp 998 (ED Va, 1968); Shapiro v Allstate Ins Co, 44 FRD 429 (ED Pa, 1968); Herges v Western Casualty & Surety Co, 408 F2d 1157 (CA 8, 1969) (bad faith); Liberty Mutual Ins Co v Davis, 412 F2d 475 (CA 5, 1969) (failure to exercise good faith); Bush v Allstate Ins Co, 425 F2d 393 (CA 5, 1970), cert den 400 US 833 (1970), reh den 400 US 985 (1970); Luke v American Family Mutual Ins Co, 325 F Supp 1330 (D SD, 1971), judgment aff’d in part and rev’d in part 476 F2d 1015 (CA 8, 1972) (under South Dakota law, an insurance company may conduct itself in such a manner as to be held liable for damages in excess of the policy limits); United Services Automobile Ass’n v Glens Falls Ins Co, 350 F Supp 869 (D Conn, 1972) (damages may extend to the entire amount of the judgment entered against insured, even if it is in excess of policy limits).

 See also Henegan v Merchants Mutual Ins Co, 31 AD2d 12; 294 NYS2d 547 (1968); Jenkins v General Accident, Fire & Life Assurance Corp, Ltd, 349 Mass 699; 212 NE2d 464 (1965); Brown v Guarantee Ins Co, 155 Cal App 2d 679; 319 P2d 69 (1957); Alabama Farm Bureau Mutual Casualty Ins Co v Dalrymple, 270 Ala 119; 116 So 2d 924 (1959); American Fire & Casualty Co v Davis, 146 So 2d 615 (Fla App, 1962); Wolfberg v Prudence Mutual Casualty Co, 98 Ill App 2d 190; 240 NE2d 176 (1968); Henke v Iowa Home Mutual Casualty Co, 250 Iowa 1123; 97 NW2d 168 (1959); Lange v Fidelity & Casualty Co of New York, 290 Minn 61; 185 NW2d 881 (1971); Gray v Nationwide Mutual Ins Co, 422 Pa 500; 223 A2d 8 (1966); Southern Fire & Casualty Co v Norris, 35 Tenn App 657; 250 SW2d 785 (1952); Hernandez v Great American Ins Co of New York, 464 SW2d 91 (Tex, 1971); Ammerman v Farmers Ins Exchange, 22 Utah 2d 187; 450 P2d 460 (1969); Harris v Standard Accident & Ins Co, 191 F Supp 538 (SD NY, 1961); Smoot v State Farm Mutual Automobile Ins Co, 299 F2d 525 (CA 5, 1962); Anderson v St Paul Mercury Indemnity Co, 340 F2d 406 (CA 7, 1965); Gaskill v Preferred Risk Mutual Ins Co, 251 F Supp 66 (D Md, 1966).

 Dumas v Hartford Accident & Indemnity Co was later overruled by Dumas v State Farm Mutual Automobile Ins Co. Further, Universal, Seguros and Smith v Transit Casualty, supra, appear to have been similarly outdated by Hernandez v Great American Ins Co, n 14 supra.

 In an affidavit dated March 10, 1985, Charles Keeley listed several statistics about himself in opposition to Frankenmuth’s motion for summary disposition.

 Black’s Law Dictionary (5th ed) defines damages as follows:
Damages. A pecuniary compensation or indemnity, which may be recovered in the courts by any person who has suffered loss, detriment, or injury, whether to his person, property, or rights, through the unlawful act or omission or negligence of another.

 See n 10.

 Stockdale was written to address the consequences of an insurance company’s failure to defend its insured. Within the lead Stock-dale opinion, as well as within its concurrence, a distinction was pointedly drawn between "failure to defend” and "failure to settle” cases:
While good faith may limit an insurer’s liability to policy limits in actions for failure to settle, it is not a defense to an action for breach of an insurer’s obligation to defend its insured. The rule subjecting an insurer to liability to its insured in excess of policy limits for failure to act in good faith in settlement negotiations recognizes that where the insurer defends the action it has a substantial measure of control in the conduct of the lawsuit and is in a position to disregard the interests of the insured and expose him to the risk of a judgment in excess of policy limits. To protect the insured’s interest, the courts have required that the insurer make reasonable eiforts to settle within policy limits. [Id. at 223-224.]
Further, in Justice Ryan’s concurrence:
I agree with my brother that good faith or bad faith on the part of the insurance company is irrelevant in an action based on breach of the contractual duty to defend. In claiming that "good faith” is an absolute defense to liability in excess of the policy limits, the defendant Farm Bureau is confusing this case with cases alleging a bad faith refusal to settle. See City of Wakefield v Globe Indemnity Co, 246 Mich 645, 651; 225 NW 643 (1929). [Id. at 229.]

 See n 12 and accompanying text.

 Accordingly, to the extent that this opinion is inconsistent with Sederholm v Michigan Mutual Ins Co, 142 Mich App 372; 370 NW2d 357 (1985), it is overruled.