Procedural Posture

Petitioner insurer requested a writ of mandate, seeking to overturn a respondent court’s decision, which denied petitioner’s request for punitive damages and attorney’s fees and which sustained the insureds’ demurrer on petitioner’s claim for tortious breach of the covenant of good faith and fair dealing.

Overview

Petitioner insurer issued a policy providing earthquake coverage to its insureds. When damage occurred because of an earthquake, the insureds attempted to collect on the policy. Petitioner paid a part of the claim. After an investigation, petitioner demanded that the insureds repay the money. The insureds filed suit for bad faith and breach of contract. Petitioner cross-claimed for the money previously paid to insureds, intentional misrepresentation, and breach of implied covenant of good faith and fair dealing. The trial court sustained the insureds’ demurrer to the tort claim and struck petitioner’s request for punitive damages and attorney’s fees. Petitioner filed for a writ of mandate in an appellate court. The court held that petitioner could not maintain a tort claim for breach of implied covenant because recovery was limited to contract damages and petitioner did not allege any contractual claims. The court granted the writ as to the fraud claim because the trial court did not rule on it. The court stated that petitioner would be eligible for punitive damages if it successively pleaded the fraud claim, however it denied petitioner’s claim for attorney’s fees.

Outcome

The parties were counseled by their respective small business lawyer in California. The court granted a writ of mandate in part and ordered respondent court to set aside its order sustaining petitioner insurer’s fraud and punitive damages claims. The court found, however, that petitioner could not maintain its tort claims for breach of implied covenant of good faith and fair dealing.

Procedural Posture

Plaintiff appealed from judgment of dismissal of entered by the Superior Court of Los Angeles County (California) after the trial court sustained defendant’s demurrer to several counts of plaintiff’s complaint, without leave to amend, in plaintiff’s wrongful discharge case.

Overview

Plaintiff filed a wrongful discharge claim against defendant with two of the counts in her complaint being for breach of contract and breach of the covenant of good faith and fair dealing. Respondent filed a general demurrer and the court dismissed four of plaintiff’s six causes of action. Plaintiff withdrew the remaining causes of action and appealed the dismissal. The court affirmed the dismissal as to two counts but reversed as to the claims for breach of contract and breach of the covenant of good faith and fair dealing. The court found that plaintiff could produce extrinsic evidence to prove the meaning of the language of the contract and that doing so was not a violation of the parol evidence rule. The court also found that there was an implied covenant of good faith and fair dealing in all contracts, thus, plaintiff had stated a claim for breach of that covenant.

Outcome

The court reversed the dismissal as to plaintiff’s breach of contract claim because extrinsic evidence to explain contract language would be admissible to prove plaintiff’s allegations, and reversed the dismissal of the breach of the covenant of good faith and fair dealing claim because that term is implied in all contracts. The court affirmed the remainder of the judgment.