Crisci v. Security Insurance Co.

66 Cal. 2d 425, 426 P.2d 173, 58 Cal. Rptr. 13 (1967)

Quick Summary

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Rosina Crisci (plaintiff) owned an apartment building and had an insurance policy with Security Insurance Co. (defendant). After a tenant suffered injuries on her property, Security refused to settle within policy limits, leading to a lawsuit against Crisci with damages far exceeding her coverage.

The central issue was whether Security failed to act in good faith by not settling within policy limits. The California Supreme Court affirmed the lower court’s decision, awarding Crisci compensation for the judgment excess and mental suffering due to Security’s breach of duty.

Facts of the Case

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Rosina Crisci (plaintiff) was the owner of an apartment building where June Dimare and her husband resided as tenants. Crisci had a liability insurance policy with Security Insurance Co. (Security) (defendant) which had a coverage limit of $10,000.

June Dimare experienced a traumatic accident on Crisci’s property when she fell through a broken step and was left hanging above the ground, resulting in physical injuries and a severe psychosis.

Dimare sued Crisci for $400,000 in damages. Security, Crisci’s insurer, refused to settle with Dimare even within the $10,000 policy limit. The jury awarded Dimare $100,000, which exceeded Crisci’s insurance coverage significantly.

Unable to pay the excess judgment, Crisci settled by transferring some property to Dimare and assigning her right to sue Security for the amount exceeding the policy limits.

Procedural Posture and History

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  1. June Dimare files a lawsuit against Rosina Crisci seeking $400,000 in damages for injuries sustained due to a fall.
  2. The jury awards June Dimare $100,000 and her husband $1,000.
  3. Security Insurance pays its policy limit of $10,000.
  4. Crisci settles with Dimare by transferring property and assigning her right to sue Security.
  5. Crisci initiates legal action against Security Insurance for failing to settle within policy limits.
  6. The trial court awards Crisci $91,000 plus interest and $25,000 for mental suffering.
  7. Security Insurance appeals to the California Supreme Court.

I.R.A.C. Format


Issue Icon

Whether Security Insurance Co. breached its duty to act in good faith by refusing to settle within the policy limits, thus causing financial damage and mental suffering to Rosina Crisci.

Rule of Law

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The insurer has an implied covenant of good faith and fair dealing that requires giving consideration to the insured’s interests at least as much as its own in deciding whether to settle a claim within the policy limits.

Reasoning and Analysis

Reasoning Icon

The California Supreme Court affirmed that the insurer must give equal consideration to the financial interests of the insured when deciding to settle claims within policy limits. The court found that Security Insurance acted unreasonably by relying solely on its psychiatric experts while knowing that an accident could trigger Mrs. Dimare’s psychosis and that reputable psychiatrists supported her claim.

The court held that Security breached its duty by not accepting a reasonable settlement offer, thus failing to protect Crisci from excess judgment.

Additionally, the court determined that mental suffering is compensable in tort actions involving significant property or financial loss. Since the refusal to settle was both a breach of contract and a tortious act, Crisci was entitled to damages for mental distress caused by the loss of her property and resulting financial hardship.


Conclusion Icon

The judgment of the trial court awarding Rosina Crisci $91,000 plus interest and $25,000 for mental suffering was affirmed by the California Supreme Court.

Key Takeaways

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  1. An insurer has an implied obligation to give equal consideration to the insured’s interests when deciding on settlement offers within policy limits.
  2. An unreasonable refusal by an insurer to accept a reasonable settlement offer can result in liability for any judgment exceeding the policy limits.
  3. Damages for mental suffering may be awarded in tort actions that involve substantial property or financial loss caused by the defendant’s conduct.

Relevant FAQs of this case

What is the legal standard for an insurer's duty of good faith and fair dealing towards its insured?

The legal standard requires that insurers act with reasonable care and diligence, considering the insured’s interests on equal footing with their own. This includes making timely settlement decisions when a settlement offer is reasonable and within policy limits. An insurer who fails to meet these standards may be held liable for resulting damages.

  • For example: An insurer receives a settlement offer of $15,000 on a policy with a $20,000 limit for a claim with potential damages of $30,000. Refusing this offer without a sound basis could be seen as acting in bad faith, subjecting the insurer to liability for any additional damages awarded above the policy.

Can mental suffering be compensated in tort actions involving breaches of contract?

Yes, mental suffering can be compensated if the breach of contract also constitutes a tortious act causing significant property or financial loss. This acknowledges the emotional distress that can accompany such losses.

  • For example: A homeowner’s significant stress due to an insurer’s refusal to cover damages after a fire, which triggers acute anxiety, could warrant compensation for mental suffering on top of property loss.

What actions can render an insurer liable for a judgment exceeding policy limits?

An insurer can become liable for excess judgment if they unreasonably refuse or fail to settle a claim within the policy limits when there is an opportunity to do so, especially when the chances of an adverse verdict are high.

  • For example: An insurer declines a settlement at policy limit in a case where liability is clear-cut and the injury claims are serious, potentially resulting in judgments multiple times the policy limit.


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