Our judicial decisions often arise out of interesting facts. And, that is the case in Crisci v. Security Insurance Company (1967) 66 Cal 2d 425 which changed California Insurance law to give insureds the protection they pay for with liability insurance. Ah, the holding of the case- not yet. Let's review the facts first. They happen to be interesting and ones that cried out for change and justice.
June Dimare and her husband were tenants living in an apartment building owned by Rosina Crisci, who was a 70 year old widow. Mrs. DiMare was going down an outside wooden staircase when a star tread failed and she fell through the hole down to her waist and was dangling 15 feet above the ground. She and her husband filed a lawsuit against Rosina Crisci who had a $10,000.00 liability policy. Demands to settle were made within the policy limits and Mrs. Crisci even offered to pay $2,500.00 toward settlement.
The insurance company, Security Insurance Company, hired an experienced lawyer. This defense lawyer and the claims adjuster both thought that there might be a verdict in excess of $100,000.00 because Mrs. DiMare had suffered injuries and had psychosis as a result of the accident. The insurance company did a comprehensive, in-depth investigation to determine if Mrs. Dimare had psychosis preceding the accident, but it learned she did not. Mrs. Crisci authorized Security Insurance to settle. But Security Insurance refused to settle.
Mrs. Crisci and her husband won their lawsuit. Mrs. Crisci was awarded $100,000.00 and her husband, on a loss of consortium claim, was awarded $1,000.00. Security paid $10,000.00 the policy limit but adamantly refused to pay any more money. Mrs. DiMare and the 70 year old widow Mrs. Crisci entered into a settlement. Mrs. Crisci paid $22,000.00, gave Mrs. DiMare a 40% interest in property that Mrs. Crisci owned, and assigned her action against Security to Mrs. DiMare. Mrs. Crisci became indigent, hysterical, and even attempted suicide. Her rent was paid for by her relatives. None of this bothered Security. It paid its $10,000.00 policy limit.
Well, a broken staircase and Security's callousness lead to the California Supreme Court affirming a judgment for Mrs. Crisci for her own damages and the judgment that was in excess of her policy limits. The court reasoned that the insurance company gave more consideration to its own financial interests than to those of its insured's knowing that there was a significant risk that a verdict would exceed the policy limit; and, therefore, it was responsible not only for the policy limit but for everything awarded above the policy limit.
Attorneys now refer to this as "opening up the policy". Insurance companies have a duty to accept reasonable settlements. And when they refuse to settle within the policy limits giving more consideration to their own interests over the interests of their insureds and there is a verdict in excess of the policy limit, the insurance companies are liable for the whole amount.
Moral of the story - An insurance company can be callous and ignore the rights of its insureds, but they have to pay the price. Now, that is a common sense decision that helps insureds get what they pay for and one that encourages insurance companies to do the right thing.
