Laxague

William D. Laxague, Sr., Frieda Laxague, and Laxague Agriculture, Inc. (hereinafter referred to collectively as Laxague) appeal from the judgment entered in their third party insurance bad faith action following the granting of summary judgment in favor of defendants, Fireman’s Fund Insurance Company and Industrial Underwriters, Inc.

The Laxagues owned and managed a sheep-breeding program. They alleged that they purchased sheep feed ordered from and prepared by Nevada Supplement Company (NSC). After the Laxagues’ sheep were fed this preparation in December 1983 and January 1984, the sheep showed signs of distress and many ultimately died or suffered physical impairment. Fireman’s Fund and Industrial were the liability insurers of NSC. According to the Laxagues, NSC and its insurers were informed of the problems and of test results showing excess copper in the feed, but the Laxagues’ claims were not settled, and the Laxagues filed suit against NSC in an action filed in federal court (the underlying action) on July 11, 1985.

Fireman’s Fund provided a defense to NSC in the action brought by the Laxagues. On December 24, 1986, NSC tendered an amended offer of judgment,…