J.B. Aguerre, Inc. v. American Guarantee & Liability Insurance

Summary

A liability insurer was not in bad faith in funding a settlement with a contribution from its insured where the insured allegedly feared punitive damages, the insurer did not coerce the contribution, the contribution was modest and in reasonable proportion to punitive damage exposure, and where the contribution was the product of collusion between the insured and claimant. We affirm the trial court’s judgment for the insurer following sustaining of a demurrer.

Factual and Procedural Background

Plaintiffs and appellants J.B. Aguerre, Inc., Jean B. Aguerre, and Claudia Aguerre (collectively Aguerre) appeal from an order sustaining a demurrer to their first amended complaint for bad faith breach of an insurance policy, without leave to amend.

Aguerre’s first amended complaint alleged the following pertinent facts:

Aguerre operates a dairy business. Aguerre bought primary and excess auto liability policies from defendants and respondents American Guaranty and Liability Insurance Company and Zurich-American Insurance Company of Illinois (collectively Zurich). The primary policy had a limit of $1 million, the excess, $5 million.

The policies (attached with the…