Amato

Appellant Mercury Casualty Company issued an auto policy which covered a Renault automobile. The policy stated that it did not provide liability coverage for bodily injury sustained by an insured. The policy defined insureds to include permissive users of an owned automobile and resident relatives of permissive users, including those related by marriage. Cross-appellant Anthony Charles Amato negligently caused an accident while driving the Renault with the permission of its owner. The accident injured his mother-in-law, cross-appellant Jacqueline Sutton, who was a passenger in the Renault. She sued Amato, and Amato requested appellant to defend him. Appellant denied the request on the ground that the policy did not cover Sutton’s claim because she was the resident relative of Amato. At the time of this denial appellant was aware of facts which, if true, indicated that Amato was not residing with Sutton.

After resolution of the underlying case in Sutton’s favor, Amato and Sutton filed this action for bad faith breach of insurance contract against appellant. A jury found that Sutton was residing with Amato at the time of the accident. The trial court nonetheless found that…