Coleman

In Moradi-Shalal v. Fireman’s Fund Ins. Companies (1988) 46 Cal.3d 287 [ 250 Cal.Rptr. 116 , 758 P.2d 58 ] (Moradi-Shalal), the Supreme Court held that a third party claimant—an individual who is injured by the alleged negligence of an insured party—does not have a private right of action against the insurer for unfair settlement practices. This case presents the question, one of first impression in California, of whether that rule applies where the third party claimant is insured by the same insurer as the other party.

We hold that Moradi-Shalal bars such an action because the coincidental fact that plaintiffs are insured by the same insurer as the other party does not change plaintiffs’ position as strangers to the other party’s insurance policy and as adversaries to the insurer. Thus, the insurer owes no duty of good faith and fair dealing to plaintiffs in settling their claims against the other party.

We also conclude that where there is no duty of good faith and fair dealing, there is no duty that would give rise to a claim of negligent infliction of emotional distress. Finally, we determine that the insurer’s conduct here does not reach the level of outrageousness…