Lee v. Crusader Insurance

Following a fire at an insured premises, the insureds are prosecuted for arson. Their insurer suspects that the insureds might not be guilty, but defers resolution of their claim until they are acquitted. In the published portion of this opinion we hold that under these circumstances the insurer is not liable for bad faith in its handling of the insureds’ claim. We therefore affirm the summary judgment entered in favor of the insurer.

Background

Plaintiffs Kyu Shup Lee and Syung Sin Lee owned a grocery and liquor store in Los Angeles that was insured by defendant Crusader Insurance Company under a policy that provided $99,000 coverage for the contents of the store and $20,000 coverage for the Lees’ loss of earnings. The market and its contents were destroyed by fire on April 29,1992, in the wake of the state court acquittal of the police officers who were charged with beating Rodney King. On May 1, the Lees made a claim under the policy.

On May 26, 1992, Los Angeles City Fire Department Arson Investigator Frank Oglesby notified Crusader that the Lees were being investigated for the arson of their store. In a letter dated May 29, the fire department informed Crusader…