Prichard

I. Summary

Procedurally, this liability insurance bad faith action comes to us contorted as a sheepshank knot. Some unraveling is necessary.

The trial court filed a judgment ruling:

Then the trial court filed an order granting a partial new trial, so the insured could seek recovery of damages for bad faith and for the costs in the underlying action. The insurer appealed from both the judgment and the new trial order.

At the time, the trial court did not have the benefit of Buss v. Superior Court (1997) 16 Cal.4th 35 [ 65 Cal.Rptr.2d 366 , 939 P.2d 766 ] (Buss), which was decided about a month after the new trial order. As we explain below, Buss greatly clarified the law concerning an insurer’s right to seek reimbursement of defense fees in a “mixed action” (one where at least one cause of action is potentially covered, but the others are not), but in so doing rejected the theory used by the trial court to conclude that the insurer here had breached its duty to defend. In fact, Buss plainly rejected the idea on which the policyholders have predicated much of their case: that new consideration, in addition to that provided in the insurance contract, is necessary for the…