Kardly

State Farm Mutual Automobile Insurance Company (State Farm) appeals the judgment against it for its alleged bad faith refusal to settle an insurance claim filed by Raymond and Esther Kardly. The jury awarded the Kardlys $80,000 contract and compensatory damages, but no punitive damages. State Farm contends it was prejudiced by the trial court’s exclusion of relevant evidence on the issue of bad faith. We agree, and reverse the judgment.

This action arises out of State Farm’s handling of a property damage claim filed by the Kardlys. The claim resulted from an automobile accident in 1978 wherein Mrs. Kardly was rear-ended by Alma Short. Mrs. Short was insured by the Automobile Club of Southern California (AAA). The Kardlys submitted a claim to State Farm for collision damage, lost personal goods and towing expenses. They contended in their complaint against State Farm that it maliciously and in bad faith denied their insurance claim.

In the meantime, the Kardlys had sued Short and obtained a general verdict against her for $63,000. Following this judgment, the trial court granted State Farm summary judgment for the Kardlys’ emotional distress causes of action. Thereafter,…