Campbell

Introduction

This mandamus proceeding raises an important question of law. Does California law recognize a cause of action by an insured against its insurer for breach of the implied covenant of good faith and fair dealing based solely on the insurer’s unjustified failure to defend? The trial court resolved the matter in the negative by sustaining without leave to amend the insurer’s demurrer to the cause of action for breach of the implied covenant of good faith and fair dealing pled by the insured. We decide the matter in favor of the insured.

Factual and Procedural Background

The Standard of Review

Because a demurrer challenges the legal sufficiency of the complaint, we must accept as true the complaint’s well-pleaded material facts, but not its contentions, deductions or conclusions of law. (Blank v. Kirwan (1985) 39 Cal.3d 311, 318 [ 216 Cal.Rptr. 718 , 703 P.2d 58 ].) We consider neither the truth nor accuracy of the material factual allegations. (Committee on Children’s Television, Inc. v. General Foods Corp. (1983) 35 Cal.3d 197, 213 [ 197 Cal.Rptr. 783 , 673 P.2d 660 ].) Those are matters to be resolved after the case has moved beyond pleading litigation.…