Krusiewicz

Introduction

CalFarm Insurance Company (CalFarm) appeals from a punitive damage award of $1,457,080 in favor of Tadeusz and Betty Krusiewicz (the Krusiewiczes) and a declaratory judgment holding CalFarm was obligated to pay the full amount of a binding arbitration award against CalFarm’s insured. The Krusiewiczes are not CalFarm’s insureds. Rather, the Krusiewiczes sued CalFarm for failing to pay a judgment they secured against Laynescape, Inc. (Laynescape), which constructed retaining walls on the Krusiewiczes’ property. Laynescape failed to properly seal the retaining walls, permitting water to permeate the walls and damage the walls’ exterior paint. Laynescape did not paint the retaining walls. CalFarm insured Laynescape under a policy covering damage to the paint, but containing a standard provision excluding from coverage the cost to repair the insured’s faulty or defective work.

In support of reversal, CalFarm argues: (1) the Krusiewiczes lack standing to sue CalFarm for bad faith, and Hand v. Farmers Ins. Exchange (1994) 23 Cal.App.4th 1847 [ 29 Cal.Rptr.2d 258 ] (Hand), on which the Krusiewiczes assert standing, was incorrectly decided; (2) the CalFarm policy…

Dissenting. — I agree with the majority that the evidence supported the jury’s finding of estoppel and that, therefore, CalFarm Insurance Company (CalFarm) was obligated to pay the full amount of the arbitration award. However, I respectfully disagree with the majority’s analysis regarding the bad faith claim against CalFarm.

As Hand v. Farmers Ins. Exchange (1994) 23 Cal.App.4th 1847 [ 29 Cal.Rptr.2d 258 ] makes clear, “a judgment creditor of an insured enjoys third party beneficiary status and rights under the policy” and “may enforce implied contractual covenants, including the covenant of good faith.” (Id. at p. 1857.) That is precisely what judgment creditors Tadeusz and Betty Krusiewicz sought to do — to enforce the covenant of good faith and fair dealing as implied in the policy.

The policy requires CalFarm to pay on Laynescape, Inc.’s (Laynescape) behalf all sums which Laynescape becomes legally obligated to pay as damages because of covered property damage. Clearly, once the binding arbitration award was confirmed to judgment, Laynescape was legally obligated to pay the damages set forth therein. CalFarm apparently asserted that just because Laynescape had become…

CalFarm Insurance Company (CalFarm) appeals from a punitive damage award of $1,457,080 in favor of Tadeusz and Betty Krusiewicz (the Krusiewiczes) and a declaratory judgment holding CalFarm was obligated to pay the full amount of a binding arbitration award against CalFarm's insured. The Krusiewiczes are not CalFarm's insureds. Rather, the Krusiewiczes sued CalFarm for failing to pay a judgment they secured against Laynescape, Inc. (Laynescape), which constructed retaining walls on the Krusiewiczes' property. Laynescape failed to properly seal the retaining walls, permitting water to permeate the walls and damage the walls' exterior paint. Laynescape did not paint the retaining walls. CalFarm insured Laynescape under a policy covering damage to the paint, but containing a standard provision excluding from coverage the cost to repair the insured's faulty or defective work.

In support of reversal, CalFarm argues: (1) the Krusiewiczes lack standing to sue CalFarm for bad faith, and Hand v. Farmers Ins. Exchange (1994) 23 Cal.App.4th 1847 , 29 Cal.Rptr.2d 258 ( Hand ), on which the Krusiewiczes assert standing, was incorrectly decided; (2) the CalFarm policy did not cover…