Dalrymple

In this appeal, we are required to determine if the trial court or the jury should decide the issue of whether an insurer had “proper cause” to pursue a declaratory relief action in which it disputed insurance coverage. (Love v. Fire Ins. Exchange (1990) 221 Cal.App.3d 1136, 1151-1152 [ 271 Cal.Rptr. 246 ].) This question arises in the context of an insured’s cross-action for damages for breach of the implied covenant of good faith and fair dealing, filed in response to the insurer’s declaratory relief complaint seeking a determination that no coverage existed. The trial court severed for trial the declaratory relief action from the “bad faith” cross-action, tried the declaratory relief action first, and entered judgment that coverage existed. The subsequent trial on the cross-complaint resulted in a jury verdict for the insured.

United Services Automobile Association (USAA) appeals the judgment entered on this jury verdict awarding its insured, cross-complainant Ann Dalrymple, $44,164.50 as bad faith damages, representing the full amount of attorney fees incurred by Dalrymple’s counsel in defense of the declaratory relief complaint brought by USAA to determine its…