Melton

Certified for Partial Publication. [*]

Industrial Indemnity Company (Industrial) appeals from a judgment holding it liable for insurance bad faith on the ground it mishandled a "courtesy defense" and refused to indemnify its insured, Keith Melton. In the underlying action, Melton was found by the Workers' Compensation Appeals Board (WCAB or the Board) to have fired an injured employee, Edward Martin, in violation of Labor Code [1] section 132a (section 132a or simply 132a) because Martin expressed an intention to file a workers' compensation claim.

The duty of good faith and fair dealing assertedly arose under any one of several theories advanced by Melton. He maintained his liability was covered, or was at least potentially covered, under his workers' compensation and employers' liability policy with Industrial. Alternatively, he argued Industrial had waived its coverage defenses, or was estopped to assert them, because it provided the defense without a reservation of rights. Finally, Melton contended the duty of good faith and fair dealing attached irrespective of the policy's application once Industrial undertook to provide a defense. The trial court ruled there…