Nicole Nunn, Petitioner v. Mid-Century Insurance Company, a California Corporation, Respondent

Summary

The court held that an excess judgment entered against an insured establishes actual damages for a bad-faith failure-to-settle claim even when the judgment is stipulated and accompanied by a covenant not to execute. It rejected the rule requiring the insured to pay or face personal exposure to the excess judgment, reasoning that entry of the judgment itself can harm the insured and that fraud, collusion, and reasonableness can be litigated in the bad-faith action. The court therefore reversed summary judgment for Mid-Century because the damages element was not defeated as a matter of law. Justice Eid, joined by Justices Rice and Coats, dissented, arguing that an insured actively defended by the insurer may not stipulate to liability in a way that deprives the insurer of control over the defense.