Suspending the Duty of Good Faith
Most courts consider litigation to be an adversary proceeding which, once instituted, suspends the duty of good faith. However, the California Supreme Court, on the last day the Rose Bird Court was in power, ruled that the duty of good faith and fair dealing continued after litigation had commenced between the insured and the insurer. White v. Western Title, 40 Cal. 3d 870, 221 Cal. Rptr. 509 (December 31, 1985). The present California Supreme Court has been chopping away at White issue by issue. It appears that the basic holding of White will be rejected by the present California Supreme Court if the Court is given the opportunity. It is, however, the law. For that reason insurers in California always seek a waiver of the holding of White v. Western Title before starting negotiations on any claim where there is a potential for a bad faith claim. Justice Kaus, in his dissent to the majority opinion in White v. Western Title, gave a warning to all insureds and attorneys for insureds in what may be a precursor of future decisions.
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