## Facts

- Laurie Irene Murphy obtained a wrongful-death judgment against Pollard arising from an automobile accident that killed her nine-year-old son.
- Pollard was insured by Allstate under a liability policy with $25,000 bodily-injury limits.
- Before trial, Murphy offered to settle for $23,500 and later for $25,000 (policy limits); Allstate rejected both and proceeded to defend.
- The jury awarded Murphy $85,000; the trial court reduced the judgment to $42,000 after Murphy accepted a remittitur on Allstate’s new-trial motion.
- After judgment, Allstate offered to pay only the $25,000 policy limit and threatened to appeal if Murphy refused; Allstate appealed without posting a bond.
- Murphy pursued collection against Pollard and then sued Allstate, alleging Allstate’s refusal to settle within limits breached the duty of good faith and fair dealing owed to Pollard and caused the excess judgment.
- Pollard did not assign any claim against Allstate to Murphy.

## Issues

1. Whether a judgment creditor may sue an insurer directly under Insurance Code § 11580(b)(2) for bad-faith failure to settle within policy limits absent an assignment from the insured.
2. Whether a judgment creditor may use a creditor’s suit under former Code of Civil Procedure § 720 to reach the insured’s unassigned bad-faith failure-to-settle claim against the insurer.

## Decision

- The California Supreme Court affirmed judgment on the pleadings for Allstate.
- Insurance Code § 11580(b)(2) permits a judgment creditor to sue the insurer only “on the policy,” subject to its terms and limits; it does not authorize an unassigned tort claim for failure to settle.
- The insurer’s duty to settle in good faith is owed to the insured, not directly to the injured claimant.
- A creditor’s suit under former Code of Civil Procedure § 720 could not be used to enforce Pollard’s unassigned bad-faith claim, particularly where the claim included non-assignable personal-tort elements.

## Legal Principles

- An insurer’s implied covenant of good faith and fair dealing includes, in appropriate cases, a duty to accept reasonable settlement demands within policy limits, but that duty runs to the insured.
- Insurance Code § 11580(b)(2) provides a post-judgment mechanism for a judgment creditor to enforce the insurer’s indemnity obligation under the policy up to policy limits; it does not expand substantive duties or create a direct third-party bad-faith action.
- A judgment creditor generally cannot prosecute an insured’s bad-faith failure-to-settle claim without an assignment from the insured.
- A creditor’s suit reaches debts or property due the judgment debtor; it does not transform an unadjudicated, personal tort cause of action into a levyable “debt,” and non-assignable components (e.g., emotional distress and punitive damages) are not reachable by assignment or creditor process.
- Although the insured’s economic-loss component of a failure-to-settle claim (excess judgment damages) is assignable, the absence of an assignment is fatal to a third party’s attempt to recover the excess from the insurer.

## Conclusion

A judgment creditor may sue an insurer to collect policy proceeds under Insurance Code § 11580(b)(2), but cannot, without an assignment from the insured, maintain a direct or creditor’s-suit action for the insurer’s alleged bad-faith failure to settle within policy limits to recover the excess judgment.


Murphy v. Allstate Ins. Co., 17 Cal. 3d 937 (Cal. 1976)