## Facts

- George Miller was injured in Colorado when a truck’s replacement windshield, installed by Solaglas California, Inc., “popped out” during a collision, ejecting him and leaving him a quadriplegic.
- Miller sued Solaglas for compensatory and punitive damages.
- Solaglas tendered defense to its primary liability insurer, Transamerica, which defended but stated punitive damages were not covered.
- Settlement discussions occurred; Miller was allegedly willing to settle within primary and excess limits, but the case proceeded to trial.
- The jury awarded about $6.1 million: roughly $5.1 million compensatory and $1 million punitive damages against Solaglas.
- Transamerica paid its $1.5 million policy limits; the excess insurer paid the remaining compensatory damages.
- PPG, as Solaglas’s successor, remained liable for the $1 million punitive award.
- PPG sued Transamerica in California for bad-faith failure to settle, seeking to recover the $1 million punitive award as consequential damages.

## Issues

1. Whether an insured may recover, as tort damages for an insurer’s bad-faith failure to settle, punitive damages assessed against the insured in the underlying action.
2. Whether an insurer’s unreasonable failure to settle can be a proximate cause of punitive damages imposed for the insured’s own egregious misconduct.

## Decision

- The California Supreme Court reversed the Court of Appeal and reinstated summary judgment for Transamerica.
- The Court held that, even if the insurer’s failure to settle was a cause in fact of the punitive award, it was not a proximate cause.
- The insured therefore could not recover from the insurer the amount of punitive damages assessed against the insured for its own misconduct.

## Legal Principles

- Liability policies in California include an implied covenant of good faith and fair dealing requiring reasonable efforts to settle third-party claims against the insured.
- An insurer that breaches this covenant may be liable in tort for damages proximately caused by the breach (including, in proper cases, amounts exceeding policy limits on compensatory liability).
- Punitive damages imposed for the insured’s own egregious conduct are legally attributable to the insured’s wrongdoing; an insurer’s failure to settle is too remote to be a proximate cause of those punitive damages.
- Public policy against shifting punitive damages to insurers bars recovery of an underlying punitive award indirectly by recharacterizing it as consequential damages in a bad-faith action.

## Conclusion

An insurer’s bad-faith failure to settle may support tort recovery for proximately caused losses, but it does not permit an insured to shift an underlying punitive damages award—imposed to punish the insured’s own misconduct—to the insurer.


PPG Indus., Inc. v. Transamerica Ins. Co., 20 Cal. 4th 310 (Cal. 1999)