In California, a Claim of Bad Faith, i.e., a Claim of Breach of the implied Covenant of Good Faith and Fair Dealing -- which is a tort -- will lie against a Liability Insurer even when the Insurer is providing its Insureds with a Defense and the Defense is provided under a Reservation of Rights. Lehman Commercial Paper Inc. v. Fidelity National Title Insurance Co., 2013 WL 26741 *4-*5, *6 (C.D. Cal. January 2, 2013).
Under the California tort of Breach of the implied Covenant of Good Faith and Fair Dealing, the judicial focus is on conduct rather than Insurance Coverage. An Insurance Company "could engage in other conduct -- such as unreasonably refusing to determine coverage -- that would give rise to tort liability even as it is discharging its contractual obligations." Lehman Commercial Paper Inc. v. Fidelity National Title Insurance Co., 2013 WL 26741 *5 (C.D. Cal. January 2, 2013).
In California as in many jurisdictions, a Title Insurance Company is a Liability Insurance Company for this purpose where the Title Insurance Policy or Policies provide for a Defense of the Insureds by the Title Insurance Company against lawsuits specified in the Title Insurance Policy, and the Insurer defends under a reservation of rights. See Lehman Commercial Paper Inc. v. Fidelity National Title Insurance Co., 2013 WL 26741 *6 (C.D. Cal. January 2, 2013).
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