California, United States of America
The following excerpt is from Safeco Ins. Co. v. Superior Court, 71 Cal.App.4th 782, 84 Cal.Rptr.2d 43 (Cal. App. 1999):
Of course, an insurer is required to act in good faith in dealing with its insured. Thus, in deciding whether or not to settle a claim, the insurer must take into account the interests of the insured, and when there is a great risk of recovery beyond the policy limits, a good faith consideration of the insured's interests may require the insurer to settle the claim within the policy limits. An unreasonable refusal to settle may subject the insurer to liability for the entire amount of the judgment rendered against the insured, including any portion in excess of the policy limits. (Comunale v. Traders & General Ins. Co. (1958) 50 Cal.2d 654, 658-661, 328 P.2d 198.)
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