California, United States of America
The following excerpt is from Commercial Union Assurance Companies v. Safeway Stores, Inc., 164 Cal.Rptr. 709, 26 Cal.3d 912, 610 P.2d 1038 (Cal. 1980):
"The insurer, in deciding whether a claim should be compromised, must take into account the interest of the insured and give it at least as much consideration as it does to its own interest. (See Ivy v. Pacific Automobile Ins. Co., 156 Cal.App.2d 652, 659 (320 P.2d 140).) When there is great risk of a recovery beyond the policy limits so that the most reasonable manner of disposing of the claim is a settlement which can be made within those limits, a consideration in good faith of the insured's interest requires the insurer to settle the claim. Its unwarranted refusal to do so constitutes a breach of the implied covenant of good faith and fair dealing."
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