TIMLIN, J.

I respectfully dissent.

I INTRODUCTION

In my opinion, the majority opinion, including its disposition, is based on:

(A) the faulty factual premises that:

(1) plaintiffs admitted that defendant's delay in settling "was not the problem" and

(2) nothing defendants allegedly did amounts to "affirmative misconduct"; and

(B) the equally faulty legal premises that defendants, as a matter of law, cannot be liable to plaintiffs because:

(1) tort liability based on intentional infliction of emotional distress (IIED) and its element of outrageous conduct depends on whether there was a "special relationship," a "preexisting, contractual relationship," or a "preexisting relationship" between defendants and plaintiffs, and no such relationship existed here;

(2) tort liability for negligent infliction of emotional distress (NIED) cannot exist unless plaintiffs were "direct victims"; plaintiffs cannot be "direct victims" unless they had a "preexisting relationship" (maj. opn., ante, at pp. 190, 205, 206) or a "preexisting, consensual relationship" (maj. opn. at p. 62, italics added) with defendants; and plaintiffs here had no such relationship with defendants;

(3) "pure" emotional distress does not constitute a personal injury (e.g., maj. opn., ante, at pp. 190, 200) and plaintiffs here suffered only "pure" emotional distress;

(4) allowing plaintiffs' recovery of emotional distress damages based on common law tortious IIED or NIED "would restore the precise evils" referred to in Moradi-Shalal v. Fireman's Fund Ins. Companies (1988) 46 Cal.3d 287, 304-305 [ 250 Cal.Rptr. 116, 758 P.2d 58] ( Moradi-Shalal) (maj. opn., ante, at p. 195, italics deleted);

(5) because there is no judicial precedent for recovery of emotional distress damages by third party claimants from a tortfeasor's insurer based on the insurer's tortious conduct, plaintiffs cannot state sufficient facts to allege a cause of action for IIED or NIED against defendants (e.g., maj. opn., ante, at p. 209);

(6) the holding in Burgess v. Superior Court (1992) 2 Cal.4th 1064 [ 9 Cal.Rptr.2d 615, 831 P.2d 1197] ( Burgess) precludes plaintiffs as third party claimants from recovering damages for emotional distress from their tortfeasor's insurer for the insurer's own tortious conduct because plaintiffs' claim, unlike the claim of the plaintiffs in Burgess, is "nonadjunct";

(7) it is plaintiffs' burden first to establish both the existence of a present duty and a breach of that duty, and then to present public policy reasons why defendants should not be exempted from general liability for their negligent conduct, rather than it being defendants' burden to present public policy reasons to justify excepting defendants from the application of general principles of tort law, principles which are applicable to all, including insurance companies. Plaintiffs purportedly have failed to meet that burden (maj. opn., ante, at pp. 202-204, 206-207, 209); and

(8) foreseeability is "essentially useless" as a factor in determining whether a defendant owes a duty to a plaintiff in "purely emotional distress cases," based on dicta in Bro v. Glaser (1994) 22 Cal.App.4th 1398, 1401-1402, 1437 [ 27 Cal.Rptr.2d 894] (hereafter Bro), Burgess, and Thing v. La Chusa (1989) 48 Cal.3d 644 [ 257 Cal.Rptr. 865, 771 P.2d 814] ( Thing). (Maj. opn., ante, at pp. 190, 201-202.)

Having now outlined those areas in which I believe the majority's most misleading statements and mischaracterizations exist, I will discuss them in more detail.

A. The Faulty Factual Premises Upon Which the Majority Opinion Is Based

The majority contends that plaintiffs "admitted" that the approximately three-year delay in settlement was not a problem, and contends that "[r]egardless of the spin which plaintiffs have put on [the facts alleged in their complaint], there is nothing finally alleged which amounts to affirmative misconduct." Both these characterizations of plaintiffs' position are incorrect.

1. The Plaintiffs Did Not Admit That Defendant's Delay in Settling Was Not a Problem

A fair reading of the first amended complaint (complaint) clearly shows that the gravamen of plaintiffs' claim is that (1) defendants delayed if making any attempts to settle plaintiffs' claim for almost three years; (2) defendants' delay and refusal to engage in good faith settlement negotiations were based in part on their use of knowingly false statements to plaintiffs concerning their insured's liability and plaintiffs' supposed preexisting conditions; and (3) defendants' motive in engaging in this affirmative conduct was their desire to keep the use of their funds for as long as possible, and to use the economic losses and emotional distress experienced by plaintiffs because of the underlying vehicular accident and the delay in settlement to obtain as advantageous a settlement for themselves as possible.

Specifically, plaintiffs alleged in their complaint that:

(1) defendants, with knowledge that their insured had admitted he did not see plaintiffs' car, and did not apply his brakes before rear-ending them, nonetheless denied and concealed his liability for the accident, when they knew that liability was reasonably clear;

(2) defendants refused to make any settlement offer, but instead asserted that plaintiffs had preexisting injuries, despite the fact that when they made such assertions, they had no reasonable basis for believing them to be true, and, in fact, knew them to be false;

(3) defendants knew that plaintiffs suffered severe emotional distress as a result of the fact that defendant refused for over three years to settle plaintiffs' claims where liability was reasonably clear and no other legitimate reasof existed for not settling;

(4) almost three years after the accident, and some two years and nine months after being apprised that plaintiffs were suffering from severe financial hardship proximately caused by the accident, and that plaintiffs were on the verge of being evicted from their home because of this financial hardship, and with no additional information regarding either liability or plaintiffs' alleged preexisting injuries, defendants sent plaintiffs a statutory offer to compromise, pursuant to Code of Civil Procedure section 998, in the sum of $295,000, which plaintiffs accepted; and

(5) defendants " actively undertook to deny the liability of their insured, and to deny that plaintiffs had suffered the wage loss and medical expenses and injuries that they had incurred, thereby stonewalling plaintiffs in an attempt to retain, as long as possible, for defendants' own benefit, the benefits payable to plaintiff[ s] under their insured's policy."

Thus, as is cogently obvious from plaintiffs' complaint, defendants' protracted delay in even attempting to settle plaintiffs' claim forms an integral part of the alleged wrong defendants committed against plaintiffs. The wrongful conduct, contrary to the majority's characterization of it, was composed of protracted delay accompanied by false statements, which statements are, in essence, circumstantial evidence of the motive behind the delay, i.e., that the reason for the delay was not because the insured was not clearly liable, or that plaintiffs had preexisting conditions, but that defendants simply wished to keep the insurer's funds in its own coffers, and wished to extract the most advantageous settlement possible by stonewalling until plaintiffs were in serious financial and emotional distress, and thus more likely to accept a lesser amount.

Thus, the complaint's allegations in toto are not limited simply to the defendants' delay in settling plaintiffs' claims, but encompass the defendants' refusal and protracted delay in not attempting to settle with plaintiffs and their wrongful reasons and ulterior purposes for such delay.

2. Plaintiffs Did Allege Facts Showing That Defendants Engaged in Affirmative Misconduct

The majority's contention that nothing alleged by plaintiffs constitutes "affirmative misconduct" is also patently incorrect. The plaintiffs' allegations of defendants' denial of the insured's liability, as well as their denial of plaintiffs' injuries and wage loss, defendants' concealment and withholding of information, their knowingly false statements to support their refusal to attempt settlement, and their refusal to make a settlement offer for years after their insured's liability was reasonably clear, constitute active conscious conduct by defendants.

The majority also concludes that the reasons given by defendants for the delay are irrelevant. The majority's conclusion in this regard is fatally flawed; it is an established legal principle that motive may sometimes show whether an act was tortious or not, e.g., a spite fence as a private nuisance and a lawsuit as malicious prosecution. (5 Witkin, Summary of Cal. Law (9th ed. 1988) Torts, § 19, p. 80.) False reasons for one's conduct may be circumstantial evidence of an ulterior, unspoken and illicit motivation. (See, e.g., People v. Osslo (1958) 50 Cal.2d 75, 93 [323 P.2d 39].)

The complaint's allegations do not simply or solely constitute assertions of tortious acts of omission or unintentional lapses or inaction by defendants, but state intentional tortious acts of delay and refusal by defendants for specific wrongful reasons and purposes.

B. The Faulty Legal Premises Upon Which the Majority Opinion Is Based 1. There Is No Requirement That There Be a Preexisting Consensual Relationship Between Plaintiffs and Defendants at the Time Defendants Engaged in the Tortious Conduct Alleged as IIED in Order That Defendants' Conduct May Be Considered to Be Outrageous, and 2. There Is No Requirement That There Be a Preexisting Consensual Relationship Between Plaintiffs and Defendants at the Time Defendants Engaged in the Tortious Conduct Alleged as NIED in Order for Plaintiffs to Be the "Direct Victims" of Defendants' Tortious Conduct

A major legal premise of the majority opinion as to both the IIED and NIED causes of action is that the plaintiffs here alleged no facts showing a "preexisting relationship" between plaintiffs and defendants. As to the NIED action, this lack of such alleged facts is converted by the majority's reliance on Bro and Burgess into its conclusion that plaintiffs therefore have failed to assert sufficient facts to show that they were the "direct victims" of any acts by defendants and, therefore, defendants owed no duty to plaintiffs. Consequently, plaintiffs are barred from recovering tort damages from defendants for NIED. (See, e.g., maj. opn., ante, at pp. 204-209.)

As to the IIED action, the majority seizes on Bro's newly-concocted-out-of-whole-cloth concept of "preexisting consensual relationship," which Bro, an NIED case, purported to extract from Burgess. ( Bro, 22 Cal.App.4th 1398, 1416: "[I]t can fairly be hypothesized from the Burgess pronouncements that the threshold question or first prong of our recommended test is to ask if there has been a preexisting, consensual relationship between the emotionally distressed plaintiff and the allegedly offending defendant. If not, that plaintiff is not in the class of persons whom Molien and Burgess perceive as having a protected interest in being free of the negligent infliction of emotional distress." [Italics added.]) The majority has become so enamored with Bro's self-created concept of "preexisting consensual relationship" that it feels compelled to apply it to plaintiffs' IIED action here, with no logical explanation as to why this concept is or should be applicable to an intentional tort.

Although the majority, in its discussion of plaintiffs' IIED action, does not refer to the classification of "direct victims" as that phrase is used in its analysis of the existence of a viable NIED action, it does add "preexisting contractual relationship" as a controlling analytic factor in determining the existence of outrageous conduct, which is an element of an IIED action.

According to the majority, in an IIED action, this allegation of a "preexisting relationship" is necessary to establish that the plaintiff had the kind of "expectation" which would lead a court to conclude that the defendant's behavior was "outrageous," the majority here having held that "the same behavior by respective defendants can be outrageous where there is privity and not where there is none."

Further, according to the majority, in an IIED action a plaintiff must establish that the defendant breached a duty owed to the plaintiff, based on its conclusion that the existence of a "special" or "preexisting" relationship is linked to the element of breach. (Italics in original omitted and italics added: "whereas the duty to refrain from intentionally inflicting emotional distress transcended the special relationship, that relationship was decisive in finding breach"; "In sum, while the law in the first instance does not require a preexisting relationship between the parties as a precondition for stating a cause of action for intentional infliction of emotional distress, there are a group of cases, of which Fletcher [v. Western National Life Ins. Co. (1970) 10 Cal.App.3d 376 ( 89 Cal.Rptr. 78, 47 A.L.R.3d 286), hereafter Fletcher] and Little [v. Stuyvesant Life Ins. Co. (1977) 67 Cal.App.3d 451 ( 136 Cal.Rptr. 653)] are illustrative, where finding a breach of duty to refrain from intentionally inflicting emotional distress derives primarily from the fact of a preexisting, contractual (special) relationship."

Although the majority takes great pains to state that as to an IIED action, a plaintiff need not allege a preexisting relationship to establish a right to be free of outrageous conduct by a defendant (implying a correlative duty by defendant not to engage in such conduct), its requirement that such be alleged to establish a breach of such duty actually limits the duty to refrain from outrageous conduct to a certain class of persons, i.e., those who had a preexisting relationship to plaintiffs.

In my opinion, the majority, by its application of the interchangeable concepts of preexisting special relationship or preexisting consensual relationship or preexisting contractual relationship to certain elements of a tort action for NIED, and to certain elements of a tort action for IIED, in effect has blurred, if not eliminated, such separate causes of action. The majority would require a person claiming "purely emotional distress damages" caused by another's conduct to (1) allege in a NIED action that she or he is a direct victim, i.e., had a preexisting consensual relationship with the defendant as defined in Bro, and (2) allege in an IIED action a prior existing relationship as either an aspect of breach (in my view really duty) in order to sufficiently allege the outrageousness of the misconduct. This, of course, flies in the face of the long-standing principles behind liability for intentional torts and liability for negligence, and appears to be a transparent attempt to require privity of contract as a prerequisite for tort liability, an attempt clearly at odds with long-standing legislative and judicial trends. (See 3 Witkin, Summary of Cal. Law, supra, Sales, §§ 95, 106, pp. 79-80, 89.)

The majority also muddies basic tort law in two ways. First, it contends that "[i]n Little and Fletcher, at the heart of our holding nonpayment of policy benefits to be outrageous was the presence of a preexisting, contractual relationship under which arose an affirmative duty to pay those benefits." These cases do not stand for any such proposition, and the majority does not (and cannot) cite to, nor quote, any language which states that the outrageousness of a given behavior is dependent on the existence of a prior contractual relationship between the plaintiff and defendant.

While it is true that the author of Fletcher, Justice Kaufman, noted that the relationship between the parties was significant in determining whether liability for IIED should be imposed ( Fletcher, supra, 10 Cal.App.3d at p. 403), the authorities he cited for that proposition did not relate to solely contractual relationships between plaintiffs and defendants.

For example, in Alcorn v. Anbro Engineering, Inc., supra, 2 Cal.3d 493, the plaintiff was the employee of the defendants. While the relationship of employer and employee may be considered contractual in nature, this was not the aspect of the relationship which the court in Alcorn mentioned; instead the court considered the fact that defendants "[stood] in a position or relation of authority over plaintiff," and were "aware of his particular susceptibility to emotional distress." ( 2 Cal.3d at p. 498, fns. omitted.)

So, too, comment e of section 46 of the Restatement Second of Torts, also relied upon in Fletcher, makes no reference to contractual relationships. Instead, it states: "The extreme and outrageous character of the conduct may arise from an abuse by the actor of a position, or a relation with the other, which gives him actual or apparent authority over the other, or power to affect his interests. . . . In particular police officers, school authorities, landlords, and collecting creditors have been held liable for extreme abuse of their position. . . ." It is clear that the common factor uniting these varied categories of actors is not their potential or existing contractual relationships with others, but their positions of power.

It is significant that Justice Kaufman also remarked, in connection with the importance of the relationship between the parties, that "Additionally, the special obligation of public utilities and other enterprises affected with the public interest has been noted as significant in the imposition of liability upon such defendants even in the absence of outrageous conduct, apparently upon a policy basis of encouraging fair treatment of the public whom the enterprises serve. [Citations]." ( Fletcher, supra, 10 Cal.App.3d at p. 403, italics added.) Given the position of automobile liability insurers in today's society and economy, as discussed in more detail later in this dissent, the majority's insistence on essentially exempting such insurers from liability for IIED as to all members of the general public with whom they may be called to interact is illogical, unreasonable, and unfair.

Second, the majority mistakenly implies that Witkin, in commenting on the cases involving liability for IIED, specifically referred to the absence of privity in those cases where no liability was found, and the presence of privity where liability did exist. ("According to Witkin, the ratio decidendi in each of these first-party cases, leading to a finding that nonpayment of benefits due the insureds under the several policies was outrageous, derived from the relationship of insured and insurer," and "To emphasize that this special relationship was the crux of finding breach in these decisions, Witkin proceeds immediately thereafter to discuss cases where the plaintiffs' claims for intentional infliction of emotional distress were denied for want of privity.") I can only encourage the readers of this opinion to read the noted sections in Witkin for themselves; Witkin makes no mention of the presence or absence of privity, and never states that it was the relationship of insured and insurer which made the insurer's conduct outrageous.

3. Emotional Distress, Without Accompanying Physical Injury, Is Legally Compensable as a Personal Injury

The majority asserts that plaintiffs assume that "all foreseeable emotional distress constitutes an injury" and that such an assumption is insupportable as a matter of logic and precedent. According to the majority, in order to show the existence of an injury subject to the provisions of Civil Code section 1714, the plaintiffs must show affirmatively that they were owed a duty and that it was breached, and this they failed to do.

The majority cites no authority for the proposition that injury is defined by duty and breach. If I, through my own negligence, slip and fall and hurt my back, I have sustained an injury; the injury has nothing to do with whether anyone owed me a duty and breached it. Duty and breach relate to the question whether the defendant will be held liable to the plaintiff, i.e., whether the defendant will have to compensate plaintiff for the harm suffered. Duty and breach do not define whether the plaintiff has suffered an injury.

Further, the majority also implies that emotional distress alone, without any accompanying physical injury, is not a form of personal injury which is legally compensable. The following quote from Potter v. Firestone Tire Rubber Co. (1993) 6 Cal.4th 965 [ 25 Cal.Rptr.2d 550, 863 P.2d 795] debunks this suggestion:

"Amici curiae first assert that, under California case law, the existence of a physical injury is a predicate to recovering damages for emotional distress in a negligence action unless the action involves `bystander' recovery (e.g., Thing v. La Chusa (1989) 48 Cal.3d 644 [ 257 Cal.Rptr. 86, 771 P.2d 814] [hereafter Thing]) or [unless] there is a `preexisting relationship' between the plaintiff and defendant (e.g., Marlene F. [v. Affiliated Psychiatric Medical Clinic, Inc. (1989)] supra, 48 Cal.3d 583) which creates a duty to the plaintiff, neither of which is implicated here. This assertion is plainly without merit. [¶] Significantly, we recently reaffirmed the principle that, in California, `damages for negligently inflicted emotional distress may be recovered in the absence of physical injury or impact. . . .' ( Burgess, supra, 2 Cal.4th at p. 1074.) We held that `physical injury is not a prerequisite for recovering damages for serious emotional distress,' especially where `there exists a "guarantee of genuineness in the circumstances of the case." [Citation.]' ( Id., at p. 1079.) [¶] Contrary to amici curiae's assertions, this principle has never been restricted to cases involving bystanders or preexisting relationships. Notably, amici curiae cite no authority even suggesting such a limitation." ( 6 Cal.4th at p. 986.)

Emotional distress without accompanying physical injury, as alleged by plaintiffs here, is, in fact, a legally compensable "personal injury" (see, e.g., 6 Witkin, Summary of Cal. Law, supra, Torts, §§ 1403, 1409, 1410, pp. 874, 879, 880) in cases in which a plaintiff's serious emotional distress was caused by a defendant's breach of a legal duty owed to the plaintiff.

4. The Holding in Moradi-Shalal Does Not Preclude Third Party Claimants From Suing Insurers for IIED or NIED in a Proper Case

The majority's final method of attempting to validate its position that insurers can never be held liable for IIED is to rely on Moradi-Shalal for the proposition that "both before and after Moradi-Shalal, there was not and is not a cause of action for intentional infliction of emotional distress, where based only on a delay in offering to settle, even though the insurer's behavior may have mirrored those settlement practices defined as unfair by the Insurance Code."

However, the court in Moradi-Shalal was not dealing with the issue of whether insurers could ever owe any kind of a common law duty to third party claimants; instead, it was dealing with the holding in Royal Globe Ins. Co. v. Superior Court (1979) 23 Cal.3d 880 [ 153 Cal.Rptr. 842, 592 P.2d 329] ( Royal Globe) that third party claimants could maintain a private, statutorily based cause of action against insurers for violations of the Insurance Code. ( Moradi-Shalal, 46 Cal.3d at p. 304.) And, in overruling Royal Globe, the court in Moradi-Shalal, after cautioning that its decision was not an invitation to the insurance industry to commit the unfair practices proscribed by the Insurance Code, specifically stated that ". . . the courts retain jurisdiction to impose civil damages or other remedies against insurers in appropriate common law actions, based on such traditional theories as fraud, infliction of emotional distress, and (as to the insured) either breach of contract or breach of the implied covenant of good faith and fair dealing. Punitive damages may be available in actions not arising from contract, where fraud, oppression or malice is proved. (See Civ. Code, § 3294) In addition, prejudgment interest may be awarded where an insurer has attempted to avoid a prompt, fair settlement. (See id., § 3291.)" ( Moradi-Shalal, 46 Cal.3d at pp. 304-305.)

The majority opinion seeks to avoid the clear import of the above-noted language, to wit, that Moradi-Shalal specifically anticipated that its overruling of Royal Globe did not preclude third party claimants from maintaining any other kinds of civil action against insurers, by characterizing it as "reassuring" (maj. opn., ante, at p. 189) and by then quoting Lee v. Travelers Companies (1988) 205 Cal.App.3d 691 [ 252 Cal.Rptr. 468] ( Lee): "`. . . it is well settled that "[t]he failure to accept an offer of settlement or the violation of statutory duties under the Insurance Code section 790.03 does not itself constitute the type of outrageous conduct which will support a cause of action for intentional infliction of emotional distress. [Citations.]"' ( Lee, supra, 205 Cal.App.3d 691, 694-695.)" The majority then "construe[s]" Lee to mean (but, notably not to have held) that a claimant can never state a cause of action for IIED based on an insurer's delay in offering to settle, "even though the insurer's behavior may have mirrored those settlement practices defined as unfair by the Insurance Code."

However, the majority opinion has pointedly ignored the language in Lee which immediately follows the portion quoted by the majority opinion, to wit: "Since plaintiffs have explicitly premised their intentional infliction of emotional distress count upon defendants' purported failure to `fulfill their statutory duties . . .' and have not alleged with specificity any other acts `. . . so extreme as to exceed all bounds of that usually tolerated in a civilized community' [citations], the trial court's ruling [sustaining defendants' demurrer without leave to amend] on that count was also correct." ( 205 Cal.App.3d at p. 695, italics added.)

In other words, Lee did not hold that a third party claimant could never state a cause of action based on "behavior" by the insurer which "mirrored those settlement practices defined as unfair by the Insurance Code." Instead, Lee held that it was not sufficient, for a cause of action for IIED, to simply allege a failure to fulfill statutory duties; instead, a plaintiff must specifically allege acts by the insurer which are outrageous. For example, in Doctors' Co. Ins. Services v. Superior Court (1990) 225 Cal.App.3d 1284, 1292 [ 275 Cal.Rptr. 674], the appellate court specifically commented, based on the opinion in Lee, that "a cause of action for intentional infliction of emotional distress may lie where an insurer sends harassing or deceptive letters in an effort to induce a third party claimant to settle. [Citations.]"

To reiterate, Moradi-Shalal did no more than deny to private plaintiffs a statutorily based, unfair claims practices cause of action pursuant to the Unfair Insurance Practices Act (UIPA). My view that the "reassuring" language in Moradi-Shalal applies to both IIED and NIED actions is generally supported by the court in Manufacturers Life Ins. Co. v. Superior Court (1994) 27 Cal.App.4th 67 [ 33 Cal.Rptr.2d 424] review granted October 13, 1994 (S031022), which stated:

"While rejecting the attempt to predicate new rights of action on the UIPA, the court in Moradi-Shalal emphasized that existing remedies were unaffected by the Act. It `urge[d] the Insurance Commissioner and the courts to continue to enforce the laws forbidding [unlawful insurance] practices to the full extent consistent with our opinion,' and declared that `the courts retain jurisdiction to impose civil damages or other remedies against insurers in appropriate common law actions, based on such traditional theories as fraud, infliction of emotional distress, and (as to the insured) either breach of contract or breach of the implied covenant of good faith and fair dealing.' ( Id. at pp. 304-305, italics added.)

". . . . . . . . . . . . . . . . . . . . . . . . . . . .

"We understand the reference to the common law in Moradi-Shalal to rest on the premise that the cause of action asserted there — unfair claims practices — had no statutory basis outside of the UIPA. Since the UIPA itself afforded no right of action, the plaintiff was relegated to such common law claims as might be available.

" Moradi-Shalal marks a return to the fundamental principle that the UIPA, like all statutes, is to be applied according to its terms. Its language neither creates new private rights nor destroys old ones. This was the view of Justice Richardson, whose dissent in Royal Globe, 23 Cal.3d [880] at pp. 895-898, was heavily cited in Moradi-Shalal. ( 46 Cal.3d at pp. 294-296.) He wrote that section 790.09 `preserves any preexisting civil or criminal liability which the insurer might face under other statutory or decisional law.' ( Royal Globe, supra, 23 Cal.3d at p. 893, some italics added; see id. at p. 896.) Similarly, the court in Shernoff v. Superior Court 44 Cal.App.3d 406, 409 [ 118 Cal.Rptr. 680], acknowledges that section 790.09 `expressly reserves to litigants all civil and criminal remedies against persons who have violated the law.' (Italics added.) These authorities are consistent with the language of the statute and with the unanimous view of courts elsewhere." ( 27 Cal.App.4th at pp. 85-86.)

Here, plaintiffs in their amended complaint eliminated earlier allegations that defendants had failed to fulfill their statutory duties under Insurance Code section 790.03 Moradi-Shalal precluded such allegations. Plaintiffs instead alleged specific conduct as a basis for their common law actions, as noted earlier, which conduct, if true, was sufficiently extreme to constitute the basis for a cause of action for IIED. (See pp. 231-235, post, concluding that conduct which would be considered outrageous if directed by an insurer at an insured is also outrageous if directed by an insurer at a third party claimant.)

Thus, contrary to the majority's assertions, all that is required to state a prima facie case of IIED are allegations of: "`(1) outrageous conduct by the defendant, (2) intention to cause or reckless disregard of the possibility of causing emotional distress, (3) severe emotional suffering and (4) actual and proximate causation of the emotional distress. [Citations.]'" ( Agarwal v. Johnson (1979) 25 Cal.3d 932, 946 [ 160 Cal.Rptr. 141, 603 P.2d 58].) And, also contrary to the majority's assertion, there need not be privity or a preexisting contractual relationship between the defendant and plaintiff before (1) the defendant's conduct can be characterized as outrageous; or (2) the defendant can be found to have breached its duty owed to the plaintiff. Thus, plaintiffs here have clearly alleged every element necessary to state a cause of action for IIED.

5. The Lack of Case Law Directly on Point Does Not Preclude Third Party Claimants From Suing for Damages for Emotional Distress Inflicted Either Negligently or Intentionally by Insurers

First, the majority makes much of the fact that plaintiffs have not cited any opinion in which a claimant's cause of action for NIED against an insurer has been recognized. (Maj. opn., ante, at p. 189.) The fact that plaintiffs have not cited any such previously published opinions is irrelevant: "The concept that there are no causes of action except those that have been recognized by precedent, assumed at some point in the common law, was not accepted generally at early common law nor is it accepted today." ( Rosefield v. Rosefield (1963) 221 Cal.App.2d 431, 435 [ 34 Cal.Rptr. 479]; 5 Witkin, Summary of Cal. Law, supra, Torts, § 16, pp. 75-77.)

If such were not the rule, there would not be causes of action for product liability, for violation of the right of privacy, for interference with prospective business advantages, or for injury to an unborn child. (See cases cited at 5 Witkin, Summary of Cal. Law, supra, Torts, § 16 at p. 77.) Here, plaintiffs are not asking us to create a new cause of action, because a cause of action for NIED has existed for some time now. Instead, they are simply asking that this court apply the same principles of tort liability to automobile liability insurance companies in their relationship with claimants as are applied to other tortfeasors.

Second, the majority claims that there has been a "uniform unwillingness of courts up to now to create a common-law duty to settle running in favor of third parties," which supposed unwillingness it attributes to the "conflict of interest" implicit in "any undertaking to characterize the legally adverse relationship between insureds and third parties as a predicate for imposing a duty to settle. . . ."

Remarkably, the majority itself cites no cases which have held, as a matter of law, that third party claimants cannot maintain an ordinary, common law cause of action for IIED or NIED against insurers if they allege the proper elements. The majority does assert that there are cases "where third parties have failed in their efforts to recover damages from their tortfeasor's insurance company for negligent infliction of emotional distress," (maj. opn., ante, at p. 207) and cites Soto v. Royal Globe Ins. Co. (1986) 184 Cal.App.3d 420 [ 229 Cal.Rptr. 192] (maj. opn., ante, at pp. 207-208) and Lee, supra, 205 Cal.App.3d 691. (Maj. opn. at pp. 208-209.)

The majority's reliance on these two cases for the proposition that third party claimants can never successfully state a cause of action for NIED against an insurer is misplaced. Lee's inapplicability for such a proposition has already been discussed. (See pp. 221-222, ante.) As for Soto, it was a pre- Molien case, and thus the majority's attempt to use its holding as post- Molien authority lacks persuasive weight.

Moreover, in Soto, this court held that the family members of an injured employee could not state a cause of action for NIED against an insurer who delayed paying the employee's claim for workers' compensation benefits, but not because of lack of "privity" or a "preexisting relationship" between the insurer and the plaintiff family members.

Moreover, the majority has not cited any cases to support its claim that there is a "uniform unwillingness" "to create a common-law duty" on the part of insurers to settle, let alone to create the duty actually at issue here: the duty to deal honestly and in good faith during settlement negotiations with third party claimants, and to attempt to come to a fair settlement within a reasonable amount of time after the insured's liability has become reasonably clear and the claimants' damages are reasonably ascertainable.

Instead, the majority concentrates on cases in which it was held that third parties lacked standing to sue the tortfeasor's insurers for breach of the implied contractual covenant of good faith and fair dealing, and ignores the fact that "Privity of contract [a form of preexisting relationship] is not necessary to establish the existence of a duty to exercise ordinary care not to injure another, but such duty may arise out of a voluntarily assumed relationship if public policy dictates the existence of such a duty." ( Merrill v. Buck (1962) 58 Cal.2d 552, 561-562 [ 25 Cal.Rptr. 456, 375 P.2d 304], italics added; see also Lacher v. Superior Court ( Southwest Diversified, Inc.) (1991) 230 Cal.App.3d 1038, 1047-1048 [ 281 Cal.Rptr. 640]; Hanberry v. Hearst Corp. (1969) 276 Cal.App.2d 680, 684-685 [ 81 Cal.Rptr. 519, 39 A.L.R.3d 173].)

It is rather obvious that by entering into policies of automobile collision liability insurance, insurers are voluntarily assuming a duty to the insured to exercise due care in handling claims by such insured under such policies, just as it is obvious that they are also entering into a potential relationship with yet-to-be-identified claimants who may be injured by their insureds, which potential relationship can and will ripen into a legally significant relationship once the insurer is notified that its insured has injured a particular claimant.

Finally, it is also apparent (despite the holding in Moradi-Shalal that such claimants may not bring a private civil action pursuant to Insurance Code section 790.03) that both case law and Civil Code section 1714 impose a duty on insurers to use due care, and to act in good faith when handling third parties' claims. (See, e.g., Moradi-Shalal, supra, 46 Cal.3d at pp. 304-305; Burgess, supra, 2 Cal.4th at p. 1079, quoting Civ. Code, § 1714, subd. (a) ["`Everyone is responsible, not only for the result of his willful acts, but also for an injury occasioned to another by his want of ordinary care or skill in the management of his property or person, except so far as the latter has, willfully or by want of ordinary care, brought the injury upon himself.'"].)

Therefore, the lack of case law directly on point in no way precludes plaintiffs here from bringing a common law, tort-based action against defendants. Additionally, the majority's unsupported assertions to the contrary, there are no cases evidencing any judicial unwillingness to require insurers to exercise the same kind of care in handling their affairs as is required of all other businesses and individuals.

6. The Majority's Distinction Between "Adjunct" and "Nonadjunct" Claims for Emotional Distress Damages Is Meaningless

The majority, in connection with its attempt to explain why automobile liability insurers are not subject to the general rule of liability stated in Civil Code section 1714, and to buttress its assertion that the emotional distress experienced by third party claimants when such insurers refuse to conduct settlement negotiations in good faith is not an injury, characterizes the claims of such claimants as "nonadjunct" in contrast with the "adjunct" claims of plaintiffs who are entitled to recover.

The majority never defines the terms "adjunct" and "nonadjunct" as used to describe claims for emotional distress, and cites no authority for its use of these terms. However, the concept of "adjunct" and "nonadjunct" claims or "adjunct" and "nonadjunct" damages was first used by the author of the majority opinion here, in the earlier opinion he authored in Bro, supra, 22 Cal.App.4th at pages 1417, 1420-1437 and 1444. In Bro, the terms were apparently defined as follows: "These classifications involve whether such claims [for emotional distress] damages were asserted in addition to other claims for damages (thus, adjunct) or whether such claims stood alone (thus, nonadjunct)." ( 22 Cal.App.4th at p. 1417.)

The opinion in Bro made an abbreviated attempt to legitimate its use of the adjunct/nonadjunct distinction as a basis for denying recovery to plaintiffs with only "nonadjunct" claims by asserting that in Burgess, "The Supreme Court ruled that the mother was not a bystander but `may state a claim for [adjunct] damages for serious emotional distress arising from the negligent delivery of her child.' ( Burgess, supra, 2 Cal.4th 1064, 1085.)" ( Bro, supra, 22 Cal.App.4th at p. 1414.) The Bro opinion's use of brackets around the word "adjunct" is, of course, the clue to the sincerity of this attempt to coin a new classification of a third party claim, based on a newly minted damage categorization being entitled "adjunct" or "nonadjunct." The court in Burgess, of course, never mentioned adjunct or nonadjunct claims.

Essentially what the court did in Bro, and what the majority attempts to do here as well, is to create a new rule (lacking any rational basis) that only when a plaintiff's claim for emotional distress is "adjunct" to some other claim, e.g., a claim for medical malpractice (even though both claims are based on one primary right, i.e., the right not to be harmed by the negligent conduct of another), will the plaintiff be allowed to recover. This is simply an effort to return to the days when plaintiffs could not recover for emotional distress which was unaccompanied by physical injury. No appellate court, including our Supreme Court, has indicated the slightest interest in reinstating such a requirement.

7. It Is Defendants' Burden to Point to Public Policy Reasons Which Justify Exempting Them From Liability for Their Negligent Conduct

The majority first urges that the holding in Rowland v. Christian (1968) 69 Cal.2d 108 [ 70 Cal.Rptr. 97, 443 P.2d 561, 32 A.L.R.3d 496] ( Rowland) upon which plaintiffs rely, is irrelevant here because (1) Rowland involved a "personal (physical) injury" (and plaintiffs here suffered no such injury); and (2) Rowland had nothing to do with the negligent infliction of emotional distress (and the case here does). (Maj. opn., ante, at pp. 198-200.)

As discussed above, plaintiffs here did suffer an injury. Furthermore, Rowland, supra, 69 Cal.2d 108 held, at pages 112-113, that a person is liable for injuries caused by his failure to exercise ordinary care in the circumstances, and, unless there is a statutory exception declaring an exception to the fundamental principle stated in section 1714, no other exception should be made unless the latter is clearly supported by public policy. This general rule applies to all cases involving injury caused by another's negligent conduct, not simply to cases involving invitees of occupiers of property or "physical" injuries such as cut hands.

The majority opinion also states that it is up to plaintiffs to point to public policy reasons which justify imposing liability on insurers for their negligent conduct committed against third party claimants while handling the latter's claims. (Maj. opn., ante, at pp. 202, 209.)

However, as analyzed in more detail later, it is defendants' responsibility to demonstrate a statutory exception or a compelling public policy reason for exempting insurers from liability to third party claimants for their negligent acts. The defendants, and the majority, have failed to do so.

Although the majority has excused itself from applying any of the public policy factors which might favor exempting defendants here from liability to plaintiffs for their allegedly negligent acts, I accept the majority's invitation to consider and apply the Rowland analytic factors to the factual allegations of this case. As set forth later in this dissenting opinion, I conclude that no policy reason exists for exempting insurers from liability to third party claimants injured by an insurer's wrongful acts. To the contrary, the application of such factors supports the existence of a duty by defendants to exercise ordinary care in handling plaintiffs' claims.

8. Foreseeability Continues to Be One of Several Factors Applicable to a Consideration of Whether a Defendant Should Be Excepted for Policy Reasons From Its General Liability to a Plaintiff for Its Negligence Even Though Plaintiff Is Primarily Seeking Damages for Emotional Distress

The majority also asserts that foreseeability is "essentially useless" as a factor in determining whether a defendant owes a duty to a plaintiff in "purely emotional distress cases," based on dicta in Bro, supra, 22 Cal.App.4th at pages 1401-1402, 1437, Burgess, and Thing. (Maj. opn., ante, at pp. 190, 201-202.) This assertion is patently wrong. In Burgess, our Supreme Court made a comment that "`foreseeability of the injury alone is not a useful "guideline" or a meaningful restriction on the scope of [a NIED action]'" ( Burgess, supra, 2 Cal.4th at p. 1074, quoting Thing, supra, 48 Cal.3d at p. 663, italics added), but it certainly did not state that foreseeability was useless in determining the issue of duty. In fact, in the post- Burgess opinion of Ann M. v. Pacific Plaza Shopping Center (1993) 6 Cal.4th 666 [ 25 Cal.Rptr.2d 137, 863 P.2d 207], Justice Panelli, writing for a six-justice majority, stated: "In this [area, i.e., the area of tort law concerning a defendant's duty to take affirmative action to control the wrongful acts of third parties], as in other areas of tort law, foreseeability is a crucial factor in determining the existence of duty. [Citations.]" ( 6 Cal.4th at pp. 676-677, italics added; see also Tarasoff v. Regents of University of California (1976) 17 Cal.3d 425, 434 [ 131 Cal.Rptr. 14, 551 P.2d 334, 83 A.L.R.3d 1166] [ Tarasoff].)

Having laid out the major factual and legal premises upon which the majority's analysis is based and my general response to the fallaciousness of such, I now examine in more critical detail the erroneous reasoning in which the majority engages by reason of its assuming the correctness of these premises to justify its affirmance of the trial court's order.

II DISCUSSION

A. Plaintiffs' Cause of Action for IIED

The majority opinion uses a melange of different arguments to discredit plaintiffs' cause of action for IIED. After this melange is separated, it is apparent that none of its component points is persuasive.

1. Plaintiffs Have Alleged Sufficient Facts to Show the Outrageous Conduct Necessary to Support a Cause of Action for IIED a. The Facts Alleged Here, Which Are Substantially Similar to Facts Found in Fletcher and Little to Be Sufficient to Constitute "Outrageous Conduct" by an Insurer, Cannot Be Distinguished on the Ground That Plaintiffs Here Supposedly Had No "Preexisting Relationship" or Privity of Contract With Defendants.

The majority opinion asserts that the facts alleged by plaintiffs do not constitute the kind of outrageous conduct necessary to support a cause of action for IIED, cursorily dismissing plaintiffs' reliance on Fletcher and Little by observing that in both cases the plaintiffs and defendants had a "preexisting, contractual relationship" under which " an affirmative duty to pay" policy benefits arose. In other words, the majority attempts to distinguish Fletcher and Little because they were first party, breach of contract cases. However, what the majority fails to deal with is that the plaintiffs in both Fletcher and Little also sued for IIED, a tort cause of action as to which the first party/third party, "preexisting, contractual relationship" distinction is irrelevant.

The distinction between first and third party cases is clearly relevant should a third party claimant attempt to sue an insurer for breach of contract, or for breach of the implied contractual duty of good faith and fair dealing (see, e.g., Royal Globe, supra, 23 Cal.3d 880, 889-890; Murphy v. Allstate Ins. Co. (1976) 17 Cal.3d 937, 940-941 [ 132 Cal.Rptr. 424, 553 P.2d 584]) but it is completely irrelevant in cases involving tort causes of action because the determinative relationship between plaintiff and defendant in tort cases is not one of contractual privity or of a "preexisting consensual relationship." Rather, it is one based on the balancing of public policy factors necessary in deciding whether a tort duty exists. ( Thompson v. County of Alameda (1980) 27 Cal.3d 741, 750 [ 167 Cal.Rptr. 70, 614 P.2d 728, 12 A.L.R.4th 701].) Therefore, the majority's reliance on the first party/third party, "preexisting, contractual relationship" distinction is simply misplaced.

In Fletcher, the insured sued his insurer for, among other things, IIED. This claim was based on allegations that the insurer had made false and threatening communications to the insured for the purpose of causing him to surrender his policy or to enter into a disadvantageous settlement. The jury returned a verdict for the insured, and the insurer appealed, conceding that its behavior towards its insured was outrageous, but contending that its conduct was privileged because it occurred during the process of settlement negotiations.

Fletcher held that an insurer, in pursuing its own economic interests, is privileged to assert its legal rights and to communicate its settlement position to its insured, despite a substantial certainty that in doing so it will cause its insured emotional distress. However, it also stated that this privilege is not absolute; such assertions must be made in a permissible way, and with a good faith belief in the existence of the rights asserted, and if the privilege is exercised in an outrageous manner, the person so doing may be held liable for IIED. ( 10 Cal.App.3d at p. 395.) It held that the insurer's bad faith refusals to make payments under the insured's policy of disability insurance, which were employed in concert with false and threatening communications to plaintiff intended to cause him to surrender his policy or accept a disadvantageous settlement, constituted conduct which could form the basis for an action for damages for IIED. ( 10 Cal.App.3d at p. 401.)

This reasoning is in clear contrast to the majority's assertion that it makes no difference in a duty analysis what reasons an insurer may have for refusing to settle a claim, or how those reasons are expressed, because it has no duty to a third party claimant to settle. According to the majority's view, in third party cases, insurers, with impunity, may refuse to settle claims for reasons entirely unrelated to questions of the insured's liability and/or the claimants' damages, instead justifying their refusal to settle simply on the basis of the insurer's economic self-interest. However, a society which depends on automobile liability insurance as much as ours does simply cannot afford to adopt such a viewpoint.

In Little, the insured sued defendant insurer for IIED after the defendant insurer purposefully ignored the great bulk of the information it had relating to its insured's medical condition as part of a course of justifying its predetermined course of discontinuing disability benefits to which the insured was entitled. Because of the financial hardships caused by the wrongful termination of her benefits, plaintiff was forced to sell her home and to live in a public housing project with her daughter, and thereafter suffered emotional distress resulting directly not only from defendant's conduct, but from the economic problems caused directly by defendant's conduct. Held, "[w]hile this conduct is less egregious than that of the defendant in Fletcher . . ., the jury was fully justified in impliedly finding defendant's conduct outrageous." ( 67 Cal.App.3d at p. 462.)

Plaintiffs here have alleged facts very similar to those held in Fletcher and Little to be sufficient to constitute a cause of action for IIED: that (1) the insurer had sufficient information regarding reasonably clear liability by its insured and plaintiffs' damages to implicate its duty to attempt, in good faith, to effectuate a prompt, fair and equitable settlement, (2) the insurer did not make any attempt to effectuate a settlement for nearly three years after receiving such information, but instead, with no reasonable basis for believing such to be the case, denied liability and asserted falsely that plaintiffs had preexisting injuries (which implicitly would reduce any damages they would be entitled to receive, even assuming liability existed), (3) the insurer made no attempt to effectuate an equitable settlement for nearly three years, with knowledge of the financial and emotional distress plaintiffs were suffering because of the injuries caused by the accident with the insured and because of the concomitant loss of income and the expense of medical care, it being alleged in part that plaintiff, Judith Krupnick, was totally disabled by the accident and that plaintiffs, as of July 15, 1983, were on the verge of being evicted from their home due to such financial hardship, (4) the insurer knew plaintiffs were suffering severe emotional distress as a result of the insurer's refusal for more than three years to settle their claims, (5) the insurer then made a settlement offer with no more information than it had had some three months after the accident, and (6) this long period of refusing to effectuate a settlement was motivated by the insurer's desire to retain monies payable to plaintiffs under the policy for as long as possible.

And, just as in Little, plaintiffs alleged facts from which it can be reasonably inferred that defendants here simply ignored their insured's admissions establishing the high likelihood of his liability, ignored plaintiffs' evidence of their injuries, and made unfounded assertions that plaintiffs had preexisting injuries, all as part of a course of justifying defendants' predetermined course of withholding payment of any settlement for as long as possible.

There is no conceivable reason based on public policy or logic to allow first parties to recover for IIED under such facts while denying third party claimants the same right. The only reason discernible in the majority's analysis is that "[i]nsurance companies exist to provide a critical financial indemnity for the risks of their insureds not to salve the feelings of the displeased third party claimants" and that "[u]nder [the contract of indemnity with their insured] [an insurer's] only duty [is] to indemnify [the insured]"; and therefore "there [is] no legal reason or requirement for the insurance carrier ever to have anything to do with plaintiff third party claimants." This, of course, is patently untrue.

The fact that there is an implied contractual duty running to the insured to settle in an appropriate case (see Murphy v. Allstate Ins. Co., supra, 17 Cal.3d at pp. 940-941) and no such implied contractual duty running to an injured claimant ( id. at p. 941), does not lead to the conclusion that the insurer has no separate duty to the claimant, pursuant to basic principles of tort law, the Insurance Code, and Civil Code section 1714 After the third party claimant has submitted a claim to the insurer and thereby established a relationship with it, the insurer has a duty to attempt to effectuate, in a reasonable amount of time, a fair and equitable settlement once liability has become reasonably clear and the insurer has a general idea of the nature and extent of the damages which the claimant could recover in an action at law.

As to tort liability, one's entitlement to a remedy for a wrong against one should not be based on a party status distinction necessary for the application of contract law. The Supreme Court concluded such in Moradi-Shalal when it specifically stated that the demise of a Royal Globe statutory action under Insurance Code section 790.03, subdivision (h) did not affect third party common law causes of action for emotional distress and fraud by claimants against insurers. ( 46 Cal.3d at pp. 304-305.)

The majority also asserts that, according to Witkin, the "ratio decidendi" in "these first-party cases," "derived from the relationship of insured and insurer," and that "[i]n other words, the decided cases clearly show that the same behavior by respective defendants can be outrageous where there is privity and not where there is none."

In fact, however, the cited passages in Witkin contain no such conclusion about the "ratio decidendi" of the noted cases, nor do the cases cited by the majority frame the issue of what is outrageous in terms of "privity" or "preexisting relationships." Our Supreme Court already has defined what makes behavior outrageous, and this definition makes it clear that privity of contract or a preexisting relationship are not requisites: "Behavior may be considered outrageous if a defendant (1) abuses a relation or position which gives him [or her] power to damage the plaintiff's interest; (2) knows the plaintiff is susceptible to injuries through mental distress; or (3) acts intentionally or unreasonably with the recognition that the acts are likely to result in illness through mental distress." ( Agarwal v. Johnson, supra, 25 Cal.3d at p. 946, italics added.)

The facts alleged by plaintiffs here, which must be accepted as true for purposes of reviewing the propriety of granting defendants' motion for a judgment on the pleadings, show that defendants, as the insurers of the person who had injured plaintiffs and as the holders of the funds to which plaintiffs had a right to look for redress of their injuries, were in such a relationship with plaintiffs that it gave them the power to damage plaintiffs' interests by withholding such funds while knowing of plaintiffs' financial problems attributable to their insured's wrongful conduct. These alleged facts further show that defendants abused this relationship by their stonewalling tactics.

The alleged facts also demonstrate that defendants knew, or should have known, that plaintiffs were susceptible to injuries through mental distress and yet engaged in delaying activities and made false statements which they reasonably could recognize would undoubtedly cause the plaintiffs severe emotional distress because of the press of the financial problems proximately caused by the combination of the automobile accident and their resulting medical bills and lost income.

Furthermore, as to whether the facts alleged by plaintiffs here constitute "outrageous" conduct by analogy with the facts in Fletcher and Little, can it be said that the "civilized community" in which we live believes it is outrageous for an insurer to lie to an insured as part of a stonewalling tactic designed to break down the insured's resolve so as to obtain a disadvantageous settlement, but that it is acceptable to use the same tactics on an injured third party claimant as to whom the insured's (and hence the insurer's) liability has become reasonably clear? I do not think so, nor, apparently, did the Legislature (the elected representatives of California citizens) when it enacted Insurance Code section 790.03, which condemns as unfair business practices the use of such tactics on both insureds and claimants.

b. Whether a Defendant Has Breached an Existing Duty to Refrain From Inflicting Emotional Distress on Another Person Does Not Depend on the Existence of a Preexisting or Special Relationship With the Plaintiff

The majority also appears to advance an inherently contradictory proposition. It begins with the comment that to allege an "actionable" IIED cause of action against an insurer, plaintiffs need not allege the existence of contractual privity or of any kind of preexisting special relationship, and, in fact, it very clearly says that the "touchstone of an actionable claim for [IIED] is the outrageous nature of the defendant's conduct, . . . without regard to a preexisting relationship." Yet the majority then proceeds to assert that the cases finding a breach of duty to refrain from IIED do so based primarily on the existence of a preexisting contractual special relationship. The majority next reiterates that it would never "be heard to say" that privity or a preexisting relationship is ever a necessary element in pleading an IIED cause of action, but then with no explanation restricts this broad and insistent statement to the establishment of a duty.

What the majority really appears to be saying is that as to that element of an actionable IIED action, i.e., the existence of a duty, a preexisting contractual special relationship need not be alleged, but as to another element of an actionable IIED action, i.e., the breach of the duty, such a relationship must be alleged. Thus, regardless of its protestations to the contrary, the majority does hold that a preexisting special relationship must be alleged for a viable IIED cause of action. Of course, no authority is cited by the majority for its proposition that the general duty to refrain from intentionally invading another's peace of mind can only be breached by one who has a preexisting relationship with the victim; common sense tells us that this cannot be the law.

A stranger who intentionally invades another person's peace of mind, and causes her severe emotional distress, is obviously just as liable to her for the breach of the relevant duty as would be her neighbor, friend or business associate. To put it another way, duty relates to actions one must take or refrain from taking to avoid causing harm to another. In turn, breach of duty relates to actions the defendant took or failed to take and thereby caused harm to another. It does not turn on the defendant's relationship with the victim. (See Black's Law Dict. (6th ed. 1990) p. 188, col. b and p. 189, col. a, respectively, which defines "breach" as "The . . . violating of a . . . duty, either by commission or omission," and "breach of duty," in pertinent part, as "[i]n a general sense, any violation or omission of a legal or moral duty.")

In conclusion, the majority's determination that plaintiffs here have not stated sufficient facts to constitute a cause of action for IIED by its characterizing plaintiffs' position to be that "the problem" was only the defendants' reasons for the delay, and not the delay itself, and by its asserting that plaintiffs had to allege privity or a preexisting consensual relationship between plaintiffs and defendants because such is a necessary allegation to establish that the defendant's conduct was outrageous, or to establish that there was a breach of the defendants' duty to the plaintiffs, is insupportable by law, public policy or logic.

B. Plaintiffs' "Causes of Action" for NIED and Violation of Civil Code Section 1714

The majority opinion discusses plaintiffs' "causes of action" for NIED and violation of Civil Code section 1714 (section 1714) in separate sections. (Maj. opn., ante, at pp. 194-209.) As pointed out below, I believe that these two "causes of action" must be discussed together.

1. In the Absence of (1) a Statutory Provision Exempting Insurers From Liability for Such Alleged Negligence or (2) Strong Public Policy Reasons Justifying Such an Exemption, Section 1714 Precludes This Court From Exempting Insurers From Liability for Damages to Claimants Caused by the Insurers' Negligent Acts

Plaintiffs pleaded, in addition to their cause of action for IIED, separate causes of action for NIED and for breach of the statutory duty imposed by section 1714, which provides, in relevant part, "(a) Every one is responsible, not only for the result of his willful acts, but also for an injury occasioned to another by his want of ordinary care or skill in the management of his property or person, except so far as the latter has, willfully or by want of ordinary care, brought the injury upon himself. The extent of liability in such cases is defined by the Title on Compensatory Relief."

This latter "cause of action" for breach of statutory duty is really not a separate cause of action. A cause of action is based on (1) a primary right possessed by the plaintiff, and (2) a primary duty devolving upon the defendant. ( Mayo v. White (1986) 178 Cal.App.3d 1083, 1093 [ 224 Cal.Rptr. 373]; Pomeroy, Code Remedies (5th ed. 1929) p. 528.)

For example, a cause of action for IIED consists of plaintiffs' legally protected interest in peace of mind (see 5 Witkin, Summary of Cal. Law, supra, Torts, § 403, at pp. 483-484 and cases cited therein) and of defendants' duty to refrain from intentional or reckless interference with that interest, while a cause of action for NIED, which is really simply a variation of a cause of action for negligence (see Potter v. Firestone Tire Rubber Co., supra, 6 Cal.4th 965, 984; Burgess, supra, 2 Cal.4th 1064, 1072; Marlene F. v. Affiliated Psychiatric Medical Clinic, Inc. (1989) 48 Cal.3d 583, 588 [ 257 Cal.Rptr. 98, 770 P.2d 278]; Slaughter v. Legal Process Courier Service (1984) 162 Cal.App.3d 1236, 1249 [ 209 Cal.Rptr. 189]), consists of plaintiffs' same legally protected interest in peace of mind and of a different duty on the part of defendants, the duty to use ordinary care in activities from which harm reasonably might be anticipated if care is not taken. (6 Witkin, Summary of Cal. Law, supra, Torts, § 732, at p. 61, § 750 at pp. 87-89 and cases cited therein.)

Thus, section 1714, which sets out the fundamental principle that every one is responsible for the consequences of his or her negligent and intentionally tortious acts, is simply an alternative statutory basis of liability in support of plaintiffs' causes of action for NIED (and also IIED). (See, e.g., Landeros v. Flood (1976) 17 Cal.3d 399, 413 [ 131 Cal.Rptr. 69, 551 P.2d 389, 97 A.L.R.3d 324].) Therefore, in discussing the analytical flaws in that portion of the majority opinion regarding general legal theories of tort liability and plaintiffs' cause of action for NIED, it is useful to discuss plaintiffs' reliance on section 1714 as an alternative basis for finding that they stated a cause of action for negligence.

Section 1714 does not purport to proscribe any particular conduct; it simply states that every one is liable for damages caused by his or her intentional or negligent acts. Thus, it is not really accurate to say that defendants have "violated" section 1714; instead, as explained below, section 1714, which reflects public policy by legislation, is really authority for the principle that, in the absence of stronger public policy to the contrary, defendants should be held liable for any injury caused by their intentional or negligent acts.

In that portion of the majority opinion related to plaintiffs' purported "cause of action" for "violation" of section 1714, the majority disposes of plaintiffs' reliance on section 1714 by criticizing plaintiffs for only citing section 1714 and Rowland as authority for the proposition that section 1714 imposes liability for NIED as alleged here.

However, the majority ignores plaintiffs' additional citation to Li v. Yellow Cab Co. (1975) 13 Cal.3d 804, 819 [ 119 Cal.Rptr. 858, 532 P.2d 1226, 78 A.L.R.3d 393] ( Li) for its position that section 1714 was intended to introduce into California's legal system a broad principle of responsibility based on continental or civil law, which would create a tort right of action that displaces more restricted common law limitations.

In Li, the California Supreme Court abolished the rule of contributory negligence, holding that it must give way to the doctrine of comparative negligence. In so doing, it specifically rejected the argument that section 1714 had codified the common law, thus rendering it invulnerable to judicially implemented evolution. Specifically, the court held, "[W]e conclude that the rule of liberal construction made applicable to the code by its own terms (Civ. Code, § 4, discussed ante) together with the code's peculiar character as a continuation of the common law (see Civ. Code, § 5, also discussed ante) permit if not require that section 1714 be interpreted so as to give dynamic expression to the fundamental precepts which it summarizes." ( Li, supra, 13 Cal.3d at p. 822.) "Therefore, and for all of the foregoing reasons, we hold that section 1714 of the Civil Code was not intended to and does not preclude present judicial action in furtherance of the purposes underlying it." ( 13 Cal.3d at p. 823, italics added.)

Thus, according to the authority cited by plaintiffs and ignored by the majority, everyone whose intentional or negligent acts cause injury to another must be held liable in tort therefor unless there is some "statutory provision declaring an exception to the fundamental principle enunciated by Civil Code section 1714" or " unless [ such exception from the general rule of liability is] clearly supported by public policy. [Citations.]" ( Rowland, supra, 69 Cal.2d 108, 112, italics added.)

The above noted authority, cited by plaintiffs, is more than sufficient to support plaintiffs' contention that, pursuant to section 1714, defendants can be held liable for NIED unless defendants could establish a statutory and/or public policy exception from such liability. Defendants have made no such effort before this court or the trial court.

Support for the plaintiffs' reliance on section 1714 as a basis for their NIED cause of action also may be found in Burgess. In Burgess, the defendant argued that the plaintiff should be denied recovery for her emotional distress on public policy grounds. The California Supreme Court disagreed, stating:

" Our starting point in determining liability for negligence is the rule set forth in Civil Code section 1714, subdivision (a): `Everyone is responsible, not only for the result of his willful acts, but also for an injury occasioned to another by his want of ordinary care or skill in the management of his property or person, except so far as the latter has, willfully or by want of ordinary care, brought the injury upon himself.' We have previously stated in the context of analyzing a claim for damages for emotional distress that `[ i] n the absence of a statutory provision limiting this rule, exceptions to the general principle imposing liability for negligence are recognized only when clearly supported by public policy.' ( Christensen, [v. Superior Court (1991)] 54 Cal.3d [868,] 885, citing Rowland v. Christian (1968) 69 Cal.2d 108, 112 [ 70 Cal.Rptr. 97, 443 P.2d 561, 32 A.L.R.3d 496].)" ( Burgess, supra, 2 Cal.4th at p. 1079, italics added.)

The bottom line is this: As referred to earlier in this dissent, the majority opinion points to no statutory provision exempting automobile liability insurance companies from the operation of section 1714 as construed by Rowland, Li and Burgess. There is none. It also fails to engage in any meaningful policy analysis as to the existence of any public policy which would justify such an exception to the general rule of liability for one's negligence. Instead, the majority does nothing more than insist that it is up to plaintiffs to provide the policy reasons for extending liability in this factual situation, and never cites any authority for its position that, contrary to the requirements of section 1714, Rowland, and Burgess, it is not defendants' burden to justify an exception to the general rule of liability for the harm caused by one's negligent or intentional torts.

In other words, after incorrectly characterizing plaintiffs' relationship to defendants as nonexistent, after erroneously characterizing plaintiffs' causes of action as based on nothing more than plaintiffs' hurt feelings over defendants' reasons for delaying settlement, and after speciously characterizing plaintiffs' causes of action against the insurer (as opposed to the underlying action against the insured) as being for "purely" emotional distress, i.e., unaccompanied by any economic loss, the majority opinion then attempts to place the burden on plaintiffs to come up with a public policy justifying their cause of action under section 1714 rather than coming up with its own public policy reasons to justify exempting defendants from liability for their own negligent and intentional torts. As should be apparent from the tortured analysis and mischaracterizations of the facts and existing precedent leading up to this conclusion, the majority is simply trying to justify the result it desires, to wit, that insurers have no duty of care in their treatment of third party claimants.

2. Fundamental Principles of Tort Law and Public Policy Preclude This Court From Exempting Insurers From Liability for Damages to Claimants Caused by the Insurers' Negligent

Because the majority opinion has given short shrift to any public policy analysis, and has totally ignored the well-settled and fundamental principles of tort law which form the basis of any discussion of policy vis-a-vis tort actions, the following discussion is necessary. Courts must follow the "fundamental principle" expressed in section 1714 that "`". . . whenever one person is by circumstances placed in such a position with regard to another . . . that if he did not use ordinary care and skill in his own conduct . . . he would cause danger of injury to the person or property of the other, a duty arises to use ordinary care and skill to avoid such danger."'" ( Tarasoff, supra, 17 Cal. 3d at p. 434, quoting Rowland, supra, 69 Cal.2d at p. 112, quoting Heaven v. Pender (1883) 11 Q.B.D. 503, 509.)

Departure from this principle is justified "only upon the `balancing of a number of considerations'" ( Tarasoff, supra, 17 Cal. 3d at p. 434), one of the major ones being the foreseeability that the failure to use reasonable care will cause harm to another. (See, e.g., Burgess, supra, 2 Cal.4th at pp. 1079-1080; Tarasoff, supra, 17 Cal.3d at p. 434; Doe v. Roe (1990) 218 Cal.App.3d 1538, 1543-1544 [ 267 Cal.Rptr. 564].) "As a general principle, a `defendant owes a duty of care to all persons who are foreseeably endangered by his conduct, with respect to all risks which make the conduct unreasonably dangerous.' [Citations.]" ( Tarasoff, supra, 17 Cal.3d at pp. 434-435.)

Instead of a reasoned application of policy factors in a consideration of whether, when liability under an insurance policy is reasonably clear, and the extent of the claimants' injuries are reasonably susceptible to objective evaluation, insurers owe claimants a duty either (1) to refrain from a bad faith refusal to settle or an unreasonable delay in attempting to settle fairly and in good faith so as to obtain a negotiating advantage or (2) to exercise reasonable care in attempting to settle the claim promptly and equitably, the majority heavily relies on Bro and Burgess to support the bald conclusion that no common law cause of action of any kind has existed in favor of third party claimants against insurers.

As discussed below, Bro, which was authored by the author of the majority opinion here, is factually inapposite. The portions of Bro relied upon by the majority are dicta and its analysis is flawed. The majority completely misinterprets Burgess's statement of the factors used to determine a direct victim and then further errs by stating that the Burgess court's recitation of two of the three bases for duty is dictum.

Before addressing those authorities, I will remind the reader that the California Supreme Court, in Moradi-Shalal, clearly acknowledged the existence and continued viability of common law causes of action maintainable by claimants as well as by insureds against automobile insurers when it said: "Moreover, apart from administrative remedies, the courts retain jurisdiction to impose civil damages or other remedies against insurers in appropriate common law actions, based on such traditional theories as fraud, infliction of emotional distress, and (as to the insured) either breach of contract or breach of the implied covenant of good faith and fair dealing." ( 46 Cal.3d at pp. 304-305, italics added.)

Contrary to the majority's proposition, the Supreme Court did not suggest in Moradi-Shalal that third party claimants could never be "direct victims" of wrongful acts by insurers, particularly when such acts were unnecessary to carry out the insurers' duties to the insured, and were specifically directed at the claimants rather than the insured. Further, contrary to the majority's implication that the fact that the Supreme Court did not specifically refer to NIED means that it intended to limit a claimant's infliction of emotional distress cause of action against insurers to IIED, in my view it is more reasonable to conclude that because the Supreme Court has recognized for some time the viability of causes of action both for IIED and NIED, it found it unnecessary to specifically state "intentional and negligent" but instead intended that both types of conduct could form the basis of common law actions by claimants against insurers for infliction of emotional distress.

I return to Bro and Burgess. The majority's reliance on Bro (maj. opn., ante, at pp. 190, 204-205) and its misinterpretation of Burgess (maj. opn., ante, at pp. 203-206) are an effort to demonstrate that plaintiffs here are not direct victims and therefore are not able to plead a cause of action for NIED. This reliance is misplaced for four reasons: (a) the Bro "two-pronged" test is mere dictum, (b) Bro's analysis is deficient because it assumes that there can be no duty without a preexisting "consensual" or "special" relationship, but it ignores continuing authority that a duty may also be assumed by the defendant or imposed by law, (c) the facts of Bro make it inapposite to plaintiffs' case, and (d) the majority's interpretation of Burgess, which rejects the holding in Burgess that duty may be assumed by a defendant or imposed by law, as well as may arise from a relationship between the defendant and plaintiff, is simply wrong.

a. Bro's Two-pronged Test Is Dictum

Bro suggests a two-pronged test for the determination of whether a plaintiff has a cause of action for NIED: (1) Did plaintiff at the time of the tortious conduct have a preexisting consensual relationship with the defendant (so as to bring plaintiff within Bro's definition of a "direct victim") ( Bro, supra, 22 Cal.App.4th at p. 1416), and, if so, (2) was the defendant's conduct, which caused plaintiff emotional distress, so outrageous that it "rise[s] to that level where, as a policy matter, liability shall attach. [Citation.]" ( Id., at pp. 1440-1441, italics deleted.)

Notably, Bro does not hold that its two-pronged test should or must be applied in determining the existence of a viable NIED action. The Bro opinion refers to a " prescribed test" ( Bro, supra, 22 Cal.App.4th at p. 1402, italics added), ". . . the first prong of the test we recommend" ( id. at p. 1416, italics added), "our recommended test" ( ibid., italics added), "our suggested test" ( id. at p. 1437, italics added), "we suggest that the way to decide these cases is . . ." ( id. at p. 1437, italics added), ". . . we have synthesized in terms of a `Black Letter' proposition . . ." ( id. at p. 1441, italics added), "under our recommendation" ( ibid., italics added), and ". . . should our recommended approach be used" ( ibid., italics added). Clearly, this so-called test is presented by Bro as dictum. (See the definition of dicta at fn. 27 on p. 248, post.)

b. Bro's Analysis Is Flawed

In the evolvement of the "direct victim" first prong of the recommended test, Bro categorized 26 cases supposedly depending upon whether, in each case, there was an explicit or implicit ruling that a "preexisting consensual" relationship existed between the plaintiffs and defendants, which relationship would then make the plaintiffs "direct victims." ( Bro, supra, 22 Cal.App.4th at pp. 1416, 1417-1420.) Finding such a relationship to exist in certain cases, Bro then further categorized those cases based on whether the claim for emotional distress damages was "adjunct" or "nonadjunct" to other tortious conduct claims. ( Id. at pp. 1420-1437.)

Rather than wade into Bro's morass of individual cases by way of a written analysis, I simply repeat that not one of these cases held, explicitly or implicitly, that a preexisting consensual relationship is the only basis on which one can conclude a plaintiff was a "direct victim" or referred to "adjunct" or "nonadjunct" claims.

Furthermore, the Bro court's apparent obsession with the "consensual" element in the analytic factor "preexisting relationship" was so great that, in its attempt to fit cases into the procrustean bed of its preexisting consensual relationship prong, it simply concluded, because many of the post- Molien cases it cited, including Burgess, involved a consensual relationship between plaintiff and defendant before the allegedly tortious conduct, that it could infer that the preexisting relationship had to be consensual in all NIED actions in order for a duty to exist and a plaintiff to be a direct victim. ( Bro, supra, 22 Cal.App.4th at pp. 1415-1416.) However, not one of these post-Molien cases used the phrase "consensual relationship" or the term "consensual." Bro's reasoning studiously ignores, or actively attempts to negate, the well-established legal principle that duty may arise from a preexisting relationship, or it may be imposed as a matter of law, or it may be assumed by the defendant without regard to the existence of a preexisting relationship. (See, e.g., Burgess, supra, 2 Cal.4th at pp. 1072-1073.)

Bro, in its analysis and its classification of the catalogue of post- Molien cases (and then its creation of a suggested two-prong test based on such analysis) proceeds on the faulty premise that the existence of a preexisting "consensual" or "special" relationship is the only possible legal basis for finding that a defendant owed a plaintiff a legal duty. This failure to consider the other two alternate sources of duty is one of Bro's fatal flaws.

The failure to look at alternate sources of duty is comparable to a scientist who is studying a given effect — for example, wilting in plants — using as a premise the principle that there is only one cause of wilting in plants — lack of watering. Using such an assumption, the scientist would conclude that if a plant wilted, its soil had not received enough water, a conclusion which would be scientifically incorrect, given that causes other than lack of watering may cause wilting, e.g., excessive heat, disease, and damage to root systems caused by gophers and insects. It would be difficult to imagine that anyone with some knowledge of plants would make the above noted assumption about the cause of wilting.

I find it equally difficult to understand how persons with some knowledge of tort law could conclude that a direct victim is defined only by reference to the existence of a preexisting consensual relationship with the defendant (see 22 Cal.App.4th at pp. 1415-1416), given the fact that Burgess, on which the Bro court relied for its faulty premise, specifically stated: "the label `direct victim' arose to distinguish cases in which damages for serious emotional distress are sought as a result of a breach of duty owed to the plaintiff that is ` assumed by the defendant or imposed on the defendant as a matter of law, or that arises out of a relationship between the two.' [Citation.]" ( 2 Cal. 4th at p. 1073, italics added.)

The difficulty in understanding the Bro court's studied exclusion of these other two sources of duty is compounded by the fact that less than a year ago the California Supreme Court issued its opinion in Potter v. Firestone Tire Rubber Co., supra, 6 Cal.4th 965, 984, addressing the nature of the torts of NIED and IIED. As to NIED it stated: "The tort is negligence, a cause of action in which a duty to the plaintiff is an essential element. [Citations.] That duty may be imposed by law, be assumed by the defendant, or exist by virtue of a special relationship. [Citation.]"

c. Bro's Facts Make It Inapplicable to Plaintiffs' Allegations

The majority's reliance on Bro is also misplaced because Bro is factually inapplicable here. Pursuant to the holding in Burgess, Donna Bro, at least, was a direct victim (the Burgess court having held that an obstetrician owes a pregnant client a direct duty to use reasonable care in delivering her child, which duty includes, of course, a duty not to negligently cause her emotional distress by injuring her fetus and child during birth). ( 2 Cal.4th at pp. 1076, 1078.) But the emotional distress suffered by Ms. Bro and Kim Bro, the father, was caused by their observation of the injury to their newborn child when the child was presented to them after birth.

The majority has nowhere suggested that plaintiffs here alleged that they suffered emotional distress as a result of observing injury to someone else caused by defendants' negligent acts. Rather, plaintiffs have alleged that the acts complained of were directed at them — that they were told that defendants did not believe the insured was liable, that they were told that they had preexisting injuries, and that it was their claims which the defendants failed to settle for almost three years once liability and damages were reasonably clear. In other words, plaintiffs are " direct victims" of defendants in the sense that defendants' negligent conduct involved defendants' direct dealings with plaintiffs and directly impacted them, causing plaintiffs economic injury as well as emotional distress, not "purely emotional distress" to which type of recovery Bro continually emphasizes it is restricted.

d. Burgess's Statement Regarding the Sources of Duty Was Not Mere Dictum

The majority here, as well as the court in Bro, misinterpret Burgess by reading one single aspect of Burgess as constituting the entire rule of law as to who is a "direct victim," i.e., a person who had a preexisting consensual relationship with the defendant. As Burgess itself makes clear, the presence or absence of a preexisting relationship, consensual or not, between a plaintiff and defendant is not the be-all and end-all of establishing whether a defendant owes a duty of due care to a given plaintiff:

"The distinction between the `bystander' and `direct victim' cases is found in the source of the duty owed by the defendant to the plaintiff. The `bystander' cases, commencing with Dillon v. Legg (1968) 68 Cal.2d 728 [ 69 Cal.Rptr. 72, 441 P.2d 912, 29 A.L.R.3d 1316], and culminating in Thing, supra, 48 Cal.3d 644, address `the question of duty in circumstances in which a plaintiff seeks to recover damages as a percipient witness to the injury of another.' ( Christensen, supra, 54 Cal.3d at p. 884.) These cases `all arise in the context of physical injury or emotional distress caused by the negligent conduct of a defendant with whom the plaintiff had no preexisting relationship, and to whom the defendant had not previously assumed a duty of care beyond that owed to the public in general.' ( Ibid., italics added.) In other words, bystander liability is premised upon a defendant's violation of a duty not to negligently cause emotional distress to people who observe conduct which causes harm to another.

"Because in such cases the class of potential plaintiffs could be limitless, resulting in the imposition of liability out of all proportion to the culpability of the defendant, this court has circumscribed the class of bystanders to whom a defendant owes a duty to avoid negligently inflicting emotional distress. These limits are set forth in Thing as follows: `In the absence of physical injury or impact to the plaintiff himself, damages for emotional distress should be recoverable only if the plaintiff: (1) is closely related to the injury victim, (2) is present at the scene of the injury-producing event at the time it occurs and is then aware that it is causing injury to the victim and (3) as a result suffers emotional distress beyond that which would be anticipated in a disinterested witness.' ( 48 Cal.3d p. 647.) [Fn. omitted.]

"In contrast, the label ` direct victim' arose to distinguish cases in which damages for serious emotional distress are sought as a result of a breach of duty owed the plaintiff that is ` assumed by the defendant or imposed on the defendant as a matter of law, or that arises out of a relationship between the two.' ( Marlene F., supra, 48 Cal.3d at p. 590.) In these cases, the limits set forth in Thing, supra, 48 Cal.3d 644, have no direct application. ( Marlene F., supra, 48 Cal.3d at p. 589, fn. 4; Christensen, supra, 54 Cal.3d at pp. 890-891.) Rather, well-settled principles of negligence are invoked to determine whether all elements of a cause of action, including duty, are present in a given case." ( Burgess, supra, 2 Cal.4th at pp. 1072-1073, first italics in original, other italics added.)

After recognizing the confusion engendered by the Molien court's perceived failure to establish clear-cut criteria for characterizing a plaintiff as a "direct victim" rather than a "bystander," the Burgess court continued:

"Nevertheless, other principles derived from Molien, supra, 27 Cal.3d 916, are sound: (1) damages for negligently inflicted emotional distress may be recovered in the absence of physical injury or impact, and (2) a cause of action to recover damages for negligently inflicted emotional distress will lie, notwithstanding the criteria imposed upon recovery by bystanders, in cases where a duty arising from a preexisting relationship is negligently breached. ( Christensen, supra, 54 Cal.3d at pp. 890-891; Marlene F., supra, 48 Cal.3d at pp. 590-591.) In fact, it is this later [ sic] principle which defines the phrase `direct victim.' That label signifies nothing more." ( Burgess, supra, 2 Cal.4th at p. 1074.)

When this last portion of Burgess, quoted by the majority at page 206 of its opinion, is read in context, it is apparent that a "direct victim," as opposed to a "bystander," may be anyone to whom the defendant owed a duty of care because such duty was "`assumed by the defendant or imposed on the defendant as a matter of law, or [because it arose] out of a relationship between the two.'" ( Burgess, supra, 2 Cal.4th at p. 1073, italics added.)

The majority here, and the court in Bro, ignore this clear language that a defendant may owe a plaintiff a duty of care for a number of independent reasons by referring to it as "dicta" and by "reject[ing]" it. (Maj. opn., ante, at pp. 205-206.) It is not dicta; it is a rule of law, and a well-established rule of law. The majority's strained effort to "reject" these other well-established legal bases of duty as dicta is more evidence of how important it is to it to reach its desired result: that an insurer never be held to owe a duty of care to a third party claimant.

In conclusion, plaintiffs have stated sufficient facts to establish that defendants owed them a duty under all three bases for duty mentioned in Burgess. First, plaintiffs had a relationship with defendants which preexisted defendants' allegedly tortious act, i.e., that of persons known by defendants to be asserting a claim against defendants' insured because the insured had negligently rear-ended them. Second, the law imposes a duty on defendants as insurers and in favor of plaintiffs as claimants to exercise reasonable care in the handling of automobile liability claims. (See § 1714) Third, by selling policies of automobile liability insurance in California, defendants here voluntarily assumed the duty to act with reasonable care in managing their automobile liability insurance business so as not to harm plaintiffs as claimants making claims against the defendants' insured under an automobile liability insurance policy between defendants and the insured.

e. Public Policy Considerations Do Not Support Excepting Insurers From the General Common Law or Civil Duty to Use Ordinary Due Care, but, to the Contrary, They Mandate That Such Liability Apply to Insurers

Although the majority opinion does not clearly frame the issue before it, I believe that the ultimate issue to be addressed in determining whether plaintiffs can allege a NIED cause of action against defendants is whether an automobile insurance company is excepted from a common law or civil duty of ordinary care to claimants, once such claimants against the insured and their injuries and losses are made known to the insurer.

To restate, contrary to the majority opinion, no public policy reasons need be alleged by plaintiffs for the imposition of basic tort liability for negligently caused emotional distress. Such liability is imposed by section 1714 Rather, it is defendants' burden to point to policy reasons to exempt them from that broad scope of liability. (See Bily v. Arthur Young Co. (1992) 3 Cal.4th 370, 419 [ 11 Cal.Rptr.2d 51, 834 P.2d 745]: "Under this rule [§ 1714, subd. (a)], an individual who has acted negligently is liable for all reasonably foreseeable injuries caused by that negligence. To this rule of general liability, courts will make only those exceptions that are `clearly supported by public policy.' [Citations.] [¶] Under the fundamental principle governing the scope of negligence liability, accountants are liable for all reasonably foreseeable injuries caused by the negligent performance of their professional duties. This would necessarily include injuries to foreseeable users like the plaintiffs in this case. If negligent accountants are to be granted special dispensation from the general scope of liability, this dispensation must be justified by considerations of public policy." See also Christensen v. Superior Court (1991) 54 Cal.3d 868, 885 [ 2 Cal.Rptr.2d 79, 820 P.2d 181].)

As has been noted by many courts: " Our starting point in determining liability for negligence is the rule set forth in Civil Code section 1714, subdivision (a): `Everyone is responsible, not only for the result of his willful acts, but also for an injury occasioned to another by his want of ordinary care or skill in the management of his property or person, except so far as the latter has, willfully or by want of ordinary care, brought the injury upon himself.' We have previously stated in the context of analyzing a claim for damages for emotional distress that `[ i] n the absence of a statutory provision limiting this rule, exceptions to the general principle imposing liability for negligence are recognized only when clearly supported by public policy.' ( Christensen, supra, 54 Cal.3d at p. 885, citing Rowland v. Christian (1968) 69 Cal.2d 108, 112 . . . .)" ( Burgess, supra, 2 Cal.4th at p. 1079, italics added; see also Ahern v. Dillenback (1991) 1 Cal.App.4th 36, 42 [ 1 Cal.Rptr.2d 339]: "In the typical negligence action, a determination that there is no duty giving rise to liability is essentially a conclusion that the weight of public policy warrants a departure from Civil Code section 1714 [Citations.]" [Italics added.])

The determination whether in a specific case the defendant will be held liable in tort to a third person, not in privity, is a matter of policy and involves the balancing of various factors. ( Biakanja v. Irving (1958) 49 Cal.2d 647, 650 [ 320 P.2d 16, 65 A.L.R.2d 1358].) The factors include "`the foreseeability of harm to the plaintiff, the degree of certainty that the plaintiff suffered injury, the closeness of the connection between the defendant's conduct and the injury suffered, the moral blame attached to the defendant's conduct, the policy of preventing future harm, the extent of the burden to the defendant and the consequences to the community of imposing a duty to exercise care with resulting liability for breach, and the availability, cost and prevalence of insurance for the risk involved.' [Citation.]" ( Christensen v. Superior Court, supra, 54 Cal.3d 868, 885-886; Burgess, supra, 2 Cal.4th at pp. 1079-1080.)

As discussed above, a continuing series of Supreme Court cases hold that section 1714 establishes as a fundamental principle that all persons have a duty to exercise ordinary care to avoid causing injuries to others and, absent a statutory exception, the only other possible exception to this principle is one based on public policy. In Rowland, the court indicated that the above-noted policy factors are used to determine whether an exception to liability should be made. It stated: "A departure from this fundamental principle involves the balancing of a number of considerations; the major ones [being those factors as quoted above from Biakanja]." ( 69 Cal.2d at pp. 112-113.)

Other Supreme Court opinions refer to section 1714 as being the beginning point in the determination of liability for negligence, i.e., they use these same factors to determine whether or not there is a duty. For example, in Christensen v. Superior Court, supra, 54 Cal.3d 868, the court approached its analysis from the perspective that the plaintiff was asserting that the conduct of another breached a duty owed to plaintiff and, therefore, the court concluded, ". . . public policy considerations are relevant in determining whether a particular plaintiff may recover damages for emotional distress." ( Christensen v. Superior Court, supra, 54 Cal.3d at p. 885.) As stated in Thompson v. County of Alameda, supra, 27 Cal.3d at page 750: "It is a fundamental proposition of tort law that one is liable for injuries caused by a failure to exercise reasonable care. We have said, however, that in considering the existence of `duty' in a given case several factors require consideration including [those factors as quoted above from Biakanja.]"

Thus, irrespective of defendants' failure to apply the above enumerated policy factors so as to justify exempting them from the general statutory duty of ordinary care to plaintiffs as third party claimants, I now will consider and apply those same factors to ascertain whether defendants had such a duty (either statutory or common law) to plaintiffs when plaintiffs submitted their claims to defendants and thereafter.

After balancing the above discussed policy factors against each other in light of the alleged facts in the complaint, my conclusion is that such a duty exists and has its source in common law, as well as in section 1714, and further such analysis demonstrates that if the defendants had attempted to establish their exemption from a duty under section 1714, they would have failed.

i. Foreseeability That Defendants' Failure to Use Ordinary Care Would Cause Harm to Plaintiffs

Although "[t]he foreseeability of a particular kind of harm plays a very significant role in [determining whether there should be a departure from the general rule that all persons have a duty to use ordinary care to prevent injury to others as a result of their conduct] (see Dillon v. Legg 68 Cal.2d 728, 739), . . . a court's task — in determining `duty' [as a matter of law] — is not to decide whether a particular plaintiff's injury was reasonably foreseeable in light of a particular defendant's conduct, but rather to evaluate more generally whether the category of negligent conduct at issue is sufficiently likely to result in the kind of harm experienced that liability may appropriately be imposed on the negligent party." ( Ballard v. Uribe (1986) 41 Cal.3d 564, 572-573, fn. 6 [ 224 Cal.Rptr. 664, 715 P.2d 624].)

In terms of this general concept of the foreseeability of harm if ordinary care is not exercised, it is patently foreseeable by automobile liability insurance companies that a person injured in an automobile accident will rely on the tortfeasor's automobile insurer to investigate the resulting third party claim in a prompt and competent manner, and to make a prompt and reasonable settlement offer within the policy limits. (See, e.g., Barrera v. State Farm Mut. Automobile Ins. Co. (1969) 71 Cal.2d 659 [ 79 Cal.Rptr. 106, 456 P.2d 674]: "The rule that an insurer must act promptly finds its source in the quasi-public nature of the insurance business and the reasonable expectation of the applicant and the general public.") ( Id. at p. 673, italics added.)

A claimant's reliance on an insurer's exercise of ordinary care in investigation and settlement negotiations is particularly foreseeable because of:

(1) the existence of the financial responsibility laws which require drivers to obtain insurance,

(2) the existence of case law which points out the public policy behind such laws of making sure injured persons are compensated (see, e.g., Barrera v. State Farm Mut. Automobile Ins. Co., supra, 71 Cal.2d 659: "The reasonable expectation of both the public and the insured is that the insurer will duly perform its basic commitment: to provide insurance. [Citation.]") ( Id. at p. 669, italics added),

(3) the automobile liability insurer's role as a government-regulated, public service entity with its concomitant duties to the general public as well as to its insured (see 20th Century Ins. Co. v. Garamendi (1994) 8 Cal.4th 216 [ 32 Cal.Rptr.2d 807, 878 P.2d 566]),

(4) the public policy to provide compensation for those injured through no fault of their own,

(5) the judiciary's responsibility not to interpret the law applicable to automobile liability insurance in a manner "which would serve only the financial interest of the insurer and directly thwart that public policy" (see, e.g., Barrera v. State Farm Mut. Automobile Ins. Co., supra, 71 Cal.2d 659, 672, 669-682 and fns. 8, 9, 10, 12 and 13 therein), and

(6) the existence of Insurance Code section 790.03, which brands as unfair business practices the pattern of conduct which unreasonably delays the payment of, or results in a total refusal to pay, settlements to injured claimants.

It is also foreseeable that the failure to handle such claims in a reasonable manner, i.e., promptly and in good faith, will result in financial harm to injured claimants, who will have had to personally pay their medical and property damage expenses, most likely at the expense of not paying or not paying on time other day-to-day expenses, particularly if they had no medical or health insurance coverage, or limited coverage or high deductibles. It is also foreseeable that claimants may have lost wages or even employment as a result of the injury. In turn, it is reasonably foreseeable that financial problems, especially when coupled with physical injuries, will cause emotional distress to the injured claimants.

Furthermore, the foreseeability of increasing harm rises in proportion to the length of the delay measured against the obviousness of liability and the seriousness of the damages suffered by the claimant; thus, in a case such as the one here, where, as discussed above, defendants, having the alleged knowledge of (1) the reasonably clear liability of their insured, (2) the significant degree of physical, economic and mental distress injuries to plaintiffs, and (3) plaintiffs' dire financial straits, reasonably could foresee that a misrepresentation to plaintiffs concerning the insured's liability and plaintiffs' preexisting injuries, plus the failure for a period of almost three years to attempt in good faith to promptly, fairly and equitably settle plaintiffs' claim, would cause harm to plaintiffs in the form of severe emotional distress and loss of the use of an equitable monetary settlement.

Thus, in my opinion, it is reasonably foreseeable, if a defendant engages in the type of conduct alleged here, that the conduct is likely to result in the kind of harm allegedly experienced by plaintiffs here. Therefore, defendants' ability to foresee the possible harm is one factor which weighs in favor of imposition of liability on defendants who have engaged in such conduct.

ii. Degree of Certainty That Plaintiffs Actually Suffered Injuries, and iii. Closeness of Connection Between Defendants' Conduct and Plaintiffs' Injuries

The allegations in the complaint state with certainty the emotional and financial distress suffered by plaintiffs and clearly show the direct connection between those injuries and defendants' conduct.

iv. Moral Blame Attached to Defendants' Conduct

v. Policy of Preventing Such Harm

790.03790.03 Burgess, supra,2 Cal.4th 10641081

Without a remedy for such potential wrongs, some injured claimants will continue to experience improper and unreasonable handling of such claims, with the resulting increased disruption in their financial affairs. Negative ripple effects on other aspects of their lives will ensue and in some cases there will also be a concomitant cost to society in terms of increased demands on public resources by such victims.

vi. Extent of Burden on Defendants and Consequences to the Community of Imposing on Insurance Companies a Duty to Exercise Reasonable Care With Resulting Liability for Its Breach

a. Consequences to the Community

Furthermore, there are strong positive consequences in making insurers bear the costs of their negligent and intentional torts vis-a-vis third party claimants, in that members of the public, who are injured by the wrongful conduct of an insured, may be assured that they would be compensated fairly and in a timely manner by insurance companies, who are engaged in a public service activity to serve particular needs of the public and for which service they are reasonably compensated. (See Calfarm Ins. Co. v. Deukmejian (1989) 48 Cal.3d 805, 816 and fn. 5 [ 258 Cal.Rptr. 161, 771 P.2d 1247] holding that insurance rates must be set by the commissioner of insurance so as to permit insurers to earn a fair and reasonable return; see also 20th Century Ins. Co. v. Garamendi, supra, 8 Cal.4th 216.)

Insurance companies are in the business of insuring against risks, and presumably set their rates accordingly. (See Barrera v. State Farm Mut. Automobile Ins. Co., supra, 71 Cal.2d at pp. 669-670: "`Insurance companies are engaged in the business of running risks for pay; . . .'") Allowing insurance companies to negligently refuse to pay, or delay paying, legitimate business obligations which were reasonably foreseeable after due consideration of the risks involved cannot be condoned (as does the majority) by characterizing third party actions against such insurers as an unwarranted expansion of tort liability, or by denying that such claimants can ever be the direct victims of insurers' negligent acts. Nor can it be condoned by asserting, as does the majority here, that "Insurance companies exist to provide a critical financial indemnity for the risks of their insureds, not to salve the feelings of displeased third party claimants."

It is clear, under our mandatory financial liability laws, as well as under California's Insurance Code, that insurers exist and are allowed to do business in California not only to provide their insureds with financial peace of mind, but to provide persons injured by their insureds with financial recompense for their injuries in a reasonable and good faith manner.

Just as public policy mandates that parents undertake the support of their own children, that spouses undertake each other's support, that employers, regardless of fault, bear the cost, through workers' compensation insurance, of work-related injuries to employees, that tortfeasors bear the cost of injuries they have caused to others by wrongful conduct or nonconduct — so that, at least in part, such burdens do not fall upon the general public — so too public policy mandates that insurance companies undertake the burden of fairly and timely settling those claims as alleged here, when the insured's liability is reasonably clear and the claimants' damages are reasonably ascertainable and which they have contracted to cover, for a price, rather than allowing such costs and expenses encompassed by the claimed damages to fall on the shoulders of the injured claimants, and, in some cases, on the doctors and hospitals whose bills will go unpaid, the welfare systems to whom the injured parties may be forced to turn, and ultimately on the taxpaying public.

b. Burden on Defendants

The burden placed on defendants as insurers by requiring them to comply with a general standard of ordinary and reasonable care in the handling and payment of claims is not greater than the burden imposed on all other businesses, as well as individuals, to use such care in the management of their affairs, so as not to harm others.

vii. Availability, Cost and Prevalence of Insurance for the Risk Involved

The record does not reveal the existence of any insurance which is available to insurers to insure them against the risk of their negligent mishandling of a third party insurance claim. But the existence or nonexistence of such insurance should not preclude an injured claimant from holding the insurer accountable when it does not exercise reasonable care in handling and settling the claims and thereby causes harm to the claimant. Automobile casualty risk insurers whose assets, including reserves, are subject to regulation of the California Insurance Commissioner, pursuant to the Insurance Code and state regulations promulgated to implement the insurance law, in all likelihood would be able to acquire specialized insurance coverage for such risks at a fair premium.

Based on the foregoing consideration of the applicable public policy factors, it is my opinion that plaintiffs have alleged sufficient facts to establish that a common law duty and civil duty under section 1714 were imposed on defendants to exercise ordinary care to avoid causing plaintiffs, as third party claimants, the alleged emotional distress resulting from defendants' actions and inactions. These allegations are sufficient to establish them as direct victims. I conclude that plaintiffs have stated sufficient facts to allege defendants negligently breached that duty and such breach caused them emotional distress and resulting damages.

III CONCLUSION

In my view, plaintiffs have stated sufficient facts to allege a cause of action for IIED and a cause of action for NIED, and the trial court erred in granting defendants' motion for a judgment on the pleadings as to all causes of action stated in plaintiffs' first amended complaint. I would reverse.