Lawrence v. Western Mutual Ins. Co

Lawrence v. Western Mutual Ins. Co. (1988) 204 Cal. App. 3d 565, involved a bad faith cause of action based on the denial of an insurance claim. The court stated, "Claims arising out of the contractual relationship are subject to the contractual limitations period." ( Id. at p. 575.) It distinguished Murphy v. Allstate Ins. Co. (1978), 83 Cal. App. 3d 38 on the grounds that the insureds in Murphy alleged damages caused by the insurer's conduct after the insured loss had occurred and "did not seek to hold the insurer on its policy." The Lawrence court explained that in Murphy "a subsequent event occurred after the initial policy coverage was triggered which was the basis for the cause of action. The subsequent event related to the policy, but ... was not a claim directly on the policy ...." Since the bad faith cause of action in Lawrence was based on the "complete denial" of an insurance claim, the court held that the cause of action was "on the policy" and was barred by the limitation of action provision. (Lawrence, at p. 575.)