In PPG Industries, Inc. v. Transamerica Insurance CO., the California Supreme Court held that an insurer may not indemnify its insured for a punitive damages judgment in a third party action. Even if the excess judgment is the result of the insurer\u27s bad faith breach of its duty to settle a third party action on behalf of its insured, an insured may not recover if it seeks compensatory damages that include a punitive damages judgment. The California Supreme Court found that to conclude otherwise would violate California\u27s long established public policy precluding indemnification of punitive damages. This Note examines the faulty reasoning in the California Supreme Court\u27s decision. Part II briefly discusses relevant principles of insurance law. Part III outlines the facts underlying PPG Industries, Inc. v. Transamerica Insurance Co., including the initial Colorado lawsuit that evolved into the case ultimately presented to the California Supreme Court. Part IV explains the procedural history of the case, including the California Court of Appeal\u27s opinion and PPG Industries, Inc.\u27s appeal to the California Supreme Court. Part V details the California Supreme Court\u27s analysis and its focus on California\u27s public policy against indemnification of punitive damages. Part VI discusses Justice Mosk\u27s heated dissent and his opposition to what he viewed as the majority\u27s apparent favoritism of insurers. Finally, Part VII criticizes the California Supreme Court for ignoring PPG Industries, Inc.\u27s allegations that it was entitled to recover consequential damages arising from Transamerica\u27s bad faith failure to settle a third party claim, thereby setting a precedent that allows insurers to escape liability for their own tortious conduct
