This section contains the nature of the case and procedural background.

DiMare was a tenant in an apartment building owned by Crisci (P). She fell when a tread on a staircase gave away. She suffered physical injuries and developed a very severe psychosis. DiMare sued P, claiming that P was negligent in inspecting and maintaining the stairs. DiMare claimed that her mental condition was caused by the accident, and asked for $400,000 as compensation for physical injuries, mental injuries, and medical expenses. P had $10,000 of insurance coverage under a policy issued by Security Insurance Co. (D). This policy obligated D to defend the suit against P and authorized D to make any settlement it deemed expedient. D hired an experienced lawyer, who decided that P would lose a verdict of at least $100,000 if the jury believed that the fall caused the psychosis. However, D still rejected $9,000 and $10,000 settlement offers, offering DiMare only $3,000 for her physical injuries and nothing for mental. The case went to trial, and the jury ruled for DiMare for $101,000. D paid $10,000. P paid the rest, leaving P indigent, and causing a decline in physical and mental health. P sued D for refusing to settle the claim. P received $91,000 for D's refusal to settle and $25,000 for mental suffering. D appealed, claiming that P could not recover unless P proved that D's refusal to settle was based on dishonesty, fraud, or concealment.

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