Opinion
KENNARD, J.—In each policy of liability insurance, California law implies a covenant of good faith and fair dealing. This implied covenant obligates the insurance company, among other things, to make reasonable efforts to settle a third party’s lawsuit against the insured. If the insurer breaches the implied covenant by unreasonably refusing to settle the third party suit, the insured may sue the insurer in tort to recover damages proximately caused by the insurer’s breach.
*313Here, a third party brought a personal injury action against the insured resulting in a judgment against the insured that included an award of punitive damages based on the insured’s egregious misconduct. The insured then sued its insurance company to recover as compensatory damages the amount of the punitive damages, which the insured alleged were proximately caused by insurance company’s unreasonable failure to settle the third party’s lawsuit against the insured. Although the insurance company’s alleged negligent failure to settle the third party lawsuit was a cause in fact of the punitive damages awarded against the insured, it was not a proximate cause of those damages. We therefore conclude that the insured in this case cannot shift to the insurance company its responsibility for the punitive damages.
I.
Plaintiff PPG Industries, Inc. (PPG) is the successor in interest to Solaglas California, Inc. (Solaglas). Solaglas was a distributor and installer of replacement windshields for cars and trucks. On July 17, 1982, in Colorado, George Miller was driving a truck manufactured by General Motors Corporation (GMC) when another vehicle collided with the left rear of the truck, causing it to jump a curb and strike a metal light pole. The truck’s windshield, which had been installed by a Solaglas facility in Colorado, “popped out” and Miller was ejected through the opening. The resulting injuries rendered Miller a quadriplegic.
Miller sued Solaglas in Colorado, seeking both compensatory and punitive damages. Solaglas tendered the defense to its liability carrier, Transamerica Insurance Company (Transamerica), which had issued policies totaling $1.5 million. Transamerica agreed to defend Solaglas, but it informed Solaglas that the insurance policies did not provide indemnity coverage for punitive damages.
Settlement efforts were unsuccessful, and a jury trial in Colorado resulted in a judgment for Solaglas, but this judgment was reversed on appeal. Miller then offered to settle for an amount within the limits of Solaglas’s liability coverage. Transamerica turned down Solaglas’s requests to accept the settlement offer. Thereafter, a second jury trial resulted in a judgment against Solaglas for $6.1 million ($5.1 million in compensatory damages and $1 million in punitive damages). Solaglas appealed.
With respect to the $1 million punitive damages, the Colorado Court of Appeal rejected Solaglas’s contention that the evidence was insufficient to support the award. (Miller v. Solaglas California, Inc. (Colo.Ct.App. 1993) *314870 P.2d 559.) The court determined that “reasonable jurors could have found beyond a reasonable doubt that Solaglas’ conduct in installing the windshield retention system created a substantial risk of harm to others and was purposefully performed with an awareness of the risk and in disregard of the consequences so as to constitute ‘wanton and reckless conduct.’ ” (Id. at p. 569.) In making this determination, the court relied on evidence that Solaglas had adopted a standard practice of installing replacement windshields using silicone instead of urethane “despite a GMC manual requiring the use of urethane when replacing a windshield, despite a NAGS Calculator parts list and price guide indicating that urethane could be required in windshield installation, despite industry publications and conventions discussing the use of urethane, and despite industry safety standards requiring the use of urethane.” (Ibid.) The court also noted that installing a windshield without a urethane seal would take only 30 minutes, yet Solaglas had instructed its stores to charge for 2.8 hours of labor for such installation. (Ibid.)
Transamerica paid the policy limits of $1.5 million plus $1,277,094.88 as costs and interest on the judgment against Solaglas in the Miller lawsuit. Industrial Indemnity Company, which had insured Solaglas for $9 million in excess liability coverage, paid the remaining $3.6 million in compensatory damages, leaving PPG, Solaglas’s successor in interest, to pay the $1 million in punitive damages.
In June 1994, PPG sued Transamerica in Los Angeles, California, for breach of the covenant of good faith and fair dealing implied in each of Transamerica’s policies. PPG alleged that Transamerica had breached the covenant by unreasonably refusing to settle the Miller lawsuit; PPG sought to recover from Transamerica as compensatory damages the $1 million it had been ordered to pay as punitive damages in the Miller lawsuit.
The trial court granted summary judgment for Transamerica, relying on the well-established rule prohibiting indemnity coverage for punitive damages awarded against the insured. The Court of Appeal affirmed the judgment. We granted PPG’s petition for review.
II.
Implied in every contract is a covenant of good faith and fair dealing that neither party will injure the right of the other to receive the benefits of the agreement. (Comunale v. Traders & General Ins. Co. (1958) 50 Cal.2d 654, 658 [328 P.2d 198, 68 A.L.R.2d 883].) This covenant imposes a number of obligations upon insurance companies, including an obligation to *315accept a reasonable offer of settlement. (Murphy v. Allstate Ins. Co. (1976) 17 Cal.3d 937, 941 [132 Cal.Rptr. 424, 553 P.2d 584]; Crisci v. Security Ins. Co. (1967) 66 Cal.2d 425, 430 [58 Cal.Rptr. 13, 426 P.2d 173].) An insurer’s breach of the implied covenant of good faith and fair dealing “will provide the basis for an action in tort.” (Foley v. Interactive Data Corp. (1988) 47 Cal.3d 654, 684 [254 Cal.Rptr. 211, 765 P.2d 373].) Because breach of the implied covenant is actionable as a tort, the measure of damages for tort actions applies, and the insurance company generally is liable for “any damages which are the proximate result of that breach.” (Neal v. Farmers Ins. Exchange (1978) 21 Cal.3d 910, 925 [148 Cal.Rptr. 389, 582 P.2d 980]; accord, Civ. Code, § 3333; Brandt v. Superior Court (1985) 37 Cal.3d 813, 817 [210 Cal.Rptr. 211, 693 P.2d 796].)
Here, PPG contends it is entitled to recover from its insurance company any monetary award, including punitive damages, that it became legally obligated to pay in the Miller lawsuit. According to PPG, settlement would have terminated that lawsuit, thus precluding any punitive damage liability, and therefore the insurer’s failure to settle the lawsuit was a proximate cause of the award of punitive damages. Not so. As we shall explain, Transamerica’s failure to settle the Miller lawsuit was a cause in fact but not a proximate cause of the award of punitive damages.
Proximate cause involves two elements. (Mitchell v. Gonzales (1991) 54 Cal.3d 1041, 1049 & fn. 4 [1 Cal.Rptr.2d 913, 819 P.2d 872].) One is cause in fact. An act is a cause in fact if it is a necessary antecedent of an event. (Prosser & Keeton on Torts (5th ed. 1984) § 41, p. 265.) Here, there were at least two causes in fact of the insured’s liability for punitive damages in the third party lawsuit: the insured’s own intentional and egregious misconduct in installing the windshield on the truck, and the insurance company’s alleged negligence in failing to settle the third party lawsuit, on the theory that settlement would not have exposed PPG to liability for punitive damages.
To simply say, however, that the defendant’s conduct was a necessary antecedent of the injury does not resolve the question of whether the defendant should be liable. In the words of Prosser and Keeton: “[T]he consequences of an act go forward to eternity, and the causes of an event go back to the dawn of human events, and beyond. But any attempt to impose responsibility upon such a basis would result in infinite liability for all wrongful acts, and would ‘set society on edge and fill the courts with endless litigation.’ ” (Prosser & Keeton on Torts, supra, § 41, at p. 264, quoting North v. Johnson (1894) 58 Minn. 242.) Therefore, the law must *316impose limitations on liability other than simple causality. These additional limitations are related not only to the degree of connection between the conduct and the injury, but also with public policy. (Prosser & Keeton on Torts, supra, § 41, at p. 264.) As Justice Traynor observed, proximate cause “is ordinarily concerned, not with the fact of causation, but with the various considerations of policy that limit an actor’s responsibility for the consequences of his conduct.” (Mosley v. Arden Farms Co. (1945) 26 Cal.2d 213, 221 [157 P.2d 372, 158 A.L.R. 872] (conc. opn. of Traynor, J.).)
In this case, there are at least three policy considerations that strongly militate against allowing the insured, the morally culpable wrongdoer in the third party lawsuit, to shift to its insurance company the obligation to pay punitive damages resulting from the insured’s egregious misconduct in that lawsuit.1
First, there is the policy of not allowing liability for intentional wrongdoing to be offset or reduced by the negligence of another. (See, e.g., 6 Witkin, Summary of Cal. Law (9th ed. 1988) Torts, § 1057, pp. 454-455; Rest.2d Torts, § 481; Prosser & Keeton on Torts, supra, § 65, at p. 462; id., § 67, at pp. 477-478.) In both Colorado and California, punitive damages may be awarded only if it is proven that the defendant engaged in conduct intended to cause injury or engaged in despicable conduct with a conscious disregard of the rights or safety of others. (Civ. Code, § 3294, subds. (a), (c); Miller v. Solaglas California, Inc., supra, 870 P.2d at p. 568.) Accordingly, punitive damages awarded under Colorado law are equivalent in all relevant respects to punitive damages awarded under California law. Here, the Colorado jury’s award of punitive damages in the third party action against the insured was based on the insured’s own intentional, morally blameworthy behavior in installing the windshield in the truck. By contrast, the action that the insured, PPG, then brought against its insurance company, Transamerica, was based on Transamerica’s alleged negligent failure to settle the third party lawsuit against the insured in Colorado. Such a cause of action is based not on a bad faith breach of the insurance contract but on the “failure to meet the duty to accept reasonable settlements, a duty included within the implied covenant of good faith and fair dealing.” (Crisci v. Security Ins. Co., supra, 66 Cal.2d at p. 430; see Johansen v. California State Auto. Inter-Ins. Bureau (1975) 15 Cal.3d 9, 16, fn. 5 [123 Cal.Rptr. 288, 538 P.2d 744].) Thus, *317allowing PPG to shift to Transamerica its responsibility to pay the punitive damages in the third party action would violate the public policy against reducing or offsetting liability for intentional wrongdoing by the negligence of another.
Second, the purposes of punitive damages, in both California and Colorado, are to punish the defendant and to deter future misconduct by making an example of the defendant. (Civ. Code, § 3294, subd. (a) [in California, punitive damages are “damages for the sake of example and by way of punishing the defendant”]; Lira v. Shelter Ins. Co. (Colo. 1996) 913 P.2d 514, 517 [giving a similar explanation of punitive damages under Colorado law].) If we were to allow the intentional wrongdoer, here the insured, to shift responsibility for its morally culpable behavior to the insurance company, which surely will pass to the public its higher cost of doing business, we would defeat the public policies of punishing the intentional wrongdoer for its own outrageous conduct and deterring it and others from engaging in such conduct in the future.2 As we explained in a previous case: “ ‘ “The policy considerations in a state where, as in [California], punitive damages are awarded for punishment and deterrence, would seem to require that the damages rest ultimately as well as nominally on the party actually responsible for the wrong. If that person were permitted to shift the burden to an insurance company, punitive damages would serve no useful purpose. Such damages do not compensate the plaintiff for his injury, since compensatory damages already have made the plaintiff whole.” ’ ” (Peterson v. Superior Court (1982) 31 Cal.3d 147, 157, fn. 4 [181 Cal.Rptr. 784, 642 P.2d 1305], quoting Northwestern National Casualty Company v. McNulty (5th Cir. 1962) 307 F.2d 432, 440-441; see City Products Corp. v. Globe Indemnity Co. (1979) 88 Cal.App.3d 31, 39-42 [151 Cal.Rptr. 494].)
Third, our public policy prohibits indemnification for punitive damages.3 (See, e.g., Ins. Code, § 533; Peterson v. Superior Court, supra, 31 Cal.3d at p. 157; City Products Corp. v. Globe Indemnity Co., supra, 88 Cal.App.3d at *318pp. 39-41.) The State of Colorado, where the judgment against PPG was rendered, has the same public policy. (Lira v. Shelter Ins. Co., supra, 913 P.2d at p. 517.) Indemnity, which may be express, implied, or equitable, is "defined as the obligation resting on one party to make good a loss or damage another party has incurred." (Rossmoor Sanitation, Inc. v. Pylon, Inc. (1975) 13 Cal.3d 622, 628 [119 Cal.Rptr. 449, 532 P.2d 97]; accord, E.L. White, Inc. v. City of Huntington Beach (1978) 21 Cal.3d 497, 506 [146 Cal.Rptr. 614, 579 P.2d 505]; Maryland Casualty Co. v. Bailey & Sons, Inc. (1995) 35 Cal.App.4th 856, 864 [41 Cal.Rptr.2d 519].) To require Transamerica to make good the loss PPG incurred as punitive damages in the third party lawsuit would impose on Transamerica an obligation to indemnify, a violation of the public policy against indemnification for punitive damages.4
Here, the punitive damages in the third party lawsuit were awarded not against the insurance company for its unreasonable failure to settle that lawsuit, but against the insured for the insured’s own morally reprehensible *319behavior in installing the windshield on the track. In an appropriate case, an insurance company’s own egregious misconduct may justify an award of punitive damages against it. For example, if in addition to proving a breach of the implied covenant of good faith and fair dealing proximately causing actual damages, the insured proves by clear and convincing evidence that the insurance company itself engaged in conduct that is oppressive, fraudulent, or malicious, the insured may recover punitive damages from the insurance company. (See, e.g., Civ. Code, § 3294, subd. (a); Egan v. Mutual of Omaha, Ins. (1979) 24 Cal.3d 809, 819-822 [169 Cal.Rptr. 691, 620 P.2d 141]; Silberg v. California Life Ins. Co. (1974) 11 Cal.3d 452, 462-463 [113 Cal.Rptr. 711, 521 P.2d 1103].) That issue is not presented here.
III.
To summarize, we agree with the highest courts of New York (Soto v. State Farm Ins. Co., supra, 635 N.E.2d 1222) and Colorado (Lira v. Shelter Ins. Co., supra, 913 P.2d 514) that an insured may not shift to its insurance company, and ultimately to the public, the payment of punitive damages awarded in the third party lawsuit against the insured as a result of the insured’s intentional, morally blameworthy behavior against the third party. To allow such recovery would (1) violate the public policy against permitting liability for intentional wrongdoing to be offset or reduced by the negligence of another; (2) defeat the purposes of punitive damages, which are to punish and deter the wrongdoer; and (3) violate the public policy against indemnification for punitive damages.
The judgment of the Court of Appeal is affirmed.
Baxter, J., Chin, J., and Brown, J., concurred.
The dissent implies that it is somehow unfair or improper to require PPG, the successor in interest to Solaglas, to bear the consequences of misconduct by Solaglas. (Dis. opn., post, at p. 323.) PPG made a similar argument in the Court of Appeal, which rejected it: PPG could not accept the benefits of its acquisition of Solaglas by bringing this action to recover under Solaglas’s insurance policy with Transamerica without also accepting the liabilities. PPG does not challenge this determination by the Court of Appeal.
We recognize that a settlement of the underlying action would relieve the insured of personal liability for its own acts of intentional egregious conduct giving rise to a claim for punitive damages. As the highest court of the State of New York has observed: “Our system of civil justice may be organized so as to allow a wrongdoer to escape the punitive consequences of his own malfeasance in order that the injured plaintiff may enjoy the advantages of a swift and certain pretrial settlement. However, the benefit that a morally culpable wrongdoer obtains as a result of this system, i.e., being released from exposure to liability for punitive damages, is no more than a necessary incident of this process.” (Soto v. State Farm Ins. Co. (1994) 83 N.Y.2d 718 [613 N.Y.S.2d 352, 635 N.E.2d 1222, 1225].)
As if stating an established rule, the dissent asserts that in “effecting a settlement, the insurer is not prohibited from offering a sum to avoid punitive damages as well as compensatory damages.” (Dis. opn., post, at p. 321.) But a recent decision, J.B. Aguerre, Inc. v.
*318American Guarantee & Liability Ins. Co. (1997) 59 Cal.App.4th 6 [68 Cal.Rptr.2d 837] (Aguerre), concluded to the contrary, and we denied review in that case.
In a footnote, the dissent asserts that Aguerre actually supports its position because the Aguerre court stated that an insurer must “cooperate” with the insured’s efforts to settle a punitive damages claim against it. (Dis. opn., post, at p. 321, fn. 2.) On the contrary, Aguerre makes clear that the insurer’s required cooperation does not extend to offering any amount in settlement of a punitive damages claim. The court there stated: “In any event, we do not think [the insurance company] was obligated to increase its settlement offer, beyond its evaluation of compensatory damage exposure, to pay [plaintiffs] additional moneys to relinquish their punitive damage claims. [Insured] has not cited a case requiring this. The rule ... is that an insurer is not obligated to indemnify against punitive damages. The same public policy which forbids an insurer from paying punitive damages in a judgment should likewise bar its payment of such damages, or some part thereof, in a settlement.” (Aguerre, supra, 59 Cal.App.4th at p. 16.) The court added that “there are no allegations here to show that [the insurer] in any way obstructed or refused to cooperate with [the insured’s] negotiation of its contribution to the settlement.” (Id. at p. 17, italics added.) Thus, Aguerre does not support the dissent’s position that an insurer either must or may pay an amount in settlement for punitive damages.
In any event, the issue of the scope of an insurance company’s duty in evaluating settlement offers is not before us. The trial court here concluded that irrespective of whether Transamerica’s refusal to settle was unreasonable, as a matter of law PPG could not recover from Transamerica the punitive damages awarded against Solaglas in the Miller lawsuit. For the same reason that it was unnecessary for the trial court to reach the issue of whether Transamerica unreasonably failed to settle, so too is it unnecessary for us to do so.
PPG cites a federal decision, Carpenter v. Automobile Club Interinsurance Exch. (8th Cir. 1995) 58 F.3d 1296, in support of its argument that the public policy against indemnification for punitive damages does not preclude an insured from recovering such damages from the insurance company when the latter has unreasonably failed to settle a third party lawsuit against the insured. But the federal court in Carpenter did not address this issue. (Id. at pp. 1301-1302.) Also, Arkansas, whose law the federal court was applying in Carpenter, does not have a public policy against indemnification for punitive damages. (Southern Farm Bureau Casualty Ins. Co. v. Daniel (1969) 246 Ark. 849 [440 S.W.2d 582, 583].)