Penny and Jeff reunite by early 1962, just as Penny is about to file for divorce. The Bakers' marriage becomes stronger than ever because of Jeff's greater degree of maturity and emotional security. Spurred by his experiences in a neighboring town during the time he went under the alias "Jack Bailey," Jeff decides to quit the Baker family business and go into music full time.
Jeff and Penny even plan to adopt a child. However, on August 23, tragedy strikes in the form of a crash. Penny survives, but suffers from amnesia for a time; Jeff, however, is killed instantly. One night months later, a fierce thunderstorm would cause Penny to flash back to the accident.
During her amnesia period, Penny would discover Lisa's extramarital affair with Bruce Elliott. By 1962, all was not right with Bob and Lisa's marriage. Even the birth of baby Tom couldn't cure Lisa's restlessness. One day, Lisa meets shoe business tycoon Bruce Elliott, the brother of her friend Linda Elliott. Lisa is so excited by the worldly ways of Bruce as opposed to the workaholic schedule Bob is keeping at the hospital. Lisa makes plans to leave Bob and marry Bruce, but a complication develops: she is pregnant with her and Bob's second child. Lisa would eventually miscarry, but by then Bob would leave her. Bruce also becomes bored with Lisa and breaks off the affair.
In New York, Betty Stewart dies. Yet before dying, she extracts a promise from David that he would never tell Dan that he was adopted. After leaving little Dan and Paul with Fred and Mary Jackson, David returns to Oakdale and to his job at Memorial Hospital.
Ellen, who lost a custody battle for Dan a year ago, still hasn't given up on one day getting him back. She has a brief relationship with lawyer Jim Norman, and the two become engaged. But Doug Cassen is skeptical about the relationship because he knows Ellen wants to marry Jim only so she could get custody of Dan from David Stewart. Ellen and Jim soon break their engagement.
Ellen's stepfather, Doug, is having his own problem in 1962. Doug is so devoted to his work at the hospital that he doesn't have as much time for Claire as he should. This leads Claire to seek the company of construction company head Bill Abbott. One day, when Bill and Claire are kissing in a car, they get sideswiped and Claire suffers a back injury. Doug finds out about what happened and insists that Claire break off her affair with Bill. However, it is Bill, not wanting to be responsible for breaking up a marriage, who first decides to end the relationship.
Claire, suffering physically from back pain and emotionally from the breakup of her romance with Bill, becomes more dependent and painkillers and sleeping pills. Claire's depression becomes so acute and alienating that Doug suggests divorce may be the only answer to their marital problems. So one evening, Claire overdoses on sleeping pills. Doug's impending struggle to save his both marriage and his wife's life would soon endanger his career.
On the day Claire overdoses on the sleeping pills, Edna Rice tries to contact Doug about her gravely ill husband, who has a duodenal ulcer. However, Doug and Bob are at the Lowell home trying to revive Claire and get her to the hospital. Doug is able to get Claire to the hospital in time to save her, but he is too late to save Mr. Rice, who dies. Edna Rice and her two grown children, Carol and Ed, file a malpractice suit against Doug. Judge Lowell, wanting to protect his family's reputation, instructs Doug and Chris to use the following false alibi: Judge Lowell had a heart attack the night Mr. Rice died, and Doug and Bob were treating him. Claire, after recovering from her overdose, decides to go into the courtroom and tell everyone what really happened. Doug keeps his job at the hospital, and he is reconciled with Claire in the process.
A now widowed Janice Turner Whipple returns to Oakdale with her two teenaged daughters, Debbie and Alice. Alice is a responsible young lady who briefly develops a crush on Donald Hughes; Debbie, however, is a "party girl" type who resents her mother's renewed romance with Don. Debbie is ultimately sent away to a strict boarding school after one wild late night too many.
Donald and Janice's renewed romance doesn't sit well with Nancy, but Chris gives his blessing to their marriage. So Donald and Janice finally marry, but Nancy's coldness toward Janice would cause a rift between her and Donald that would take years to mend. Donald and Janice soon left Oakdale.