Another Court Rejects Reverse Bad Faith

The Policyholder is the Egg

Despite the Pressure, the Egg Remains Unbroken

For many years, courts have held insurance companies responsible for at least some of their bad faith actions.  Most courts allow a policyholder to assert a bad faith claim and recover damages in excess of limits in situations where the insurer fails to settle within policy limits or unreasonably denies a claim.  These types of allegations give rise to a tort action for breach of the implied covenant of good faith and fair dealing because “the insurer must act fairly and in good faith in discharging its contractual responsibilities.”  Gruenberg v. Aetna Ins. Co., 510 P.2d 1032, 1037 (Cal. 1973).  The reason for a bad faith cause of action is to deter that kind of conduct by insurers and level the playing field because “[t]he insurance company, as the dominant party, however, has an even greater obligation than the insured to act in good faith.”  Sears Mortgage Corp. v. Rose, 634 A.2d 74, 84 (N.J. 1993). (more…)