Insurance bad faith is a legal term of art unique to the law of the United States that describes a tort claim that an insured person may have against an insurance company for its bad acts. Under the law of most jurisdictions in the United States, insurance companies owe a duty of good faith and fair dealing to the persons they insure. This duty is often referred to as the "implied covenant of good faith and fair dealing" which automatically exists by operation of law in every insurance contract. If an insurance company violates that covenant, the insured person (or "policyholder") may sue the company on a tort claim in addition to a standard breach of contract claim. The contract-tort distinction is significant because as a matter of public policy, punitive or exemplary damages are unavailable for contract claims, but are available for tort claims. The result is that a plaintiff in an insurance bad faith case may be able to recover an amount larger than the original face value of the policy, if the insurance company's conduct was particularly egregious.
Read more about Insurance Bad Faith: Historical Background, Bad Faith Defined, Assignment or Direct Action, Litigation
Famous quotes containing the words insurance, bad and/or faith:
“For there can be no whiter whiteness than this one:
An insurance man’s shirt on its morning run.”
—Gwendolyn Brooks (b. 1917)
“Shakespeare had no tutors but nature and genius. He caught his faults from the bad taste of his contemporaries. In an age still less civilized Shakespeare might have been wilder, but would not have been vulgar.”
—Horace Walpole (1717–1797)
“Nelse McLeod: Faith can move mountains Milt, but it can’t beat a faster draw. There’s only three men I know with his kind of speed—one’s dead, the other’s me, and the third is Cole Thornton.
Cole Thornton: There’s a fourth.
McLeod: Which one are you?
Thornton: I’m Thornton.”
—Leigh Brackett (1915–1978)