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Midlige, Suzanne; Re, Robert; Hoffman, William --- "Claims: An Overview of the US Tort of ‘Bad Faith’ – A Common Law Approach to Regulating Insurer Claims Handling and Settlements" [2012] ELECD 160; in Burling, Julian; Lazarus, Kevin (eds), "Research Handbook on International Insurance Law and Regulation" (Edward Elgar Publishing, 2012)

Book Title: Research Handbook on International Insurance Law and Regulation

Editor(s): Burling, Julian; Lazarus, Kevin

Publisher: Edward Elgar Publishing

ISBN (hard cover): 9781849807883

Section: Chapter 6

Section Title: Claims: An Overview of the US Tort of ‘Bad Faith’ – A Common Law Approach to Regulating Insurer Claims Handling and Settlements

Author(s): Midlige, Suzanne; Re, Robert; Hoffman, William

Number of pages: 26

Extract:

6 Claims: an overview of the US tort of `bad faith' ­ a
common law approach to regulating insurer claims
handling and settlements
Suzanne Midlige, Robert Re and William Hoffman



1. INTRODUCTION

In the United States, `bad faith' claims frequently arise not only in disputes between
insureds and insurers but also in disputes between insurers. Bad faith claims are signifi-
cant to insurers because they potentially expose them to `extracontractual' types of
damages and even punitive damages. That is, a finding of bad faith potentially exposes an
insurer to liability beyond the policy limits originally bargained for in the insurance
contract. This chapter provides an overview of the bad faith cause of action in the US,
beginning with its origins in the early twentieth century, and a comparison of the bad faith
cause of action to concepts such as uberrima fides, or utmost good faith, familiar to
English and European markets. Also discussed are the contexts in which bad faith claims
may arise, the damages available to a successful bad faith claimant and the various
standards that US courts may apply in deciding a bad faith claim. In particular, this
chapter discusses, and provides examples of, some of the most common categories of bad
faith, including bad faith claims that arise when an insurer wrongfully refuses to defend an
insured or wrongfully refuses to settle a covered claim within policy limits.
The assertion of bad faith claims by insureds is on the rise in the US. Not surprisingly,
bad faith came ...