The Development of the Implied Covenant of Good Faith and Fair Dealing

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The Covenant of Good Faith and Fair Dealing is a general assumption of the law of contracts, that people will act in good faith and deal fairly without breaking their word. When insurers use shifty means to avoid obligations or deny what the other party obviously understood was a violation of the duty of good faith. The covenant, with regard to insurance, has been implied in every contract of insurance since the beginning of modern insurance at the Lloyd’s Coffee shop more than three centuries ago.

The implied duty of good faith and fair dealing is a centuries-old concept. It is aimed at ensuring that the parties to a contract do not interfere with the other party’s performance or destroy the other party’s reasonable expectations with respect to the benefits of the contract.