A Video Explaining Common Law Bad Faith

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In the 1950’s the California Supreme Court, recognizing that some insurers took advantage of their customers by refusing to pay claims that were clearly owed under the terms and conditions of the policy; failed to negotiate settlements within policy limits, and left insureds to fend for themselves, a new tort grew was created. The California Supreme Court, concluding that some insurers failed to deal fairly with those they insured. Because contract remedies did not provide, in the reasoning of the California Supreme Court, a procedure by which adequate damages could be provided to the person wronged by his or her insurer, the tort of bad faith arose to the joy of the plaintiffs’ bar.

The concept of the tort of bad faith developed as a means of providing a recovery in tort for the breach of what had previously been regarded as a simple contract action. Contract damages are traditionally limited the injured party’s recovery to those damages within the contemplation of the parties at the time the contract was made.

Compensatory Damages Available for Breach of Contract

Expectation Damages:

Consequential Damages:

Liquidation Damages:

Restitution:

Specific Performance:

Damages from Insurer for Breach

Tort Damages

Limitations on Punitive Damages

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Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders.

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