Statutory Requirement That Insurers Act in Good Faith
Because some insurers failed to fulfill their promises, because some insurers took advantage of their insureds, California courts created a new tort, the tort of bad faith. Further, in addition, since some insurers acted in bad faith and caused harm to their insureds, the California legislature enacted a Fair Claims Settlement Practices Act to allow it to regulate insurers. The Regulations in various iterations have been adopted across the country.
The state set up a statutory scheme and a set of regulations that allowed the state, by the office of the elected Insurance Commissioner, to punish insurers who violated the statutory and Regulatory requirements. The statutes and Regulations are one sided, they only control the activities of insurers, not those who are insured.
On the subject of whether the statute created a private right to sue, the Moradi-Shalal court applied a legislative intent analysis and held that “thus far the Legislature has not manifested an intent to create such a private right of action.” [Moradi-Shalal v. Fireman’s Fund Ins. Companies, (supra), 46 Cal. 3d 287, 305]. Since the Legislature had not manifested an intent to create a private right to sue, Moradi-Shalal found that there was no private right to sue. The Regulations were written to deal with the need identified by the Supreme Court in Moradi Shalal to give people who were harmed by an insurer to punish the wrong-doing.
© 2020 – Barry Zalma
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. He also serves as an arbitrator or mediator for insurance related disputes. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 52 years in the insurance business. He is available at http://www.zalma.com and email@example.com.
Mr. Zalma is the first recipient of the first annual Claims Magazine/ACE Legend Award.
Over the last 52 years Barry Zalma has dedicated his life to insurance, insurance claims and the need to defeat insurance fraud. He has created the following library of books and other materials to make it possible for insurers and their claims staff to become insurance claims professionals.
Read posts from Barry Zalma at https://parler.com/profile/Zalma/posts
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