Insurance and the Law of Unintended Consequences
Insurance is, and always will be, a business of the utmost good faith. All parties to the insurance contract agree, in good faith and fair dealing, to do nothing to deprive the other the benefits of the contract.
Insurance is, and always be, nothing more than a contract.
The insurer makes a promise to the insured that if a contingent or unknown loss occurs caused by a peril or risk insured against and not excluded, to pay the insured indemnity as promised by the contract up to the limits provided.
The insured promises to truthfully disclose the risks of loss faced by the insured, property owned by the insured, the business of the insured and/or the insured’s liability exposures. The insured also promises to honestly present a claim, prove the claim, and cooperate with the insurer in its investigation.
If the parties to the insurance contract deal with each other fairly and in good faith the policy remains viable, claims are paid promptly and to the satisfaction of the insurer and the insured.
Only if a true tort occurs can the insured waive the contract action and sue in tort.
Breach of contract, by centuries old tradition, is not a tort and cannot and should not be considered a tort.
The Tort of Bad Faith has served its purpose and is now causing more problems than it solves. It is time the courts and state legislatures rescind the tort and return to common law contract damages.