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Insurance bad faith is a tort [1] unique to the law of the United States (but with parallels elsewhere, particularly Canada) that an insurance company commits by violating the "implied covenant of good faith and fair dealing" which automatically exists by operation of law in every insurance contract.
Hangarter v. Provident Insurance Company, 373 F.3d 998 (9th Cir. 2004), [1] (UnumProvident, now referred to as Unum or Unum Group [2]), is a landmark decision by the 9th Circuit Court of Appeals on the issue of disability bad faith insurance law.
Uberrima fides is strictly limited in English law to the formation of the insurance contract. [5] During the mid-20th century, American courts expanded it much farther into a post-formation implied covenant of good faith and fair dealing. Violation of that implied covenant came to be seen as a tort, now known as insurance bad faith. [5]
In February 2010, a Boulder, Colorado jury found that Assurant Health had breached its contract with a woman who was severely injured in a hit-and-run accident, and awarded her $183,551 for medical bills and approximately $37.1 million in punitive damages. This was described as "one of the largest bad-faith judgments in Colorado history". [31]
The concept of good faith was established in the insurance industry following the events of Carter v Boehm (1766), and is enshrined in the Insurance Contracts Act 1984 (ICA). [26] The act stipulates, in Section 13, obligations of all parties within a contract to act with utmost good faith.
In 1984, while the appeal was ongoing, Campbell reached a settlement with the victim's estate, where Campbell would pursue an insurance bad faith action against State Farm. The attorneys for the victim's estate would represent Campbell in the bad-faith suit. In 1989, Campbell's appeal was denied by the Utah Supreme Court. [58]
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