Posted On: January 11, 2008, 1:49 pm CST

Posted By: TC

The truth of the matter is that Bad Faith legislation and common law did not come into existence because the Trial Bar wanted more money. Its growth was the result of insurance companies using the power imbalance they had over their insureds to delay or deny money that was actually due under the policy.

While its true that Bad Faith actions are not the norm, without some sort of repercussion for an insurance company's bad faith acts (beyond what is mostly available in a state's version of the Model Act), there is really no strong incentive for insurance companies to pay.

While an individual proposed statute might go too far and reduce the insurance company's ability to fight questionable claims (which is important), the right statute will deter bad faith by insurance companies by penalizing them when appropriate while still allowing them to challenge debatable claims.