A Video About the Birth & Growth of the Tort of Bad Faith

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Fletcher v. Western Life

In Fletcher v. Western Life Ins. Co., 10 Cal. App. 3d 376, 89 Cal. Rptr. 78 (1970), the plaintiff, Fletcher was, at the time of trial, a 41-year-old father of 8 children, seven of whom were still in school.

Defendants’ conduct was premeditated, continuous and persistent (citation) and defendant Amason, who was still employed as Western National’s claims manager at the time of trial, indicated that he would conduct himself similarly if a similar situation should again arise. The primary function of punitive damages is to deter the defendant and those similarly situated from engaging in similar tortuous conduct in the future.

Gruenberg v. Aetna

It is manifest that a common legal principal underlies all of the foregoing decisions; namely, that in every insurance contract there is an implied covenant of good faith and fair dealing. The duty to so act is imminent in the contract whether the company is attending to the claims of third persons against the insured or the claims of the insured itself. Accordingly, when the insurer unreasonably and in bad faith withholds payment of the claim of its insured, it is subject to liability in tort.

“We conclude, therefore, that the duty of good faith and fair dealing on the part of defendant insurance companies is an absolute one. At the same time, we do not say that the parties cannot define, by the terms of the contract, their respective obligations and duties. We say merely that no matter how those duties are stated, the nonperformance by one party of its contractual duties cannot excuse a breach of the duty of good faith and fair dealing by the other party while the contract between them is in effect and not rescinded.”

Silverg v. California Life

under these circumstances defendant’s failure to afford relief to its insured against the very eventuality insured against by the policy amounts to a violation as a matter of law of its duty of good faith and fair dealing implied in every policy. 11 Cal. 3d at 462. (Emphasis added.)


An insurer should never leave the insured without benefits while it is involved in a dispute with another insurer or provider of benefits. It should, rather, protect its right to dispute coverage and get its money back by means of a reservation of rights letter or a non-waiver agreement. The reservation of rights letter keeps the insurer, while it is taking care of an insured whose coverage is in question, from being bound to the insured forever. It allows the insurer, unilaterally, to give itself the opportunity to complete a thorough investigation, determine whether coverage applies, and then—if it does not apply—withdraw its benefits and even seek return of what it has paid. The non-waiver agreement is a contract where both the insured and the insurer agree that while the insurer is investigating neither party waives the rights available under the contract.

© 2021 – 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 54 years in the insurance business.

He is available at and Mr. Zalma is the first recipient of the first annual Claims Magazine/ACE Legend Award. Over the last 53 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.

Go to the podcast Zalma On Insurance at;  Follow Mr. Zalma on Twitter at; Go to Barry Zalma videos at ; Go to Barry Zalma on YouTube-; Go to the Insurance Claims Library –  The last two issues of ZIFL are available at  podcast now available at