May, 2002
Chart Presents State-by-State Policy With Case Citations
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Reverse Bad Faith Information
|While insureds and third parties may bring bad faith actions against insurers, insurers in most jurisdictions do not have the same opportunity. Some insurers have sought to establish a tort of reverse bad faith, or the tortious breach of the covenant of good faith and fair dealing by the insured.
Although the Oklahoma Supreme Court refused to recognize a tort of reverse bad faith, it described the doctrine as an “independent tort allowing insurers to seek affirmative relief for an insured's breach of the duty of good faith and fair dealing. The approach draws from the principle that an insurer should not be subjected to bad-faith liability if the insured (a) procured the policy through fraud, (b) breached contractual obligations, or (c) engaged in other misconduct.” First Bank of Turley v. Fidelity and Deposit Ins. Co. of Maryland, 928 P.2d 298 (Okla. 1996).
Most jurisdictions are silent on the subject, but some have specifically declined to recognize the tort of reverse bad faith. See Johnson v. Farm Bureau Mutual Ins. Co., 533 N.W.2d 203 (Iowa 1995); Tokles & Sons, Inc. v. Midwestern Indem. Co., 605 N.E.2d 936 (Ohio 1992); and Lewis v. Aetna Ins. Co., 78 F. Supp.2d 1202 (N.D. Okla. 1999).
A Tennessee statute, though, imposes a liability on insureds when actions are not brought in good faith. If a suit is not brought in good faith, the insured is liable to the insurance company for a sum of up to 25 percent of the amount of the claimed loss (Tenn. Code Ann. §56-7-106).
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