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Third Party Claimant has no Right to Tort Damages for Bad Faith by Other  Party\'s Insurer   

https://zalma.com/blog

The Supreme Court of California was faced with the question of \\u201cwhether  an insurance company\\u2019s breach of the covenant sounds in tort when it  retroactively overcharges a premium it knows is not owed.\\u201d  In Jonathan Neil & Associates v. Jones, a dispute between Jones  Trucking and Jonathan Neil & Associates arose after an audit of the  Joneses\\u2019 operations found the trucking company was subcontracting  business to other trucking companies. A rule governing the state\\u2019s  assigned risk plan called for Jones Trucking to pay for the  subcontractors\\u2019 insurance. Cal-Eagle, the insurer, sought to  retroactively collect increased premiums from the Joneses, and brought  in Jonathan Neil & Associates, a collection agency.  A breach of this duty of reasonable settlement gives rise to tort  damages. However, the Supreme Court of California has, in the past,  refused to extend the tort remedy to breaches of contracts other than  insurance contracts. The question raised was whether bad faith conduct  not involving a claim entitled an insured to tort damages. The court  rejected the expansion of tort damages.  \\u201cImposing a duty of good faith and fair dealing running from the Insurer  to the [plaintiffs] would \\u2018create a serious conflict of interest for  the [I]nsurer\\u2019 by obligating it to safeguard both the [plaintiffs\\u2019] and  Gonzalez\\u2019s interests.\\u201d Plaintiffs, as third party claimants, have no  contractual relationship with the insurer and cannot sue the insurer for  breach of the implied covenant of good faith and fair dealing. In so  arguing, the court applied the law as stated by the California Supreme  Court in Moradi-Shalal v. Fireman\\u2019s Fund Ins. Companies (1988) 46 Cal.3d  287 (Moradi-Shalal).  The Supreme Court held that a third party claimant\\u2014an individual who is  injured by the alleged negligence of an insured party\\u2014does not have a  private right of action against the insurer for unfair settlement  practices.  \\xa9 2021 \\u2013 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 52 years in the insurance business. He is  available at http://www.zalma.com and zalma@zalma.com.  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 https://anchor.fm/barry-zalma;  Follow Mr. Zalma on Twitter at https://twitter.com/bzalma; Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921; Go to Barry Zalma on YouTube- https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg; Go to the Insurance Claims Library \\u2013 https://zalma.com/blog/insurance-claims-library/ Read posts from Barry Zalma at https://parler.com/profile/Zalma/posts; and Read last two issues of ZIFL here.