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13 Pac. L. J. 833 (1981-1982)
Insurance Bad Faith Law: The Need for Legislative Intervention

handle is hein.journals/mcglr13 and id is 873 raw text is: Insurance Bad Faith Law: The Need for Legislative Intervention GLENN L. ALLEN* In 1958, the California Supreme Court first recognized a tort of in- surance bad faith.' Since then, the scope and use of this tort has ex- panded dramatically, markedly increasing the vulnerability of insurers to large verdicts. In many situations, insurers are now faced with what approaches strict liability. Ambiguous standards of conduct serve as an open invitation to litigation. This article will review how insurance bad faith law has developed in California, note some of the problems that have been created, and conclude by proposing interim legislation designed to help correct some of the inequities which have developed. BACKGROUND Prior to Royal Globe Insurance Co. v. Superior Court,2 bad faith cases could be divided into two basic common law types: third party bad faith and first party bad faith. This nomenclature can be a source of confusion. Before Royal Globe, the third party bad faith action oc- curred when an insured was sued by a third party, the insurer failed to settle within the policy limits after being given an opportunity to do so, the third party obtained an award in excess of the limits, and the in- sured then sued the insurer for the bad faith failure to settle within the policy limits. Although the term third party bad faith was used * A.B., University of California at Berkeley. J.D., Harvard Law School. 1. Comunale v. Traders & General Ins. Co., 50 Cal. 2d 654, 328 P.2d 198 (1958). 2. 23 Cal. 3d 880, 592 P.2d 329, 153 Cal. Rptr. 842 (1979).

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