How Do Third-Party, Bad Faith Bodily Injury Claims Affect Automobile Insurance Costs and Compensation?

by Angela Hawken, Stephen J. Carroll, Allan Abrahamse

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This research brief describes work documented in The Effects of Third-Party, Bad Faith Doctrine on Automobile Insurance Costs and Compensation (MR-1199-ICJ).

Excerpt: In its 1979 decision in Royal Globe Insurance Company v. Superior Court, the California Supreme Court gave an accident victim the right to bring a claim for punitive damages against another person's liability insurer if the victim felt that the insurer had engaged in unfair claims settlement practices. Although the California Supreme Court reversed this decision in 1988, so-called third-party, bad faith suits continue to be debated nationwide. Since the 1988 reversal, several states have subsequently considered or enacted legislation to allow such claims. In 1999, California passed legislation reinstating these suits, but the legislation was overturned by statewide referenda before being put into effect. Nonetheless, about a dozen other states are now considering whether to allow third-party, bad faith claims.

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