Reverse Bad Faith: Does It Exist And Can It Be Useful?

Law360, New York (June 23, 2015, 10:51 AM EDT) -- Last month, in State Auto Property & Casualty Insurance Co. v. Hargis, No. 13-5020 (6th Cir. May 6, 2015), the U.S. Court of Appeals for the Sixth Circuit predicted that the Kentucky Supreme Court would not allow insurers to sue policyholders for the tort of "reverse bad faith." The court's analysis drew a distinction between the duty of good faith and fair dealing that is implied by law into contracts and the distinct, common law duty that arises from a "special relationship" between the parties. Only the latter duty gives rise to a tort claim. The court also found that no other state has recognized a tort of reverse bad faith. Yet, given recent interpretations of the contractual duty, it's arguable that "reverse bad faith" is already here — and what we should be asking is whether it can be of any use....

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