The history and development of the Duty of Good Faith and Fair Dealing insurers owe to its own insured has evolved in California since the beginning of the 1970s. Generally, with every contract, the obligations of good faith and fair dealing are not delineated in the contract itself, but are "…imposed by law governing the manner in which the contractual obligations must be discharged-fairly in good faith."1
In first party cases, it is the insurer’s duty to provide the insured financial coverage for covered losses, and there are affirmative acts an insurer must undertake when dealing with an insured. Essentially, an insurer is obligated by its contract to do two specific things:
1) conduct a thorough and prompt investigation of an insured’s claim for coverage and benefits; and
2) refrain from acting in a way that would unreasonably delay or withhold insurance benefits to the insured.2
In 2008, California’s Sixth District Court of Appeal further developed its take on the duty of good faith and fair dealing in City of Hollister v. Monterey Insurance Company.3 The Court stated each party to the insurance contract was required to "do everything that the contract presuppose that he will do to accomplish its purpose."
In California first party claims, an insurance company must reasonably investigate and move a claim forward in a reasonable manner and time frame. Although each contract or policy may dictate certain parameters (meaning every contract imposes different duties), we still rely on the 1979 case of Egan v. Mutual of Omaha Insurance Company4 to guide our "legitimate expectations of the parties arising from the contract" to determine whether a insurer fulfills its obligations to an insured in accordance with its duty of good faith and fair dealing .