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 .


1 See Gruenberg v. Aetna Ins. Co.(1973) 9 Cal. 3d 566.
2 See Silberg v. California Life Ins. Co.(1974) 11 Cal. 3d 452.
3 (2008) 165 Cal. App. 4th 455.
4 (1979) 24 Cal. 3d 809.

  • Harry Begier, Jr.

    The history of bad faith is much older than 1970 in the United States. See:

    1890 Dwelling-House Ins. Co. v. Gould, 134 Pa. 570, 588, 19 A. 793, 795 (Pa. 1890 (good faith should be mutual between an insurer and the insured);

    1894 McCormick v. Royal Ins. Co., 163 Pa. 184, 192-193, 29 A. 747, 750 (Pa. 1894 (good faith requires an insurer to notify an insured to start suit and what its defenses will be);

    1895 Freedman v. Fire Ass’n of Philadelphia, 168 Pa. 249, 254, 32 A. 39, 40-41 (Pa. 1895 (where good faith requires an insurance company to speak, failure to do so will be an estoppel);

    1911 Honesdale Ice Co. v. Lake Lodore Improvement Co., 232 Pa. 293, 300-30l, 81 A. 306 (Pa. 1911 (Applying rule of Freedman and good faith to contracts generally).

    1930 Fedas v. Insurance Co. of Pennsylvania, 300 Pa. 555, 559, 151 A. 285, 286 (Pa. 1930 (Utmost in fair dealing should characterize the transactions between an insurance company and the insured)