Insurer Can't Sue Insured for Reverse Bad Faith.

• Jurisdiction: United States
• Date: 01 April 1999

An insurer has no claim against its insured in tort for the breach of the covenant of good faith and fair dealing, the California Court of Appeal, Second District, decided in Agricultural Insurance Co. v. Superior Court (MKDG/Rhodes SC Partnership), 82 Cal.Rptr.2d 594 (1999).

The case arose from a controversy over payments to an insured for damage to its building resulting from the January 1994 earthquake in Northridge, California. The insurer charged the insured with falsifying claims, and in a cross-complaint to the insurer's action for bad faith and breach of contract, it employed the tort theories of reverse bad faith and fraud. The trial court sustained the insured's demurrer to both.

The court of appeal agreed that the insurer could not assert a reverse bad faith cause of...