ABSTRACT
This paper explores the evolution of the civil liability regime for insurance claims settlement disputes in the United States, and the ways in which it has affected the incidence of disputes and litigation of insurance claims. The paper first surveys the history of insurance bad faith legal doctrine in the US and discusses the predicted impacts of this doctrine from economic theory. The empirical study makes use of a large sample of automobile insurance claims settled in 42 US states over the 25 year period in which insurance bad faith doctrine was evolving in the US states. The paper concludes that changing bad faith standards initially led to increases in insurance claim settlement failures, as indicated by higher rates of litigated claims and higher incidence of litigation proceeding to trial. But, as the law matured, declining uncertainty about bad faith tort law eventually reduced the scope for disagreement in settlements, ultimately reducing claim settlement failures in first-party auto insurance claims.
Tennyson, Sharon L, Insurer Liability and Claim Settlement Failures: Evidence from the United States (June 30, 2020), Chapter 19 in Contemporary Insurance Law, Ernesto Tzirulnik et al, eds, Roncarati Publishers, Sao Paulo, 2021.
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