Limits on Bad Faith
The Court of Appeal, in Jonathan Neil refused to allow that every breach of an insurance contract (any more than every breach of contract) will allow a plaintiff to recover tort damages. The court was satisfied the “insurance cases” exception preserved in Freeman & Mills does not extend to every breach of an insurance contract. The covenant of good faith and fair dealing is reciprocal, binding both the insurer and the insured. Nevertheless, an insured is not guilty of the tort of bad faith when the insured breaches the covenant; in those circumstances the insurer is limited to contract remedies.
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