The Law & the Tort of Bad Faith
Barry Zalma
May 25, 2023
Posted on May 25, 2023 by Barry Zalma
See the full article at https://www.linkedin.com/pulse/law-unintended-consequences-barry-zalma-esq-cfe
The law of unintended consequences is not statutory. No state or federal government has enacted it into law. No executive has signed the law. It is, rather, a law of the nature of people. It is an adage or idiomatic warning that an intervention in a complex system always creates unanticipated and often undesirable outcomes.
General observation requires the hypothesis that actions of people, especially of governments, will always have effects that are unanticipated or unintended, has been proved. Economists and other social scientists have heeded its power for centuries. Regardless, for just as long, politicians, insurers and popular opinion have largely ignored the law of unintended consequences to their detriment.
There is no common-law duty for a court, especially in a heavily regulated sector of the economy like insurance to create new rules. Every court should be loathe to invent duties unmoored to any existing precedent. The law of unintended consequences counsels against it.
To find a good illustration of the law of unintended consequences, one need look no further than the Supreme Court’s decision in Williamson County Regional Planning Comm’n v. Hamilton Bank of Johnson City, 473 U.S. 172, 105 S.Ct. 3108, 87 L.Ed.2d 126 (1985). The Court’s actual holding was pedestrian: that Hamilton Bank’s takings claim was unripe because the bank had not exhausted its administrative remedies, specifically its right to ask the County for a variance to develop the property in the manner proposed. In dictum, however—dictum in the sense that the Court’s pronouncement was at that point unnecessary to its decision—the Court went on to say that the bank’s claim was “not yet ripe” for a “second reason. That reason too was couched in terms of exhaustion: that under state law “a property owner may bring an inverse condemnation action to obtain just compensation for an alleged taking of property”; and that, until the bank “has utilized that procedure, its takings claim is premature.” The Court’s implicit assurance, of course, was that once a plaintiff checks these boxes, it can bring its takings claim back to federal court.
That assurance proved illusory. State-court judgments are things to which the federal courts owe full faith and credit. That obligation means that takings claims litigated in state court cannot be relitigated in federal. Thus—by all appearances inadvertently— Williamson County all but guarantees that claimants will be unable to utilize the federal courts to enforce the Fifth Amendment’s just compensation guarantee against state and local governments. [Lumbard v. City of Ann Arbor, 913 F.3d 585 (6th Cir. 2019)]
The law of unintended consequences applies as much in jurisprudence as anywhere else; bending a rule to accommodate one litigant doesn’t always achieve better justice — sometimes it just sows confusion in anyone trying to figure out what a court might do in other cases in the future. A prudent court will take the lesson to leave rulemaking to the legislators and administrators, even when the outcome appears unjust. The orderly development of the law is not without rough patches, but it is better than living under the law of unintended consequences. [United States ex rel. Prather v. Brookdale Senior Living Cmtys., Inc., 892 F.3d 822 (6th Cir. 2018)]
In addition, as one dissenter said that the majority’s desire to cure all wrongs by eviscerating the doctrine of governmental immunity, while well-intentioned, is fraught with the law of unintended consequences. Depriving governmental officials of governmental immunity when making policy decisions, when making sentencing decisions, and when running the government would certainly cause most of us to rethink the traditional notion of public service. [Doe v. Dep’t of Corr., 323 Mich.App. 479, 917 N.W.2d 730 (Mich. App. 2018)]
Courts will often work strenuously to avoid making decisions that will result in difficulties in the future by application of the law of unintended consequences which causes more problems than the decision may cure. My opinion is that the well intentioned creation of the tort of bad faith helped one insured only to cost hundreds of millions of dollars, if not a few billion, to those unaware purchasers of insurance who must pay more in premiums than they would had the tort not been created by the California Supreme Court.
Adapted from my book It’s Time to Abolish The Tort of Bad Faith https://www.amazon.com/gp/product/B08RF1S2DP?pf_rd_r=M6RBTZK9KZABN6KCY5JM&pf_rd_p=5ae2c7f8-e0c6-4f35-9071-dc3240e894a8&pd_rd_r=3dbbb740-39d8-4f40-9983-b484c6d7d78a&pd_rd_w=4AX5G&pd_rd_wg=cgH0p&ref_=pd_gw_unk
(c) 2023 Barry Zalma & ClaimSchool, Inc.
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Policy Limits Demand Accepted Settles Claim
Post 5434
Posted on August 26, 2026 by Barry Zalma
See the full video at https://lnkd.in/g-ZtsSgK and at https://lnkd.in/ghMBdYWR
A Contingent Offer Accepted Ends the Dispute
In Farmers Insurance Exchange, a California Reciprocal Insurance Exchange, The Superior Court For The County Of San Bernardino, Kathleen Ann Wood, E087128, California Court of Appeals, (July 9, 2026) Farmers Insurance Exchange insured Doyle Archer under an automobile policy with bodily injury limits of $15,000 per person and $30,000 per accident.
FACTUAL BACKGROUND
Archer rear-ended Kathleen Ann Wood at a red light, causing Wood to assert a bodily injury claim against him. Wood’s counsel sent Farmers a pre-litigation settlement demand offering to resolve Wood’s claim for the available policy limits, stating that if the $100,000 demand exceeded the policy, the offer was for the policy limits.
Farmers timely responded in writing, agreed to pay Wood the $15,000 per-person policy limit, and provided the requested ...
Policy Limits Demand Accepted Settles Claim
Post 5434
Posted on August 26, 2026 by Barry Zalma
See the full video at https://lnkd.in/g-ZtsSgK and at https://lnkd.in/ghMBdYWR
A Contingent Offer Accepted Ends the Dispute
In Farmers Insurance Exchange, a California Reciprocal Insurance Exchange, The Superior Court For The County Of San Bernardino, Kathleen Ann Wood, E087128, California Court of Appeals, (July 9, 2026) Farmers Insurance Exchange insured Doyle Archer under an automobile policy with bodily injury limits of $15,000 per person and $30,000 per accident.
FACTUAL BACKGROUND
Archer rear-ended Kathleen Ann Wood at a red light, causing Wood to assert a bodily injury claim against him. Wood’s counsel sent Farmers a pre-litigation settlement demand offering to resolve Wood’s claim for the available policy limits, stating that if the $100,000 demand exceeded the policy, the offer was for the policy limits.
Farmers timely responded in writing, agreed to pay Wood the $15,000 per-person policy limit, and provided the requested ...
The Largest Residential Burglary of All Time
Post 5407
Fraud & the Fear of Bad Faith Suits
Posted on July 22, 2026 by Barry Zalma
See the full video at https://lnkd.in/gWQQEySW and at https://lnkd.in/gyhdK6wv
This is a Fictionalized True Crime Story of Insurance Fraud explaining why Insurance Fraud is a “Heads I Win, Tails You Lose” situation for Insurers. The story is one of a collection designed to help to Understand How Insurance Fraud in America is Costing Everyone who Buys Insurance Thousands of Dollars Every year and Why Insurance Fraud is Safer and More Profitable for the Perpetrators than any Other Crime.
This is a Fictionalized True Crime Story of Insurance Fraud explaining why Insurance Fraud is a “Heads I Win, Tails You Lose” situation for Insurers. The story is one of a collection designed to help to Understand How Insurance Fraud in America is Costing Everyone who Buys Insurance Thousands of Dollars Every year and Why Insurance Fraud is Safer and More Profitable for the Perpetrators than any Other Crime.
After ...
Communications with Arson Investigation is Privileged
Post 5488
Posted on September 11, 2026 by Barry Zalma
ACE Was Not Required To Produce Any Disputed Document Because Each Was Protected By The Attorney-Client Privilege, or The Work-Product Doctrine.
See the full video at and at https://rumble.com/v7fbzvo-arson-for-profit-is-ground-to-deny-claim.html
In Rubesne Resources LLC, a Colorado Limited Liability Company v. ACE Property And Casualty Insurance Company, a Foreign Corporation, Civil Action No. 1:24-cv-02300-DDD-SBP, United States District Court, D. Colorado (August 30, 2026) Rubesne Resources LLC sought insurance coverage from ACE Property and Casualty Company after a January 5, 2024 fire destroyed its business.
South Metro Fire Rescue classified the ignition as intentional, and ACE’s retained expert concluded that gasoline had been poured in multiple areas and ignited. ACE retained coverage and subrogation counsel, National Subrogation Services, and a cause-and-origin expert ...
Arson for Profit is Ground to Deny Claim
Posted on September 11, 2026 by Barry Zalma
Communications with Arson Investigation is Privileged
Post 5488
ACE Was Not Required To Produce Any Disputed Document Because Each Was Protected By The Attorney-Client Privilege, or The Work-Product Doctrine.
See the full video at and at https://rumble.com/v7fbzvo-arson-for-profit-is-ground-to-deny-claim.html
In Rubesne Resources LLC, a Colorado Limited Liability Company v. ACE Property And Casualty Insurance Company, a Foreign Corporation, Civil Action No. 1:24-cv-02300-DDD-SBP, United States District Court, D. Colorado (August 30, 2026) Rubesne Resources LLC sought insurance coverage from ACE Property and Casualty Company after a January 5, 2024 fire destroyed its business.
South Metro Fire Rescue classified the ignition as intentional.
After reviewing the disputed documents in camera, the court found that each was protected.
LAW
Colorado Revised Statutes § 10-4-1003 requires ...
Referral of Claims to its SIU Is Not Bad Faith
Post 5487
Posted on September 10, 2026 by Barry Zalma
In WIZ Collision, LLC, on behalf of itself and as assignee of Jawara Small, Chester Street LLC, and Aziz Brooks v. GEICO Corporation, No. 25-cv-4201 (KAM)(JAM), United States District Court, E.D. New York (August 28, 2026) Wiz Collision, a New York City auto-body shop, regularly repaired vehicles and submitted insurance claims for customers. It alleged that GEICO repeatedly approved claims and repairs, then referred certain claims to its Special Investigations Unit, stopped issuing payments, and delayed resolution despite ultimately finding no fraud.
Wiz Collision sued on its own behalf and as purported assignee of three customers, asserting contract, good-faith, consumer-protection, and injunctive claims. GEICO removed the case and moved to dismiss under Rule 12(b)(6).
LAW
Under Rule 12(b)(6), a complaint must plead facts supporting a facially plausible claim. Article III standing requires a concrete injury, ...
