Research On Insurance Bad Faith Institution In United States And Canada And Its Implication To China

Insurance bad faith is an institution in which an insured or a beneficiary has a right todamages beyond the policy limit because of the misconduct of an insurer. Thisdissertation purports to explore and discover the core value and practical advantage ofthe institution, to perfect Chinese insurance law system, to protect the legal interests ofconsumers of insurance, to maintain a rational order of the insurance market, to clarifythe boundary between two legal sector, namely tort law and contract law, and toprovide the beneficial enlightenment to the understanding of the interaction betweenthem by comparative research of insurance bad faith institution in United States andCanada.The objectives of this dissertation are as follows: firstly, completely andcomprehensively discusses the insurance bad faith institution, displays the overalltheory framework and system settings of the insurance bad faith institution in UnitedStates and Canada, on which the follow-up researchers can do further study; secondly,objectively assesses the positive and negative effect of the institution, weighs thealternatives of the specific settings, explicits the core value of it, and discusses the keyfactors and basic standard of first party bad faith and the third party bad faith; thirdly,designs the basic institutional framework and the relevant rules of Chinese insurancebad faith institution.On the basis of summing up and reviewing the relevant literature of both United Statesand Canada, referring to those outstanding achievements, this dissertation, by way ofanalyzing the historical change of insurance bad faith institution and the classicprecedents, comparatively studying both countries' institutions and legal settings ofbad faith, explores and uncovers the cause of the insurance bad faith institution, thedevelopment of it, the existing issues, the core value of the institution and the directionof future development in order to tamp the foundation for systemic designing Chineseinsurance bad faith institution. In designing the Chinese bad faith institution, thisdissertation firstly explicits the necessity of the institution by the way of law and economics, then suggests the feasible path of designing the institution based onexisting legal rules, and finally chooses the most appropriate settings for China basedon the results of the comparative research.Finally, the conclusion of this dissertation is that the insurance bad faith institution isan effective legal system to solve the Chinese "difficulty in claim handling" problem.Through a comparative study for American and Canadian insurance bad faithinstitutions, it is not difficult to find bad faith imposes certain pressure on an insurerfor reasonable claim settlement practice. No matter what standard this system willadopt, as long as the existence of such pressure, it can to some extent balance theinterests between an insurer and an insured, lower the economic incentive to insurers'misconducts, motive insurers to handle the claims in a more reasonable and legal way,at last improve the insurance contracting environment and thereby benefit bothinsureds and insurers.The current Chinese law has laid a good foundation for the introduction of insurancebad faith institution. Through the corresponding provisions of insurance law, contractlaw, tort law and consumer protection law, the insured is entitled to the damagesbeyond the policy limit in case of a delay of an insurer in claim handling. Thisdamages, in some cases, also includes mental suffering and punitive damages. Ifthrough certain procedures will these clauses be integrated into a whole, such asadding a clause regulating insurance bad faith conduct in insurance law, the insurancebad faith institution can be introduced into China.According to Chinese existing law, bad faith action can be either based on contract lawor tort law, which depends on the specifics of the case and the choice of the parties.The author thinks, China shall first introduced the first party insurance bad faith rules,and defer laying the rules of third party insurance bad faith. This is a temporary choicebecause Chinese liability insurers do not have the duty to defend. The establishment ofthe first party bad faith needs a corresponding standard which shall be the one bothUnited States and Canada adopt, namely “fairly debatable” standard. An insurer is not liable for bad faith liability unless it is proved that the denial of the benefit isunreasonable and the insurer knows or should have known the denial is unreasonable.In addition, because of the relevant differences of the laws among China, America andCanada, the defenses an insurer may assert against bad faith in China are different thanthe ones an insurer may assert in both Canada and the United States.