In Braesch v. Union Insurance Co., the Nebraska Supreme Court first recognized the tort of bad faith denial of first party insurance claims. Nebraska was the thirty-sixth jurisdiction to recognize a cause of action for bad faith in first-party cases. This Note begins with an overview of the development of the law of bad faith in insurance. It discusses the earlier adoption of the bad faith tort action in situations where liability insurers breached their duty to settle claims in good faith. It further discusses why other courts transferred the third party insurer's obligation to deal in good faith to first party insurers. Second, the Note outlines the facts and holding of the case. Third, it analyzes the court's rationale for imposing the duty of good faith and fair dealing upon insurers and for allowing mental distress damages for bad faith breach of first party insurance contracts. Fourth, it discusses the implications of that rationale for bad faith breach outside the insurance setting. Finally, the Note examines the types of conduct that will expose an insurer to extracontractual tort damages in first party claims and cautions potential defendants that when a first party bad faith plaintiff successfully pleads a tort cause of action, certain defenses will not be available. The Note also incorporates the two subsequent Nebraska decisions which have applied the standard set forth in Braesch.
Steven B. Fillman,
Braesch v. Union Insurance Co., 237 Neb. 44, 464 N.W.2d 769 (1991) Policy Rationales of the Bad Faith Cause of Action and Implications to Non-Insurance Commercial Contracts,
72 Neb. L. Rev.
Available at: http://digitalcommons.unl.edu/nlr/vol72/iss2/7