This is one of a series of articles under the by line “Butler on Bad Faith” originally published in Mealey’s Litigation Report: Insurance Bad Faith, Vol. 19, #20, p. 23 (February 21, 2006).
[Editor’s Note: Alan J. Nisberg, Esquire, is a partner with the law firm of Butler Weihmuller Katz Craig LLP with offices in Miami, Mobile, Tallahassee, and Tampa. He is an experienced trial and appellate lawyer, active in the firm’s extra-contractual, coverage and class action departments. This commentary, other than the quoted material, are the author’s opinions – not the opinions of Butler Weihmuller Katz Craig LLP nor Mealey’s Publications. © Copyright 2006 by the author. Responses are welcome.]
Until the 20th Century, insurance contracts were treated the same as any other contract, with recovery generally limited to the damages contemplated by the parties when they entered into the contract.[FN1] Insurance contracts, like any other, were enforced by their explicit terms, and courts were reluctant to substitute their own judgment for the terms upon which the parties agreed absent some independent tort or injustice. By the end of the 19th Century, however, the judiciary in the United States began to recognize a general obligation of good faith performance implied in every contract.[FN2] By the 1930s, the implied covenant of good faith became a standard doctrine.[FN3] This duty of good faith and fair dealing originated to resolve disputes over agreements that were not explicit on pivotal contract terms, or left discretionary power in the hands of one of the contracting parties.[FN4]
This concept of “good faith and fair dealing” has been applied to many different types of contracts that left performance in the discretion of one of the parties.[FN5] However, the implied covenant has been applied differently across the country and has received critical scrutiny by scholarly writers.[FN6]
In his widely cited law review article, Professor Steven J. Burton discusses the implied covenant of good faith and fair dealing. He did not specifically address insurance contracts, but did evaluate contracts by which one party was permitted to exercise discretion in performing contractual obligations. Steven J. Burton, Breach of Contract and the Common Law Duty to Perform in Good Faith, 94 Harv. L. Rev. 369 (1980). As Professor Burton points out in various contexts, it may be in the best interests of the parties to allow one of them to exercise discretion. One party to a contract may be willing to rely on the good faith of the other because detailed planning may be ineffectual or inadvisable.[FN7] Accordingly, discretion is often vested with one of the parties to the contract. The good faith performance doctrine requires this discretion to be exercised in accordance with the intentions of parties, or to protect their reasonable expectations when entering into the contract.[FN8] Bad faith performance occurs when the discretion is used for the improper purpose of attempting to recapture opportunities foregone upon contracting. Good faith performance occurs when a party’s discretion is exercised for any purpose within the reasonable contemplation of the parties at the time of formation.[FN9]
The Restatement (Second) of Contracts notes that every contract imposes on each party a duty of good faith and fair dealing in its performance and enforcement.[FN10] A comment to the Restatement states that “[g]ood faith performance or enforcement of a contract emphasizes faithfulness to an agreed common purpose and consistency with the justified expectations of the other party; it excludes a variety of types of conduct characterized as involving ‘bad faith’ because they violate community standards of decency, fairness or reasonableness.”[FN11]
The implied covenant to perform on a contract in good faith is historically an element of the contractual obligation.[FN12] “[A] party’s good-faith cooperation is an implied condition precedent to performance of a contract; where that cooperation is unreasonably withheld, the recalcitrant party is estopped from availing himself of his own wrong doing.”[FN13] Consistent with this traditional approach, Florida Courts have held unequivocally that the rights conferred by the implied covenant of good faith and fair dealing are limited to the agreed terms of the contract. In Florida, the implied covenant of good faith cannot be maintained in the absence of breach of an express contract provision.[FN14] Moreover, in Florida, “[t]he implied obligation of good faith cannot be used to vary the terms of an express contract.”[FN15] By contrast, in New Jersey a party’s performance under a contract may breach that implied covenant even though that performance does not violate a pertinent express term.[FN16]
Whether the implied covenant of good faith is interrelated with, or independent of, the express contract terms, the motive of the party exercising discretion is a factor to consider. “[A] party must exercise discretion reasonably and with proper motive when that party is vested with the exercise of discretion under a contract.”[FN17] The Supreme Court of New Jersey, for example, has established the following test for a breach of the implied covenant of good faith and fair dealing:
A party exercising its right to use discretion in setting price under a contract breaches the duty of good faith and fair dealing if that party exercises its discretionary authority arbitrarily, unreasonably, or capriciously, with the objective of preventing the other party from receiving its reasonably expected fruits under the contract. Such risks clearly would be beyond the expectations of the parties at the formation of a contract when parties reasonably intend their business relationship to be mutually beneficial.[FN18]
Eventually, insurance contracts were perceived differently from other kinds of contracts because they came to “occupy a unique institutional role” in modern society and affected a large number of people whose premium rates were dependent upon the acts of not only themselves but also other insureds.[FN20] As a result, an entire body of law developed in the context of insurer “bad faith.”
This transition began when liability policies became more prevalent than traditional indemnity policies as the standard insurance policy form. With liability policies, insurers took on the implied duty to exercise discretion in defending and settling third-party claims brought against their insureds. Insurers were now responsible to avert exposure to the insureds in excess of policy limits.[FN21] This new relationship with the insureds is more akin to that which exists between an attorney and client.[FN22] Courts started to recognize that insurers “owed a duty to their insureds to refrain from acting solely on the basis of their own interests in settlement.”[FN23] The implied contractual duty to exercise appropriate discretion in the handling of the insured’s defense was transformed into a fiduciary duty in tort requiring the “exercise of good faith” or the “avoidance of bad faith.”[FN24] If an insurer did not act in good faith, it would have to pay the entire judgment entered against the insured, even if the amount exceeded the insured’s policy limits. Hence, an extra-contractual remedy emerged for an insurer’s violation of their implied contractual duty of good faith and fair dealing. The insurer “bad faith” action was born.
In Florida, third-party bad faith claims were recognized as early as 1938.[FN25] Based on the insurer’s contractual responsibility to negotiate and settle the claim on behalf of the insured, and the concomitant contractual duty of the insured to cooperate fully with the insurer in this regard, Florida recognized an insurer’s duty of good faith in the exercise of its discretion to negotiate a settlement within policy limits, if possible.[FN26]
Jurisdictions such as Florida and New York have refused to recognize a common law tort for breach of the implied covenant of good faith and fair dealing, because the implied covenant relates to one’s discretion in performing a contractual obligation.[FN27] This intellectual adherence to the purely contractual concept of the implied covenant of good faith, however, has overwhelmingly given way to public policy interests unique to the insurance industry. Various arguments have been presented supporting the need for an independent tort cause of action in first-party cases. The arguments inevitably center around the inequality of bargaining power of insureds in general and the unique public interest associated with the insurance industry.[FN28] For example, it has been argued that without an extra-contractual remedy in tort the insurers could avoid payment without facing any penalty more significant than interest on the moneys withheld. Insureds would need the extra leverage of a tort remedy to police an insurer’s bad faith misconduct because they were impotent to enforce effectively the terms of the insurance contract. Moreover, an insured is usually suffering from personal injury or a property loss when presenting a claim. While insurance is commonly intended to give the insured “peace of mind,” the very vulnerability of the insured when presenting a claim calls for protection against insurer malfeasance.[FN29]
Today, many jurisdictions recognize an implied duty of good faith in first-party insurance claims.[FN30] For example, in California, the courts have held that the duty of an insurer to act in good faith in settling a first-party claim of its insured is similar to the duty of the insurer to act in good faith in handling claims of third parties against the insured.[FN31] Following the lead of California, many states have now recognized that an insurer owes to its insured an independent legal duty of good faith and fair dealing in both first-party and third-party claims.[FN32] The reasons for this expansion were based more on public policy than adherence to the traditional concept of the implied contractual obligation to exercise good faith discretion in contract performance.
California’s judiciary was the first to extend the insurance concept of “good faith and fair dealing” beyond a contractual obligation of commercial reasonableness in settling or paying a claim. California recognized a new legal standard of performance (sounding in tort) independent of any contractual obligation.[FN33] Arizona, as another example, has determined that the implied duty of good faith and fair dealing may be an action in tort or contract. The tort action for breach of the implied covenant of good faith and fair dealing in Arizona must be based on a “special relationship between the parties arising from elements of public interest, adhesion, and fiduciary responsibility.”[FN34] Most states now recognize a first-party action for insurer “bad faith” by judicial fiat.[FN35]
The judiciary in Florida, however, refused to recognize the tort of first-party bad faith at common law because the fiduciary relationship present in third-party actions is simply not present in first-party actions.[FN36] The interests of the insurer in a first-party action are adverse to the interests of the insured, so Florida determined that no basis for a fiduciary obligation of good faith and fair dealing existed as a common law remedy in tort.[FN37] In Baxter v. Royal Indemnity Co.,[FN38] the insureds contended that the first-party provisions (uninsured motorist benefits) in an automobile insurance policy issued by the insurer created a fiduciary relationship between the parties, imposing upon the insurer the duty of good faith and fair dealing with its insured in settling the claim. The insureds argued that when their insurer failed to evaluate, negotiate, and settle their first-party claim in good faith, their insurer breached this fiduciary duty, thereby entitling them to both compensatory damages in excess of policy limits and punitive damages for the insurer’s tortious conduct. The Baxter Court held that the “bad faith” theory (i.e., failure to settle in good faith) only applied to the bodily injury and property damage liability provisions of the automobile insurance policy, and had no application to the first-party claim arising under the uninsured motorist provision of the policy.[FN39] The insurer’s interest in the first-party claim for uninsured motorist benefits were adverse to the interest of its insured, so no basis for a fiduciary relationship between the parties existed.[FN40] It is the existence of the fiduciary relationship between the parties under the bodily injury liability provisions of the policy which imposes the obligation of exercising good faith in negotiating for and effecting a settlement of the claim against its insured and which subjects it to excess liability if it acts in bad faith.[FN41] Therefore, at common law in Florida, if an insurer acted in bad faith in settling a first-party claim filed by its own insured, the insured’s only remedy would be a contract claim against the insurer for damages contemplated by the insurance policy, unless the insured could prove an independent tort such as fraud or intentional infliction of emotional distress.[FN42] Other states, including Missouri, New York, Oregon, Pennsylvania and Utah, have followed the same line of reasoning.[FN43]
In some jurisdictions, however, the first-party tort action for insurer “bad faith” has been approved by legislative sanction.[FN44] For example, in 1982 the Florida Legislature enacted a statutory tort remedy for first-party bad faith claims.[FN45] The legislative enactment of a statute permitting first-party (and third-party) bad faith actions allowed recovery of tort damages beyond the damages available in a breach of contract action.[FN46] Therefore, Florida’s judiciary has remained true to the traditional concept of the implied covenant of good faith and fair dealing as a purely contractual obligation of a party to exercise its discretion reasonably, while allowing the legislature to promulgate statutory remedies to protect the public trust.
The traditional concept of good faith and fair dealing is alive and well in discretionary performance contracts outside the insurance sector. When it comes to the insurance industry, however, greater public policy interests have prevailed. The contract principle behind the implied covenant of good faith and fair dealing that would otherwise have applied to insurance contracts has been forgotten in the law applicable to most insurance policies. In its place remains the common law or statutory tort actions we know today only as insurer “bad faith.”
FN1. State Farm Mut. Auto. Ins. Co. v. LaForet, 658 So. 2d 55, 58 (Fla. 1995), citing Roger C. Henderson, The Tort of Bad Faith in First-Party Insurance Transactions: Refining the Standard of Culpability and Reformulating the Remedies by Statute, 26 U. Mich. J.L. Ref. 1 (Fall 1992).
FN2. See, e.g., Genet v. President of Del. & Hudson Canal Co., 136 N.Y. 593, 611, 32 N.E. 1078, 1082 (N.Y. 1893).
FN3. See, e.g., Odem Realty Co. v. Dyer, 45 S.W.2d 838, 840 (Ky. 1932); Kirk La Shelle Co. v. Paul Armstrong Co., 188 N.E. 163, 167 (N.Y. 1933); World’s Exposition Shows v. Benevolent Protective Order of Elks, No. 148, 186 So. 721, 723 (Ala. 1939).
FN4. The implied covenant of good faith and fair dealing has been described as a “residual gap-filling default rule of contract law.” Thomas A. Diamond and Howard Foss, Proposed Standards for Evaluating When the Covenant of Good Faith and Fair Dealing Has Been Violated: A Framework for Resolving the Mystery, 47 Hastings L.J. 585.
FN5. Accord Sepe v. City of Safety Harbor, 761 So. 2d 1182, 1184 n.2, citing Travelers Int’l, A.G. v. Trans World Airlines, 41 F.3d 1570, 1575 (2d Cir. 1994)(good faith obligation implied in airline’s discretion do determine appropriate level of advertising); Tymshare, Inc. v. Covell, 727 F.2d 1145, 1153—54 (D.C. Cir. 1984)(good faith obligation implied in determining sales quotas); Kohler v. Leslie Hindman, Inc., 80 F.3d 1181, 1188 (7th Cir. 1996)(good faith obligation implied in auction house’s discretion to rescind sales); Oberbillig v. Bradley Mining Co., 372 F.2d 181, 184 (9th Cir. 1967)(good faith implied in discretion to conduct mining operations); Transamerica Premier Ins. Co. v. K & S Constr., 850 F. Supp. 930, 934 (D. Colo. 1994)(good faith obligation implied in insurer’s discretion to provide financial assistance to construction company), etc.
FN6. Thomas A. Diamond and Howard Foss, Proposed Standards for Evaluating When the Covenant of Good Faith and Fair Dealing Has Been Violated: A Framework for Resolving the Mystery, 47 Hastings L.J. 585.(“Despite its widespread recognition, the implied covenant of good faith and fair dealing is shrouded in mystery.”). This insightful article samples the different standards applied across the nation to the implied covenant of good faith and fair dealing and recommends standardized criteria to identify what is good versus bad faith. See also Steven J. Burton, Breach of Contract and the common Law Duty to Perform in Good Faith, 94 Harv. L.Rev 369.
FN7. Steven J. Burton, Breach of Contract and the Common Law Duty to Perform in Good Faith, 94 Harv. L. Rev. 369 (1980)(citing Llewellyn, What Price Contract? – An Essay in Perspective, 40 YALE L.J. 704, 727 (1931); Macneil, The Many Futures of Contract, 47 S.CAL. L. REV. 691 (1974). Weistart, supra note 8, at 618—22. See also Kessler & Stern, Competition, Contract, and Vertical Integration, 69 YALE L.J. 1 (1959); Klein, Crawford & Alchian, Vertical Integration, Appropriable Rents, and the Competitive Contracting Process, 21 J.L. & ECON. 297 (1978)).
FN8. Id., citing Sessions, Inc. v. Morton, 491 F.2d 854, 857 (9th Cir. 1974); Ryder Truck Rental, Inc. v. Central Packing Co., 341 F.2d 321, 323—34 (10th Cir. 1965); and Perkins v. Standard Oil Co., 235 Or. 7, 15—17, 383 P.2d 107, 111—12 (1963) (en banc). See also Morris Silverman Mgt. Corp. v. Western Union Financial Svcs., Inc., 284 F.Supp.2d 964 (N.D. Ill. 2003)(good faith performance permits exercise of discretion for any purpose within the contemplation of the parties; breach of duty of good faith occurs when one uses its discretion for a reason outside the risks assumed by the party claiming breach); Newman v. Snap-On Tools Corp., 1988 WL 1099676 (E.D. Va. 1988); Tavarozzi v. Emmanuel, 2001 WL 204193 (Conn. Super. 2001).
FN9. Id., citing E.J. Albrecht Co. v. New Amsterdam Cas. Co., 164 F.2d 389 (7th Cir. 1947); Dorsey Bros. v. Anderson, 264 Md. 446, 287 A.2d 270 (1972); Tillett v. Deering, Milliken & Co., 88 N.Y.S.2d 148 (Sup. Ct. 1948).
FN10. Restatement (Second) of Contracts § 205 (1981).
FN11. Restatement (Second) of Contracts § 205 comment a (1981).
FN12. See, e.g., County of Brevard v. Miorelli Engineering, Inc., 703 So. 2d 1049, 1050 (Fla. 1997); Insurance Concepts and Design, Inc. v. Healthplan Services, Inc., 785 So. 2d 1232 (Fla. 4th DCA 2001) (holding that a duty of good faith must relate to an express term of the contract and is not an abstract and independent term which may be asserted as a source of breach when all other terms have been performed pursuant to the contract requirements).
FN13. Bowers v. Medina, 418 So. 2d 1068, 1069 (Fla. Dist. Ct. App. 1982).
FN14. Hospital Corp. Of America v. Florida Med. Ctr., Inc., 710 So. 2d 573, 575 (Fla. 4th DCA 1988).
FN15. City of Riviera Beach v. John’s Towing, 691 So. 2d 519, 521 (Fla. 4th DCA.1997). Other jurisdictions such as Illinois regard the implied covenant of good faith and fair dealing as merely a guide in the construction of explicit terms in an agreement. Payne v. McDonald’s Corp., 957 F.Supp. 749, 758 (D.Md.1997)(determining that under Illinois law covenant of good faith and fair dealing does not provide independent source of duties).
FN16. Wilson v. Amerada Hess Corp. 168 N.J. 236, 773 A.2d 1121 (N.J. 2001).
FN17. Beraha v. Baxter Health Care Corp., 956 F.2d 1436, 1443(7th Cir. 1992)(applying Illinois law) (party exercising discretion must exercise discretion reasonably with proper motive, not arbitrarily, capriciously, or in a manner inconsistent with reasonable expectations of parties); Amoco Oil Co. v. Ervin, 908 P.2d 493, 499 (Colo.1996)(same); Abbott v. Amoco Oil Co., 249 Ill. App.3d 774, 189 Ill. Dec. 88, 619 N.E.2d 789, 795 (1993)(same).
FN18. Wilson, 168 N.J. at 251, 773 A.2d at 1130.
FN19. A first-party claim involves a direct claim by an insured (the first party) against his own insurance company (the second party) for payment of policy benefits. It does not involve an insured’s exposure to liability for the claims of another. A first-party “bad faith” claim traditionally involves an allegation that the insurer failed to settle a claim of loss to the insured. On the other hand, a third-party claim involves allegations that the insured is liable for losses suffered by an independent claimant (the third party). Traditionally, a third-party “bad faith” claim involves an allegation that insured subsequently suffered a loss because the insurance company failed to settle the third party claim for a reasonable sum.
FN20. LaForet, 658 So. 2d at 58, citing Roger C. Henderson, The Tort of Bad Faith in First-Party Insurance Transactions: Refining the Standard of Culpability and Reformulating the Remedies by Statute, 26 U. Mich. J.L. Ref. 1 (Fall 1992) at 8.
FN21. LaForet, 658 So. 2d at 58, citing Roger C. Henderson, The Tort of Bad Faith in First-Party Insurance Transactions: Refining the Standard of Culpability and Reformulating the Remedies by Statute, 26 U. Mich. J.L. Ref. 1 (Fall 1992) at 19—22. Traditional indemnity policies required the insured to defend the claim himself. The insurance company only paid the third party claim against the insured after the dispute concluded. Id.
FN22. LaForet, 658 So. 2d at 58, citing Baxter v. Royal Indem. Co., 285 So. 2d 652 (Fla. 1st DCA 1973), cert. discharged, 317 So. 2d 725 (Fla. 1975).
FN23. Henderson, Roger C. Henderson, The Tort of Bad Faith in First-Party Insurance Transactions: Refining the Standard of Culpability and Reformulating the Remedies by Statute, 26 U. Mich. J.L. Ref. 1 (Fall 1992) at 21.
FN24. Id. at 22.
FN25. See Automobile Indem. v. Shaw, 184 So. 852 (Fla. 1938).
FN26. Baxter v. Royal Indemn. Co., 285 So. 2d 652, 655 (1st DCA Fla. 1973), cert. discharged, 317 So. 2d 725 (Fla. 1975).
FN27. Johnson Enters. of Jacksonville, Inc. v. FPL Group, Inc., 162 F.3d 1290, 1314 (11th Cir. 1998)(applying Florida law)(holding that good faith requirement does not exist “in the air” but attaches only to an existing contractual obligation); Insurance Concepts and Design, Inc. v. Healthplan Svcs., Inc., 785 So. 2d 1232, 1234 (Fla. 4th DCA 2001)(duty of good faith must relate to an express term of the contract; it is not an abstract and independent source of breach when contract has been performed); New York Univ. v. Continental Ins. Co., 87 N.Y. 2d 308 (N.Y. Ct. Of App. 1995)(holding that bad faith allegations amount to nothing more than a claim that the implied contractual obligation of good faith and fair dealing has been breached, which is “duplicative” of the breach of contract action); Cont’l Info. Sys. Corp. v. Federal Ins. Co., No. 02 Civ. 468 (NRB), 2003 WL 145561 (S.D.N.Y. 2003)(holding that New York does not recognize a claim for extra-contractual damages predicated solely on bad faith denial of insurance coverage).
FN28. Spencer v. Aetna Life & Cas. Ins. Co., 227 Kan. 914, 611 P.2d 149 (Kan. 1980).
FN30. Opperman v. Nationwide Mut. Fire Ins. Co., 515 So. 2d 263, 267 (Fla. 5th DCA 1987), citing Spencer v. Aetna Life and Casualty Ins. Co., 227 Kan 914, 611 P.2d 149, 151—52 (1980)(citing multiple cases recognizing first-party bad faith actions); See also Acquista v. New York Life Ins. Co., 285 A.D. 2d 73, 730 N.Y.S.2d 272, 276—77 (N.Y. A.D. 2001)(citing cases from Alaska, Arizona, California, Colorado, Connecticut, Idaho, Indiana, Iowa, Kentucky, Mississippi, Montana, Nebraska, Nevada, New Mexico, North Dakota, Ohio, Oklahoma, Rhode Island, South Dakota, Texas and Wyoming).
FN31. See Gruenberg v. Aetna Insurance Co., 9 Cal.3d 566, 108 Cal. Rptr. 480, 510 P.2d 1032 (1973).
FN32. Accord Opperman, 515 So. 2d at 267.
FN33. Accord Opperman, 515 So. 2d at 267, citing Egan v. Mutual of Omaha Insurance, 24 Cal.3d 809, 169 Cal. Rptr. 691, 620 P.2d 141 (1979), cert.denied, 445 U.S. 912, 100 S.Ct. 1271, 63 L.Ed.2d 597 (1980); Gruenberg, 510 P.2d 1032 (recognizing that a breach of the implied duty of good faith and fair dealing sounds in both contract and tort).
FN34. Wells Fargo Bank v. Arizona Laborers, Teamsters and Cement Masons Local No. 395 Pension Trust Fund, 38 P.3d 12, 28 (Ariz. 2002).
FN35. See note 30, supra.
FN36. LaForet, 658 So. 2d at 59.
FN38. See note 26, supra.
FN39. Baxter, 285 So. 2d at 655.
FN40. Id. at 656.
FN42. Talat Enterprises, Inc. v. Aetna Cas. and Surety Co., 753 So. 2d 1278 (Fla. 2000); Industrial Fire & Cas. Ins. Co. v.. Romer, 432 So. 2d 66 (Fla. 4th DCA 1983). For a discussion of how an independent tort (e.g., fraud) may be brought together with a breach of contract action, see T.D.S. Inc., v. Shelby Mut. Ins. Co., 760 So. 2d 1520 (11th Cir. 1985)(applying Florida law).
FN43. See, e.g., Duncan v. Andrew County Mut. Ins. Co., 665 S.W.2d 13 (Mo. App. W.D. 1983); New York Univ. v. Continental Ins. Co., 87 N.Y.2d 308 (N.Y. Ct. of Appeals 1995); Farris v. USF&G, Co., 587 P. 2d 1015, 1020 (Ore. 1978); D’Ambrosio v. Pennsylvania Nat’l Mut. Ins. Co., 431 A.2d 966, 968—70 (Pa. 1981); Beck v. Farmers Ins. Exchange, 701 P.2d 795, 800 (Utah 1985).
FN44. See, e.g., Section 624.155, Fla. Stat. (Florida); 42 Pa. Cons. Stat. section 8371 (Pennsylvania).
FN45. See Section 624.155, Fla. Stat. (1982). Section 624.155 provides that an insurer has acted in bad faith if it has “[n]ot attempt[ed] in good faith to settle claims when, under all the circumstances, it could and should have done so, had it acted fairly and honestly toward its insured and with due regard for [the insured’s] interest.” § 624.155(1)(b)1. Florida differs from most jurisdictions given that first-party bad faith actions for failure to settle are actionable only under section 624.155 and not the common law. LaForet, 658 So. 2d at 62.
FN46. Time Insurance Co., Inc. v. Burger, 712 So. 2d 389, 392 (Fla. 1998)(holding that section 624.155(1)(b)(1) authorizes the recovery of damages for emotional distress in a first-party bad faith claim against a health insurance company, because an unjustified refusal to pay an insured’s medical or hospital bill could result in the inability to obtain health care).