In California and several other states, a movement is underway to enact legislation that would allow accident victims to sue the insurance company of the person allegedly responsible for their injuries. The idea is to create a new and unprecedented form of insurance litigation by means of a single legislative act. Proponents contend that such legislation is needed to prevent the mistreatment of accident victims by insurance companies who otherwise have little incentive to respond sympathetically to the plight of people who are not their customers. Nevertheless, an apparent backlash against the trend toward deregulation begun in the 1980s has spawned a renewed interest in litigation among devotees of the regulatory state. Regulation is out.
Litigation is in.
3 In this case, however, it is unnecessary to speculate about the nature or likelihood of the unintended consequences of regulation through litigation. In considering legislation to authorize such lawsuits, policymakers must weigh the costs to consumers of third-party bad faith bills against any potential benefits. The insurer s duty. Liability insurance protects policyholders from the risk of being held responsible for someone else s injury or loss. As with any form of insurance, the cornerstone of liability insurance is the insurance contract the written agreement between policyholder and insurer that sets forth the rights, duties, and obligations that the parties bear in relation to each other.