Insurance is form of risk management primarily used to hedge against the risk of a contingent, uncertain loss. Insurance is defined as the equitable transfer of the risk of a loss, from one entity to another, in exchange for payment. An insurer is a company selling the insurance; the insured, or policyholder, is the person or entity buying the insurance policy.
The amount to be charged for a certain amount of insurance coverage is called the premium. The transaction involves the insured assuming a guaranteed and known relatively small loss in the form of payment to the insurer in the exchange for the insurer’s promise to compensate (indemnify) the insured in the case of a financial (personal) loss.
The insurer receives a contract, called the insurance policy, which details the conditions and circumstances under which the insured will be financially compensated. Insurance involves pooling funds from many insured entities (known as exposures) to pay for the losses that some may incur. The insured entities are therefore protected from risk for a fee, with the fee being dependent upon the frequency and severity of the event occurring.
Insurance is therefore the transfer and spread of risk.
Consumer Rights Topics
We assist policyholders with losses of all kinds covered by insurance policies and guide them through the complexities of the claim, coverage issues, and/or lawsuits. Every California contract contains an implied covenant of good faith and fair dealing, whereby each party covenants not to “do anything which will injure the right of the other to receive the benefits of the agreement.’”
Insurance Bad Faith
Every California contract contains an implied covenant of good faith and fair dealing, whereby each party covenants not to “do anything which will injure the right of the other to receive the benefits of the agreement.’” (Wolf v. Walt Disney Pictures and Television (2008) 162 Cal.App.4th 1107, 1120.) However, in insurance contracts, unlike other contracts, breach of the implied covenant by the insurer gives rise to an independent tort known as insurance bad faith. (Egan v. Mutual of Omaha Insurance Company (1979) 24 Cal.3d 809, 818.)