ance adjusters, medical cost managers, appraisers and vocational counselors, of- ten directly employed by insurance carriers, are highly trained in the law and medicine and frequently perform in an expert capacity. The Mesmer Court continued by noting that the distinction:
...between a pure contract duty and a tort duty growing out of the manner in which a contractual obligation is un- dertaken, is reflected in our opinions dealing with (1) a liability insurer’s breach of the insurance contract by erroneously disclaiming coverage, and (2) a liability insurer’s undertaking to defend against a claim and its bad faith failure to settle the claim within policy limits. The former gives rise only to a breach of contract action;
the latter
gives rise only to a tort action.16 What is most curious about this lan- guage of the Mesmer Court is its treatment of third party bad faith excess claims as an example of a broader category of per- missible tort claims founded upon a contractual duty. By including third party
16Id. at 257, 725 A.2d 1053.
bad faith failure to settle cases within the ambit of torts growing out of the manner in which a contractual obligation is un- dertaken, the court avoided setting up an artificial distinction between first party bad faith and third party bad faith cases and has left open the door for recogni- tion of such a cause of action where an appropriate factual scenario involving a first party claim is presented. This language of the Mesmer Court in-
volving violation of the appropriate standard of care in the fulfillment of a con- tractual obligation already undertaken is reminiscent of and consistent with tradi- tional tort principles involving volunteers, where liability has been founded upon negligence in the performance of the vol- unteered activity even though no obligation to render assistance existed in the first place. 17
In Mesmer, although a carrier may deny a claim in its entirety, 17
Adler, Relying Upon The Reasonableness of Strangers: Some Observations About the Cur- rent State of Common Law Affirmative Du- ties to Aid or Protect Others, 1991 Wisc L. Rev. 867, 875 citing Restatement (Second) of Torts § 324 (1965).
thereby leaving only a contractual cause of action to enforce the obligation, once the obligation is undertaken, it must be performed within the appropriate stan- dard of care. It should also be noted that
whether the court recognizes a tort cause of action against a first party insurer founded on traditional negligence prin- ciples or whether the court recognizes a new cause of action in “bad faith” is of little consequence. In the context of third party bad faith litigation, the Court of Appeals has already noted that the con- cepts of “bad faith” and simple negligence are similar and that evidence of negligence may be offered in third party bad faith claims in support of the plaintiff’s claim.18 The real issue is whether the Court of Appeals is prepared to recognize either a negligence claim or a bad faith claim against a first party insurer under appro- priate circumstances.
(Continued on page 10)
18White supra note 8, at 333
Spring 2000
Trial Reporter
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