Background
Gruenberg was a dispute over a fire insurance claim. The insurer refused to pay, and the policyholder sued, claiming the insurer had acted in bad faith.
What the court held
The California Supreme Court held that the duty of good faith that insurers owe in handling claims against their policyholders also covers the policyholder’s own claim. That duty includes not unreasonably withholding payments due under the policy. The duty is imposed by law, not by the policy’s terms. An insurer that fails to deal fairly and in good faith by refusing, without proper cause, to pay a covered loss may be liable in tort for breaching the implied covenant of good faith and fair dealing.
Why it matters for life insurance claims
Gruenberg was not a life insurance case, but its rule applies to first-party insurance generally, and beneficiaries of individual life policies rely on the same principle when a death claim is stalled or refused without good reason. Rules differ by state, and claims under employer plans governed by ERISA generally cannot bring these tort claims. Our delayed claims guide covers statutory interest on late payments.
Read the opinion
Gruenberg v. Aetna Ins. Co., 9 Cal.3d 566 (1973) (Stanford’s SCOCAL archive of California Supreme Court opinions).
Not legal advice. This page summarizes general rules and the specific statutes cited. Your policy's wording, the state whose law applies, and whether the coverage came through an employer can all change the result. See the disclaimer and editorial policy.