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Dunlap v. State Farm Fire and Casualty Co.7/5/2005
's position. Reasonable conduct is at the core of whether there has been a breach of the implied covenant of good faith and fair dealing. The implied covenant requires "'a party in a contractual relationship to refrain from arbitrary or unreasonable conduct which has the effect of preventing the other party to the contract from receiving the fruits' of the bargain." Here, the bargain was for uninsured/underinsured motorist coverage. The fruit of the bargain is payment under the terms of the UIM policy when no other insurance is available to the Dunlaps, not a settlement with DART.
We have stressed that the implied covenant of good faith and fair dealing exists to protect the "parties' reasonable expectations." Under the statute and insurance policy at issue here, there could be no reasonable expectation that State Farm would provide uninsured motorist coverage for a motorist that was still insured. To the contrary, the expectations of the parties were that unless DART's policy was exhausted by settlement or judgment there could be no UIM claim. We should honor that bargained for expectation. The majority's point that DART's liability was "questionable" makes no difference. Disputes over liability are to be expected and a trial exists to resolve them. Because the undisputed nature of the Dunlaps request shows that the implied covenant of good faith and fair dealing does not come into play, it is my opinion that a remand to allow an amendment to the complaint is unwarranted. I respectfully dissent from the decision to reverse in part and remand.
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