The Duty of Good Faith in Insurance Relationships: The Decision in Gibson v Parkes District Hospital

Abstract

An insurer's bad faith rejection or denial of a valid claim can cause significant economic hardship and distress to an insured party. Such damage may go uncompensated by the eventual enforcement of the claim. One possibility for controlling such conduct is by imposing a duty of good faith on insurers, the breach of which gives rise to damages in tort. This case note discusses the decision of Gibson v Parkes District Hospital, where the New South Wales Supreme Court formulated such a duty in the context of a statutory worker's compensation scheme. It also considers the possibility of expanding the scope of the duty to include insurance relationships in the private sphere and those arising out of New Zealand's own accident compensation legislation.