The appellants challenged the dismissal of their claim for consequential and punitive damages arising from an insurer's delay in paying fire insurance proceeds to mortgagees after hotel fire losses.
The court held that the insurer's duty of good faith requires prompt and fair handling of claims, but rejected the argument that Statutory Condition 12 of the Insurance Act imposes an absolute 60-day payment obligation giving rise to consequential damages whenever a claim ultimately succeeds.
Although the court found a limited breach of good faith in failing to pay at least 50 percent of the amount claimed once the insurer relied only on a co-insurance position, the appellants failed to prove any resulting loss beyond interest already paid.
Punitive damages were also unavailable because no compensable damage flowed from the bad faith breach and the conduct was not sufficiently harsh or malicious.
