Casualty insurance contract interpretation and bad faith issues are the major topics in dispute between and among insurance companies and their insureds. All insurance-related litigation may be divided into four general categories: (1) insured V. insurance company, (2) primary insurance company v. primary insurance company, (3) excess insurance company v. primary Insurance company, and (4) insurance company (primary, excess, or reinsurer) V. reinsurance company.
The adverse effects of this litigation on the insurance industry, the court system in the U.S., and on the American taxpaying public are farreaching. Two significant proposals are made to reduce the problem of excessive litigation. They call for the Insurance companies to agree on a "Guiding Principle" to arbitrate coverage and bad faith issues under procedures that would be developed with the assistance of the American Arbitration Association and for the addition of a provision for arbitration of these coverage and bad faith disputes to all thirdparty casualty insurance policies.