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A contract of insurance is a contract based upon the utmost good faith, and, if the utmost good faith be not observed by either party, the contract may be avoided by the other party. The duty of good faith in insurance law, first enunciated by Lord Mansfield in 1766 in Carter v. Boehm, predates the coming into existence of the United States. However, the most important and significant aspect of the duty of the utmost good faith, is the duty imposed upon the insured rather than the insurer, particularly prior to the conclusion of the contract. The duty to indemnify is, of course, the essence of an insurer's obligation under an insurance contract. In English law, a claim under an insurance policy is, in current law, a claim for damages. There is no right to damages for late payment of damages. Often an award of interest will not reflect the policyholder's true loss. In Untied States law, contracts usually include an implied covenant of good faith and fair dealing. A failure by a party to act in good faith may thus lead to a breach of contract action regardless of the express terms of the contract. A failure to act in good faith may also constitute a tort. Depending on the jurisdiction, the type of insurance and the alleged failing of the insurer, an insurer who acts in bad faith may incur liability not only for damages owing under the policy but also for uncovered economic losses of the insured, the insured's emotional distress damages and attorney's fees, substantial punitive damages, and various statutory penalties. In Korea, the insurer's duty to pay is provided for by the Commercial code. But, where the insurer doesn't pay insurance money to insured unjustifiably, the insured's right is not provided for. Article 393 of the Korean Civil Code specifies general damage and foreseeable special damage as the remoteness of damages. Thus. whether or not the insured has a right to damages for late payment as special damages is based on the Article 393 of the Korean Civil Code. Also a failure to pay may constitute a tort according to circumstances. However, There is little hope of the interpretation of law on the korean precedent cases. Therefore, at this time there is a need to make provisions for protecting the insured.


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