The proposed bill aims to establish a cause of action for breach of the implied covenant of good faith and fair dealing within the context of insurance contracts in Arkansas. It introduces a new section, 23-66-216, which defines the implied covenant as an unspoken promise that insurers will not act in ways that hinder or delay the performance of the contract or impair the benefits expected by policyholders. The bill allows policyholders or their assigns to pursue a tort claim against insurers for violations of this covenant, with the burden of proof resting on the claimant to demonstrate that the violation resulted from negligence, reckless conduct, or intentional actions.

Additionally, the bill outlines the types of damages that can be recovered, including compensatory, consequential, and punitive damages, provided they meet the necessary evidentiary standards. It also specifies that insurers can defend against such claims if the conduct in question is permitted by the express terms of the insurance contract. Furthermore, the bill enumerates specific actions by insurers that would constitute a breach of the implied covenant, such as failing to adhere to industry standards, engaging in unfair claims practices, or unreasonably delaying or denying claims. The section is intended to be remedial and should be interpreted broadly to fulfill its purpose.