This essay is aimed at addressing the current state of the law of insurance contracts in India from a comparative viewpoint and at evaluating its possible future development in an open market economy. The analysis will be centered around the likely attitude that the Indian judiciary and other quasi-judicial dispute resolution bodies will have about large multinational insurance companies and their critical relationship with the insured, in the performance of their contractual obligations. These private law profiles of the business of insurance and the legal problems related to interpretation and enforcement of insurance policies by the courts are generally neglected by the prospective foreign investors, whose attention is mainly captured by regulatory aspects such as licenses, rates of participation, solvency margins (the excess of assets over liabilities), technical reserves, prudential norms, repatriation of profits and dividends and the like. Nevertheless, the relevance of judicial activism in the field of insurance is a key component of the insurance market that should taken into careful consideration by the international insurance groups, as it is shown by the massive body of Bad Faith Insurance law developed by the United States' courts during the last few decades. American courts have employed the contractual duty of good faith and fair dealing as the legal basis for the implementation of a policy aimed at monitoring and discouraging the opportunistic behavior of those insurance companies that too often disregarded the legitimate rights and interests of their policyholders. This paper explores the legal panorama that Indian courts will face, once confronted with the same factual situations that gave rise to the judge-made law of bad faith in the US.