See the full video at https://rumble.com/v177ocj-fairly-debatable-or-genuine-dispute-defenses-to-bad-faith.html and at https://youtu.be/1gW3RoO2g4I
A claim in bad faith should be rejected in a summary judgment if there was a real dispute about a reasonable factual dispute or an unresolved area within the insurance court. When the court decides whether a dispute is genuine, the court does not decide which party is “right” in the disputed issue, but only that a reasonable and legitimate dispute actually existed. [Chateau Chamberay Homeowners Ass’n v. Associated Int’l Ins. Co., 90 Cal. App. 4th 335, 348 n.7 (2001), as modified on denial of reh’g (July 30, 2001).
Insurers, afraid of a bad faith judgment, should consider the fact that there can be no bad faith claim for denial of coverage if the insurer was correct as a matter of law in denying coverage. [Frog, Switch & Mfg. Co., Inc. v. Travelers Ins. Co., 193 F.3d 742, 751 n.9 (3d Cir. 1999).] When a court finds that Great American was not obligated to provide coverage under the terms of the insurance, the claim in bad faith fails in the same way. Before the honest insurer knows that it acted against its insured fairly and in good faith, before giving in to the extortion process and offering millions to avoid litigation, it must consider that an insurer does not act in bad faith if it refuses to pay amounts that is reasonable. in dispute. While an insured may present evidence showing that the insurer knew that there may be a question as to whether there was a legitimate question or disagreement as to the justification, amount or value of the claim. An insured must present proof of a clear right to coverage. If the insurer is convinced that there is no evidence that gives the insured the right to insurance, it must in good faith refuse to pay and be willing to sue in the highest available court to prove that it acted correctly.
The damage of evil faith is like the mythical vampire – it hides in the dark. The law on unintended consequences applies to the situation and the reasons for its creation – bad actions by insurers that cost innocent insured to suffer were not cured by bad faith. Rather, the insurance companies and their customers were hurt by the fear of assessing damages and penalties, which increased the cost of insurance across the country. The truth about bad faith is that it will die only if it is put in the light of day. It does not solve the expected problem. Rather, it created a new problem: several lawsuits in bad faith were raised even when the reason for the rejection of all or part of a claim was made because there was a real dispute between the insurer and the insured or that the decision to refuse was fair. arguable.
Insurers seem to forget, or ignore, the fact that in order to establish a claim of bad faith in an insurance context, a plaintiff must show two factors: (1) the insurer lacked a “fairly debatable” reason for its failure to pay a claim, and ( 2) the insurer knew or negligently disregarded the lack of a reasonable basis for rejecting the claim.
The damage of bad faith makes a few lawyers very rich; a few insured persons receive compensation that they have not negotiated, and make the costs of the insurance unaffordable for those who only want to receive the benefits of the agreement.
If the courts of the United States still consider – despite the evidence now available – that the existence of damages in bad faith is a good thing and helps to deter insurers from abusing their insured, they must limit the use and abuse of damages. of evil faith.
Policyholders and their attorneys rely heavily on bad faith claims in coverage disputes to not only get the insurer’s attention, but to push for favorable deals due to the risk of high jury awards if the bad faith claim gets so far in litigation. . Trials in bad faith are traditionally not interested in whether the claim of the insured was a claim that the insured claimed but rather an attempt to take advantage of a claim – a purpose that is contrary to the purpose of the insurance, to provide compensation.
There is no doubt that accusations that an insurer has acted in bad faith receive the attention of an insurer. However, if an insured person can go further and specifically claim punitive damages, they can end up in the driver’s seat for insurance disputes and change the question from interpreting the agreement to whether – regardless of coverage – the insurer acted badly and should be punished.
Sometimes the fear of being beaten by courts is the fat of Wyoming, although it is usually measured by the objective standard, whether the validity of the denied claim was not quite debatable. Although a claim for benefits is quite debatable, the insurer may violate the duty of good faith and fair handling by the way in which it investigates, handles or rejects a claim. [State Farm Mut. Ins. Co. v. Shrader, 882 P.2d 813, 828 (Wyo. 1994)] A rather debatable reason for rejecting a claim is not a defense against damages that may be due to participating in oppressive and intimidating claim proceedings. So when making the decision to fight an evil belief process, the insurer must also be sure that it not only had a good, fair and genuine reason to deny the claim but must also be able to prove that they treated the insured fairly and examined carefully and in good faith before you make the decision not to pay.
If the insured’s claim was rather debatable, the insurer has the right to refuse to do so without risking a lawsuit in bad faith. [Blanchard v. Mid-Century Ins. Co., 933 N.W.2d 631, 637 (S.D. 2019)]
Of course, an insurer must not unilaterally determine the coverage. There must be a reasonable basis for that decision. A plaintiff can test the reasonableness of the insurer’s decision that there is no coverage in the district court and if there is no real dispute, the claim may continue in bad faith. On the other hand, if there is a real dispute governing the issue of coverage, the insured’s claim is quite debatable and the claim for damages for bad faith based on the insurer’s refusal to pay the claim may not be upheld. [Travelers Indem. Co. v. Armstrong, 565 S.W.3d 550, 568 (Ky. 2018)] A reasonable basis in law or facts for rejecting the claim is established by the absence of a contractual obligation in an insurance for coverage. [Messer v. Universal Underwriters Ins. Co., 598 S.W.3d 578 (Ky. Ct. App. 2019)]
When a claim is “quite debatable”, an insurer has the right to discuss it. [Anderson v. Cont’l Ins. Co., 85 Wis.2d 675, 271 N.W.2d 368, 376 (1978)] A claim is quite debatable if it can be challenged on any logical basis, and the issue can generally be decided by law by the court. The relevant question is whether an insurer has no reasonable basis for rejecting a claim. An assessment of whether a particular statement is quite debatable involves the question of whether the facts necessary to evaluate the statement are properly investigated and developed or are ruthlessly ignored and ignored. A deficient investigation in itself is not a sufficient reason for recovery if the insurer actually has an objectively reasonable basis for rejecting the claim. [Reuter v. State Farm Mut. Auto. Ins. Co., 469 N.W.2d 250, 254–55 (Iowa 1991); Peterson v. W. Nat’l Mut. Ins. Co., 930 N.W.2d 443 (Minn. App. 2019)]
It seems obvious to me that bad faith has served its purpose. It should be killed. The courts of the United States should return to the customary law of contract where the insured receives the benefits of the insurance contract promised by the insurance.
For many years after the initiation of the tort in bad faith, there were few defenses – apart from the basic terms of the contract – to defend themselves against claims of bad faith. The “quite debatable” or “genuine defense” has changed the law in favor of the insurance companies and provided a potential defense that should make it easier for an insurer to defend itself against damages.
(c) 2022 Barry Zalma & ClaimSchool, Inc.
Barry Zalma, Esq., CFE, now limits his internship to the position of insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He practiced law in California for more than 44 years as a lawyer for insurance coverage and claims management and more than 54 years in the insurance industry. He is available at http://www.zalma.com and firstname.lastname@example.org.
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