The ever-expanding genuine-dispute doctrine, and how to deal with it (Part 4)
Advocate. August 2007 | Download .pdf
By Jeffrey I. Ehrlich, Editor-in-Chief
Strategies and pitfalls
Until the Supreme Court says otherwise, if you litigate bad-faith cases you will have to deal with the genuine-dispute doctrine. Know the relevant genuine-dispute cases and take pains to plead and to develop your case in a way that will allow you to raise the factual concerns that they discuss. Most important, keep the focus of the trial court’s inquiry on the central issue in any bad-faith case – whether the carrier’s conduct was reasonable. If you have done a careful job of evaluating the case before you agree to take it, if you have pleaded the case carefully, and have directed your discovery efforts to the critical pressure points in all genuine-dispute cases, you stand a good chance of convincing the trial court whether the carrier acted reasonably is a factual issue that only the fact finder can resolve.
Pay particular attention to the insurer’s investigation of the claim. “Though the existence of a ‘genuine dispute’ will generally immunize an insurer from liability, a jury’s finding that an insurer’s investigation of a claim was biased may preclude a finding that the insurer was engaged in a genuine dispute, even if the insurer advances expert opinions concerning its conduct.” (Hangarter, 373 F.3d at 1010.)
Was the investigation fair and unbiased? Did the insurer take pains to uncover all relevant facts, and did it include all of those facts in its analysis? Did the experts the insurer selected have a reason to give the insurer a favorable report? Do they rely on the insurer or the insurance industry for a substantial portion of their income? Has the insurer used them so often that it had reason to know how they would view the issue presented? Has the insurer been scrupulous honest with its policyholder? Has it complied with all of its statutory and regulatory obligations? These are some of the questions you should be asking when you work up a bad-faith case.
And beware the self-inflicted wound. If the policyholder has been writing nasty letters to the carrier asking for an unrealistic amount of damages and threatening a large punitive-damages award, you may want to pass on signing up the case. Jurors do not like to see policyholders who are looking past their own claim to a big payday in court. Likewise, once the file is in your hands, do not take a position so extreme that a court could conclude that you had created a genuine issue by asking for too much.
Bear in mind that bad faith requires more than proof that the insurer denied a claim, or even that it breached the terms of the policy. Before you file a bad-faith case, something must strike you as unreasonable about the way the carrier acted. Your focus in preparing the case should always be on that unreasonable conduct. If it is there, the genuine-issue doctrine should not be an obstacle between you and the jury. ■