My last post on a trio of important Colorado cases governing bad faith claims concluded with the abuse by insurers of the "fairly debatable" doctrine in motions for summary judgment on both the common law and statutory bad faith actions by honest policy-holders.
Pinnacol’s reliance upon Zolman for a different result is misplaced. That case does not stand for the proposition that proof of fair debatability allows judgment for the insurer as a matter of law in a bad faith case. . . . To the extent that Pinnacol contends its evidence of fair debatability defeated [the policy-holder's] bad faith claim, we conclude that this proposition would be true only if the evidence of the reasonableness of its conduct were undisputed, and only if a reasonable person could not reach the same conclusion as the jury, when viewing the evidence in the light most favorable to Schuessler.
Schuessler, 2012 COA 86, ¶¶ 39-42.
Just because an insurer comes forward with some evidence that its conduct was reasonable does not mean that a policy-holder is precluded from coming forward with evidence that State Farm’s conduct was unreasonable, even recklessly so. See Zolman, 261 P.3d at 497 (“What constitutes reasonableness under the circumstances is ordinarily a question of fact for the jury.”).
The insurer's abuse of the “fair debatability” doctrine would also have absurd consequences. If an insurer could win summary judgment merely by adducing some evidence that its claim investigation and handling was at some point reasonable, then the jury instruction on the defense of fair debatability would be a nullity. The issue would never reach the jury because insurers would prevail as a matter of law at the summary judgment stage or at the latest be granted a directed verdict each and every time. The law does not allow such absurd results.
Stay tuned (and if you have any questions, please contact the firm).