Feeney: Are You "In Good Hands"?

FEENEYFINAL_685717.
DOC(DONOTDELETE) 4/27/20118:24:17AM
AreYouInGoodHands?1:Balancing
ProtectionForInsurersandInsuredin
FirstPartyBadFaithClaimswitha
UniformStandard
CASSANDRAFEENEY*

ABSTRACT
Badfaithinsurancelitigationisontheriseduetoeconomicpressure
and the rising costs of services. Insurance companies are more likely to
deny legitimate claims, and policyholders are more inclined to bring
fraudulent claims. Because states regulate badfaith claims, inconsistent
jurisprudence for bathfaith litigation has developed. Specifically, states
varyonthedutyowedbyinsurancecompanies,thestandardofbadfaith,
and discovery procedures. Since these three aspects of litigation are
intertwined, altering one standard could dramatically impact the
procedureandpracticalityinbringingabadfaithclaimonastatebystate
basis.
A uniform procedural process can be developed that would better
servetheinterestsofinsurancecompanies,policyholders,andthejudicial
system.Statesshouldadoptatotalityofthecircumstancesstandard,along
withtheinsurerdutyofgoodfaithandfairdealing,todeterminewhether
badfaithhasoccurred.Further,whenaninsurancecompanyhasengaged
inbadfaithconduct,theclaimsfileshouldbediscoverablesimultaneously
with the contract claim. After more than forty years of state
experimentation,itistimeforstatestoadopttheproposedbrightlinerules
tocreateauniformprocedureinthisareaofinsurancelaw.
1ALLSTATEINS.COMPANY,http://www.allstate.com/(lastvisitedApr.23,2011).
* Candidate for Juris Doctor, New England School of Law (2011). B.A., Political Science,
magnacumlaude,UniversityofRhodeIsland(2007).IwouldliketothankSeanFeeneyand
Eva Mancuso for being incredible mentors; my Note editors, Matthew Hranitz and Jarret
Berg, for providing inspiration, guidance, and valuable suggestions throughout the writing
process;andmyfamilyandmyfriendsfortheircontinuedsupportandencouragement.
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686 NewEnglandLawReview v.45|685
INTRODUCTION
Y
ou consider yourself a prudent individual.2 All your life, you have
anticipated and planned for contingencies.3 Accordingly, you hold
automobile, home, and health insurance policies.4 You seek out a
dependableinsurancecompany,diligentlypayyourpremiums,andnever
fail to schedule an annual checkup.5 You think you have everything
covered.6Butareyoureallyprotected?7Weallrelyonaffordableinsurance
to live healthy.8 In 2009, Americans spent almost $809 billion on private
health insurance alone, which amounts to over seventeen percent of
Americans total spending.9 Every year, insurance premiums increase at
rates higher than inflation and wage raises, with the average increase of
fifteen percent in 2009 and ninetyseven percent from 2000 to 2008.10 In
early 2010, rates increased by doubledigit percentages in over twenty
statesAnthemBlueCrossandBlueShieldincreasedratesbyuptothirty
2SeegenerallyAndersonCooper360Degrees:InsuranceBattle(CNNtelevisionbroadcastOct.
2, 2007), available at http://transcripts.cnn.com/TRANSCRIPTS/0710/02/acd.02.html

[hereinafter Insurance Battle] (presenting stories by policyholders who struggled with their
insureraftertheywereinjured).
3See generally id. (discussing how one insured purchased automobile insurance to protect
againstthepossibilityofanautomobileaccident).
4See EUGENE R. ANDERSON ET AL., INSURANCE COVERAGE LITIGATION 11.01 n.6 (2d ed.
Supp. 2010) (listing some examples of firstparty insurance coverage, including health,
accident,life,disability,homeowners,fire,title,andpropertydamageinsurance).ThisNote
will discuss firstparty badfaith claims in general, which include health, home, and
automobile insurance disputes. See also infra notes 4247 (distinguishing firstparty claims
fromthirdpartyclaims).
5SeegenerallyInsuranceBattle,supranote2.
6See id. (suggesting that there is a reasonable expectation that purchasing insurance
automaticallyguaranteescoverageintheeventofanaccident).
7See
id. (detailing how insurance companies willingness to delay, deny, and dispute
insuredsclaimscallsintoquestionwhetherinsuredsarereallyprotected).
8SeeJamesR.Jebo,OvercomingAttorneyClientPrivilegeandWorkProductProtectioninBad
FaithCases,70DEF.COUNS.J.261,261(2003).
9ChristopherJ.Trufferetal.,HealthSpendingProjectionsThrough2019:TheRecessionsImpact
Continues, HEALTH AFF., Mar. 2010, at 1, 6, available at http://www.politico.com/static/

PPM136_100203_health_projections.html.
10Good
Morning America: Can Insurance Company Justify Rate Hike? (ABC television
broadcast Feb. 17, 2010), available at http://abcnews.go.com/GMA/YourMoney/video/
anthembluecrossratehikes9860814?tab=9482931&section=1206834&playlist=1363932. In the
lastdecade,wagesonlyincreasedbytwentyninepercent,andtheinflationratewasjustover
twenty percent. See HEALTH CARE FOR AMERICA NOW, HEALTH INSURERS FALSELY CLAIM
RISING COSTS JUSTIFY SOARING PREMIUMS 5 fig.1 (2010), available at http://hcfan.3cdn.net
/578b1f7456962bfa7a_r6m6bhcjn.pdf.
2011 A Uniform First-Party Bad-Faith Standard 687
nine percent in California.11 Despite the astronomical cost of insurance,

Americans continue to pay high prices with confidence that their claims
willbepaidiftheysufferanyharmtotheirhealth,homes,orvehicles.12
Butwhathappensifyourhomeisrippedapartandtossedasidebya
storm,leavingyouabandonedonyourdebrisstrewnproperty?13Thereisa
glimmerofhopeastheinsurancerepresentativeapproachesbutheoffers
you only half of the estimated cost to rebuild your $300,000 home.14
Heartbrokenanddejected,youattempttonavigatethroughthevagueand
confusing insurance policy for a better solution, but finding no guidance,
yougiveupandacceptthelowoffertoavoidyearsofbattlingthroughthe
legalsystem.15
This situation raises the question of whether the insurance company
engagedinbadfaithconductinafirstpartyclaim.16Badfaithhasdifferent
meanings and requirements in each state, although most states generally
recognizebadfaithasaninsurancecompanyengaginginunreasonableor
unfairconductthatisknowingorintentional.17Someexamplesofbadfaith
conduct include: denial of a claim that should have been paid; delay in
investigation,settlement,orpayment;orundersettlingaclaim.18Badfaith
11News Release, U.S. Dept of Health & Human Servs., Sebelius Unveils New Report on
Requested Premium Increases in States Across the Country (Feb. 18, 2010), available at
http://www.hhs.gov/news/press/2010pres/02/20100218b.html.
12See, e.g., Egan v. Mut. of Omaha Ins. Co., 620 P.2d 141, 145 (Cal. 1979) (describing the
purposeofinsurancetoprovidepeaceofmindandsecurity).
13SeeDavidDietz&DarrellPreston,TheInsuranceHoax,BLOOMBERG MARKETS,Sept.2007,
at34,35.
14Seeid.
15Seeid.at36.
16Firstparty
claims are claims brought by a policyholder against their own insurance
company,seekingdirectcompensation.Seeinfranotes4247andaccompanyingtext(defining
afirstpartyclaimanddistinguishingitfromathirdpartyclaim).
17SeegenerallySTEPHEN S. ASHLEY, BAD FAITH ACTIONS 2:15(2ded.1997)(explainingthe
definitions of bad faith that each state has adopted); see also ROBERT H. JERRY, II,
UNDERSTANDING INSURANCE LAW 151 (2d ed. 1996) (Indeed, good faith and bad faith
remainelusiveconceptswithnouniversallyaccepteddefinition.Despitetheseuncertainties,
the useofgoodfaithandbadfaithasstandardstotesttheproprietyofinsurersconduct
gives courts and juries considerable flexibility in adjusting the relative interests of insurers
andinsureds.).
18MODEL UNFAIR CLAIMS SETTLEMENT PRACTICES ACT 4 (Natl Assn of Ins. Commrs
2008); see Victor E. Schwartz & Christopher E. Appel, CommonSense Construction of Unfair
Claims Settlement Statutes: Restoring the Good Faith in Bad Faith, 58 AM. U. L. REV. 1477, 1488
n.50 (2009) (listing the states that adopted NAICs model legislation). See generally David E.
Bordon, Unfair Claims Practices and Bad Faith: A Guide for Insurers, FIDELITY L. ASSN J., Nov.
1995, at 99, available at http://www.fidelitylaw.org/Publications/Journals/PDF/1995/__1995
bordon.pdf (discussing differences among the states unfair claims settlement practices
litigation continues to increase,19 and with additional economic pressure,

such as would occur in a recession or due to internal mismanagement,
insurance companies are more likely to engage in badfaith denials of
legitimate claims.20 Some specific causes of insurers increased bad faith
includeindustrycompetitionandanearmonopolybyinsurancebrokers.21
American citizens have suffered through dramatic increases in insurance
ratesformanydecades,withoneofthefirstmajorpricespikesinthe1970s
and anotherover 300%in the 1980s.22 These early increases sparked a
tortreformmovementintheearly1970s,resultinginthenewtortoffirst
party bad faith,23 which allows policyholders to collect extracontractual
damagesforbadfaithconduct.24
Over time, firstparty badfaith claims25 developed significant
statutesorregulations).
19SeeInsuranceCompanyGreed:AnIndustryPuttingProfitsOverPolicyholders,AM. ASSNFOR
JUST., http://www.justice.org/cps/rde/xchg/justice/hs.xsl/739.htm (last visited Apr. 23, 2011).

SeegenerallyAM. ASSNFOR JUSTICE, TRICKSOFTHE TRADE: HOW INSURANCE COMPANIES DENY,
DELAY, CONFUSEAND REFUSE 2 (2008), availableathttp://www.hardywolf.com/pdf/AAJtricks
ofthetradeInsuranceTactics.pdf (discussing some tactics used by insurance companies to
makemoney).
20The 1990 Dingell report, named after the committee chairman Representative John
Dingell who led the investigation of insurance insolvency cases, uncovered common
underlying badfaith conduct among insolvent companies, including mismanagement and
fraudulentactivity,falsereports,recklessmanagement,...fraud,greedandselfdealings.
Regulation Modernization, INS. INFO. INST. (Oct. 2010), http://www.iii.org/issue_updates/
RegulationModernization.html; see Reference Library, FIGHT BADFAITH INS. COS.,
http://www.badfaithinsurance.org/publications.html (last visited Apr. 23, 2011) (illustrating
that the increase of bad faith among insurance companies correlates with the recessionary
downturn).
21SeegenerallyRichardE.Stewart&BarbaraD.Stewart,TheLossoftheCertaintyEffect,RISK
MGMT. & INS. REV., Sept. 2001, at 29, 3034, available at http://www.badfaithinsurance.org/
media/RmirLossCertainty.pdf (discussing different economic changes and the influences on
theinsuranceindustry).
22Americans for Insurance Reform Mission Statement, AMERICANS FOR INS. REFORM,
http://www.insurancereform.org/mission.html(lastvisitedApr.23,2011).
23Badfaithinthefirstpartycontextgenerallymustestablish(1)theinsurersconductwas
unreasonableand(2)theinsurerkneworshouldhaveknowntheconductwasunreasonable.
See,e.g.,Turnerv.StateFarmFire&Cas.Cos.,614So.2d1029,1032(Ala.1993);Brownv.U.S.
Fid.&Guar.Co.,977P.2d807,815(Ariz.Ct.App.1998);Dalev.Guar.NatlIns.Co.,948P.2d
545, 551 (Colo. 1997); Sampson v. Am. Standard Ins. Co., 582 N.W.2d 146, 149 (Iowa 1998);
EmpireFire&MarineIns.Co.v.SimpsonvilleWreckerServ.,Inc.,880S.W.2d886,888(Ky.Ct.
App.1994);Lauzonv.StateFarmMut.Auto.Ins.Co.,674A.2d1246,1247(Vt.1995);Weissv.
UnitedFire&Cas.Co.,541N.W.2d753,757(Wis.1995);Ahrenholtzv.TimeIns.Co.,968P.2d
946,95051(Wyo.1998).
24See,e.g.,Gruenbergv.AetnaIns.Co.,510P.2d1032,1038(Cal.1973).
25SeeANDERSONETAL.,supranote4,11.01n.6(discussingexamplesoffirstpartyclaims).
procedural and substantive variations among states as a result of the

McCarranFergusonAct,whichleftregulationofinsurancetothestates.26
Problems arise as states vary on the duty owed by insurance companies,
the standard that constitutes bad faith, and the discovery process in
bringing a breachofcontract and badfaith claim.27 Some states allow the
claimstobeheardtogether;otherstatesbifurcatetheclaimsfortrial;28and
at least two states provide for severance.29 These variations raise further
complicationswiththescopeandtimingofdiscoveryonbadfaithclaims.30
In particular, complications arise as to whether the claims file is
discoverable,whichisthemostimportantevidenceforthebadfaithclaim
since it contains the insurance adjusters comments about the claim and
potentialevidenceofneglectorfraudulenthandling.31
Due to the variation among the states, some argue there should be
more centralized regulations of the firstparty badfaith tort to avoid
confusion,inconsistency,andlackofpredictability.32Insuranceconsumers
advocate for increased policyholder protection since insurance companies
have the upper hand in providing policies, payments, and negotiations.33
26McCarranFerguson Act, 15 U.S.C. 101115 (2006) ([T]he continued regulation and
taxationbytheseveralStatesofthebusinessofinsuranceisinthepublicinterest....).
27SeeinfraPartI.CD.
28E.g., Hall v. City of Austin, 450 S.W.2d 836, 838 (Tex. 1970) (stating that, generally,
bifurcationleavesthelawsuitintactbutenablesthecourttohearanddetermineoneormore
issues without trying all controverted issues at the same hearing); see Gregory S. Clayton,
BifurcationofBreachofContractandBadFaithClaimsinFirstPartyInsuranceLitigation:Prosand
ConsforInsuranceCarriersandPolicyholders,21VT.B.J.&L.DIG.35,35(1995).
29RhodeIslandandTexasarethetwostatesthatseverclaims.SeeBartlettv.JohnHancock
Mut. Life Ins. Co., 538 A.2d 997, 1002 (R.I. 1988); Hall, 450 S.W.2d at 83738. Severance
dividesthelawsuitintotwoormoreseparateandindependentcauses,andajudgmentin
oneisfinalandappealable.Hall,450S.W.2dat83738.
30SeeinfraPartI.D.
31Gary Williams, Litigating the Bad Faith Case, ARE YOU COVERED? (1998),
http://areyoucovered.com/BFLit.htm;seealsoBrownv.SuperiorCourt,670P.2d725,734(Ariz.
1983) (en banc) (The claims file is a unique, contemporaneously prepared history of the
companyshandlingoftheclaim;inanactionsuchasthistheneedfortheinformationinthe
file is not only substantial, but overwhelming.); Escalante v. Sentry Ins., 743 P.2d 832, 842
n.10 (Wash. Ct. App. 1987) (In general, the relevancy objections raised . . . are meritless
becausetheverynatureofmostbadfaithactionsmakesmost,ifnotall,oftheinsurersclaim
filerelevant.).
32See Bad Faith Claim Practices Defined, FIGHT BADFAITH INS. COS., http://www.badfaith
insurance.org/definitions.html(lastvisitedApr.23,2011);RegulationModernization,supranote
20.
33Allstate,StateFarm,OtherBadFaithInsuranceCompaniesRackupRecordProfitsbyCheating
Customers, NEWSINFERNO (Aug. 3, 2007, 9:30 AM), http://www.newsinferno.com/archives

/1674(describinginsurersunfairtacticstolimittheamountofmoneytheyspendonclaims,
includinglyingtocustomersaboutthemeaningofthepolicyanddamageestimates).
The standard procedure in some companies is to procrastinate and

dispute rather than honor policies.34 Conversely, insurance companies
arguethebalanceofprotectionhasswungtoofarinfavorofpolicyholders,
and now insurers face enterprising plaintiffs attorneys, who seek
technical violations to bring a claim,35 and the risk of very large punitive
damage awardsone case awarded $145 million in punitive damages
alone.36
States should adopt the totalityofthecircumstances standard to
determinewhetherbadfaithhasoccurred,alongwiththeinsurerdutyof
goodfaithandfairdealing,andwhenaninsurancecompanyhasengaged
inbadfaithconduct,theclaimsfileshouldbesimultaneouslydiscoverable
with the contract claim.37 This best serves the judicialsystem by reducing
litigation, while preserving the solvency of insurance companies and
protecting policyholders from unfair treatment and everincreasing
insurancerates.38
ThisNoteexaminestheproceduralanddiscoveryproblemsthatarise
in bringing a badfaith claim, analyzes why states have reached different
proceduralapproaches,andcallsonfuturecourtsandlegislaturestoactin
amoreconsistentfashionintheinterestofpublicpolicy.39PartI.Aexplains
the history of the firstparty badfaith tort. Part I.B examines thedifferent
dutiesowedbyinsurancecompaniestothepolicyholder.PartI.Cexplores
the different standards used to determine if an insurance company
engaged in bad faith. Part I.D considers the procedural hurdles,
specifically, when a badfaith claim can be heard and the scope of
discovery.PartIIanalyzesthedifferentstandardsforbadfaithandargues
that states must adopt a uniform badfaith standard and discovery
procedure to provide a more predicable and fair system. Finally, Part III
34Richard Hazleton, The Tort Monster that Ate Dow Corning, WALL ST. J., May 17, 1995, at
A21.
35Schwartz & Appel,supranote18,at1479& n.6(quotingWhitev. W.TitleIns.Co.,710
P.2d309,328n.2(Cal.1985)(Kaus,J.,concurringanddissenting)(Itseems...thatattorneys
whohandlepolicyclaimsagainstinsurancecompaniesarenolongerinterestedincollecting
on those claims, but spend their wits and energies trying to maneuver the insurers into
committingactswhichtheinsuredscanlatertrotoutasevidenceofbadfaith.)).
36See Campbell v. State Farm Mut. Auto. Ins. Co., 2001 UT 89, 12, 69, 65 P.3d 1134,
114041,1155(awardingpunitivedamagesforabadfaithclaimwheretheinsurancecompany
contested liability and refused to settle the suit brought against its insured, who was
responsibleforanunsafedrivingmaneuverthatkilledonepersonandpermanentlydisabled
another),revd538U.S.408,418(2003)(findingthatthepunitivedamagesawardviolatedthe
FourteenthAmendment).
37SeeinfraPartII.AC.
38SeeinfraPartII.
39SeeinfraPartIII.
discusses potential implications of adopting a uniform, brightline

standard.
I. TheDevelopmentofFirstPartyBadFaithClaims
Implied in a contract is the obligation to practice good faith and fair

dealinginperformingandenforcingthecontract,whichtypicallyprovides
onlyconsequentialdamagesifthereisabreachofthecontract.40Thisduty
assumes the insurer will not frustrate the policyholders right to receive
benefitsfromthecontractandthattheinsurerwillgivethepolicyholders
financial interests consideration equal to its own.41 There are two
classifications of badfaith claims: thirdparty claims and firstparty
claims.42 The distinction between firstparty and thirdparty claims
depends on who the policyholder is.43 Thirdparty claims arise when an
individual is injured by a policyholder, or an individual who contracted
directlywiththeinsurancecompanytoindemnifythemagainstliabilityto
thirdparties;forinstance,anautomobileaccidentisacommonexampleof
athirdpartyclaim.44Thirdpartybadfaithoccurswhentheinsurerrefuses
to defend or settle the claim.45 By contrast, firstparty claims occur when
the individual that is injured is the policyholder who contracted with the
insurance company and seeks direct compensation; for example, seeking
compensation for hospitalization is a common firstparty claim.46 First
partybadfaithariseswhentheinsurerwrongfullyrefusestosettleavalid
claim with the policyholder under his contract.47 While this Note focuses
only on firstparty insurance claims, the distinction between the two
classifications is important for understanding how firstparty claims have
developed and why states should provide particular safeguards to
policyholdersbringingfirstpartyclaims.48
40U.C.C.1304(2004);RESTATEMENT (SECOND) OF CONTRACTS205(1981).Anumberof
jurisdictionshaverecognizedthemorestringentfiduciarydutyfrominsurancecompaniesto
thepolicyholder.SeeinfraPartI.B.
41SeeCraigv.IowaKemperMut.Ins.Co.,565S.W.2d716,722(Mo.Ct.App.1978);ROBERT
H.JERRY,II&DOUGLASR.RICHMOND,UNDERSTANDINGINSURANCELAW180(4thed.2007).
42See Mark J. Browne et al., The Effect of BadFaith Laws on FirstParty Insurance Claims
Decisions,33J.LEGALSTUD.355,356n.1(2004).
43SeeANDERSONETAL.,supranote4,11.01.
44Seeid.11.03.
45SeeComunalev.Traders&Gen.Ins.Co.,328P.2d198,202(Cal.1958).
46SeeANDERSONETAL.,supranote4,11.01n.6.
47SeeBrowneetal.,supranote42,at356.
48For example, some states provide a cause of action under the states unfair claims
settlementpracticesactforfirstpartyclaimsbutnotthirdpartyclaims.See,e.g.,W.VA. CODE
ANN. 33114a(a) (LexisNexis 2006) (where thirdparty claimants cannot recover under the
unfairclaimssettlementpracticesact,whichprovidesacauseofactionandextracontractual
A. HistoryofFirstPartyBadFaithClaims
Badfaith claims have dramatically shifted the balance of insurance

transactions between the insurer and the policyholder by providing the
policyholder with more bargaining power.49 Before badfaith claims,
insurerswerenotpenalizedforrefusingtopayaclaim,eveniftherefusal
wasunreasonableorgroundless.50Insurancecompanyemployeesoragents
oftenexploitedthisfreedombydelaying,limiting,ordenyingpaymentofa
claim.51Evenwiththemostegregiousconduct,policyholdersweremostly
limited to recovery for damages from breach of contract,52 and penalties
levied against insurance companies were not severe enough to deter the
badbehavior.53
Itwasnotuntil1973,afewyearsafterthedevelopmentofthirdparty
badfaith claims, when the California Supreme Court adopted firstparty
badfaith claims allowing tort liability beyond the contract remedies.54
Gruenberg v. Aetna Insurance Co. and its progeny emphasized two main
reasons behind this new tort.55 First, the badfaith tort was developed to
preservethespecialrelationshipbetweenaninsureranditspolicyholder56
sinceinsurersarepurveyorsofavital[quasipublic]service.57Duetothis
special relationship, the insurer is expected to put the policyholders
interestbeforeitsowninmaximizingprofitsandshouldactingoodfaith
andfairdealing,especiallysincetherelationshipisinherentlyunbalanced
reliefinthecontextoffirstpartybadfaithclaims).
49SeeNicholsv.StateFarmMut.Auto.Ins.Co.,306S.E.2d616,619(S.C.1983)(explaining
thatinsurerscouldarbitrarilydenyclaimsiftherewasnothreatofpossiblebadfaithclaims).
50RogerC.Henderson,TheTortofBadFaithinFirstPartyInsuranceTransactions:Refiningthe
StandardofCulpabilityandReformulatingtheRemediesbyStatute,26U.MICH. J.L. REFORM 1,11

12 (1992) (explaining insurers freedom from penalties before the enactment of consumer
protections).
51Schwartz&Appel,supranote18,at1482&n.20(citingNewOrleansIns.Co.v.Piaggio,
83 U.S. (1 Wall.) 378,386 (1872) (finding the damages could not exceed the insurance policy
agreementplusinterest)).
52For
the commonly recognized commonlaw rule that limited damages to those
contemplatedbythecontract,seeHadleyv.Baxendale,156Eng.Rep.145,151(Ex.1854).
53Schwartz& Appel,supranote18,at1483&n.24(citingHenderson,supranote50, at13
(explainingthatmoststatesdidnotproviderecoveryforattorneysfeesandpenalties)).
54Gruenbergv.AetnaIns.Co.,510P.2d1032,1040,1042(Cal.1973);seeSchwartz&Appel,
supra note 18, at 148586 & n.43 (listing various cases that adopted the badfaith tort in the
1970sandearly1980s).
55SeeAndersonv.ContlIns.Co.,271N.W.2d368,37576(Wis.1978);seealsoEganv.Mut.
of Omaha Ins. Co., 620 P.2d 141, 146 (Cal. 1979) (discussing the public policy reasons for
allowingthetortofbadfaith).
56Egan,620P.2dat146.
57Id.
by the insurers superior bargaining position and the adhesive nature of

theinsurancecontract.58Thesecondreasonforthenewtortwastoprovide
punitive damages when insurers act egregiously in denying a claim,
reflecting the courts attempt to prevent abuse of disparate power in the
contractual relationship.59 With this new tort, policyholders could collect
extracontractual damages, including mental anguish, emotional distress,
interest, lost income, other economic losses, and even punitive damages,
when an insurance company wrongfully refused to pay an insurance
claim.60
Throughoutthe1970sand1980s,manystatesadoptedandcodifiedthe
firstparty badfaith tort.61 In the 1970s, the National Association of
Insurance Commissioners (NAIC) drafted model legislation, which
many states adopted and still hold as their current statute.62 Some
provisionsintheNAICsmodelstatuterequireinsurerstoactreasonably,
including: communicating promptly; implementing investigation
standards; accepting or denying claims timely; investigating before
denying claims; and negotiating in good faith for prompt, fair, and
equitable settlements of claims.63 These provisions protect against the
insurers offering substantially less than what should be recovered, which
wouldotherwisecompelpolicyholderstoinstitutelitigation.64
Despite the model statute as a guide, states still adopted varying
proceduralapproachesforbringingbothabreachofcontractandbadfaith
claim.65 Further pleading and proof problems arise because commonlaw
58Id.;seeAnderson,271N.W.2dat374.
59SeeEgan,620P.2dat146.
60Browne et al., supra note 42, at 35556; Douglas R. Richmond, An Overview of Insurance
BadFaithLawandLitigation,25SETONHALLL.REV.74,7980(1994).
61Schwartz&Appel,supranote18,at148586&n.43(listingAlabama,Alaska,Arkansas,
Colorado, Connecticut, Idaho, Iowa, Kentucky, Mississippi, Montana, Nebraska, Nevada,

New Mexico, North Dakota, Ohio, Oklahoma, Rhode Island, South Carolina, South Dakota,
Texas, and Wisconsin as states that adopted firstparty bad faith by judicial decision in the
1970sand1980s).
62Id.at1487&n.48(explainingthehistoricaldevelopmentofNAICsModelUnfairTrade
PracticesAct(MUTPA)fromthe1950s,whentheActwastoregulatemarketingpractices,
to 1972 when the MUTPA was amended to include regulations regarding unfair claims
settlement practices). All the states have adopted the NAIC model statute, except South
Carolina,SouthDakota,andMississippi.SeeASHLEY,supranote17,9:02&n.22.In1990,the
NAIC amended the Model Act, which was adopted by a few states, including Georgia,
Illinois,Louisiana,Missouri,Nebraska,Oklahoma,andRhodeIsland.Id.,9:14&n.68.
63Schwartz& Appel, supra note 18, at 1488; see IDAHO CODE ANN. 411329 (2010)
(adoptingthemodellegislationwithoutsignificantmodification).
64Schwartz&Appel,supranote18,at1488.
65See generally JOYCE C. WANG ET AL., CARLSON, CALLADINE & PETERSON LLP, BAD FAITH
DEVELOPMENTS IN THE WEST: AN UPDATE (2007), available at http://www.ccplaw.com/

bad faith exists sidebyside with statutory law, and each provides a
different cause of action and recovery.66 For example, the commonlaw
badfaith claims typically only cover policyholders and thirdparty
beneficiaries, while the statutes provide wider protections for more
potential plaintiffs and recovery beyond that provided by common law,
suchasattorneysfees.67Evenwhenthelawthatgovernsabadfaithclaim
is determined, issues continue to emerge.68 Questions arise regarding the
duty owed by the insurance company, the standard that must be met to
showbadfaith,andthetimingofdiscoveryforabadfaithclaim.69
B. DutyOwedbyanInsuranceCompany
In bringing a badfaith action, the core of statutes regulating unfair

claims settlement is determining the reasonableness of insurance
companies in denying coverage.70 Various duties owed by the insurer to
thepolicyholderhavedevelopedamongthestates.71Thedutyofgoodfaith
and fair dealing assumes the insurer will not frustrate the policyholders
righttoreceivebenefitsfromthecontractandthattheinsurershallgivethe
policyholders financial interests consideration equal to its own.72 On the
other hand, a fiduciary is bound to act in the highest good faith toward
his beneficiary, and owes a duty of undivided loyaltymeaning the
fiduciary may never seek to gain an advantage over his beneficiary.73
publications/2007pdf/Bad_Faith_Developments_in_Western_States.pdf (highlighting the

differentbadfaithclaimapproachesofArizona,California,Nevada,OregonandWashington
Statedespitetheircloseproximity).
66SeeASHLEY,supranote17,9:04;see,e.g.,StateFarmMut.Auto.Ins.Co.v.Laforet,658
So.2d55,5859(Fla.1995)(notingthatwhilethereexistsastatutorybasisforfirstpartybad
faithclaims,therewasnoactionatcommonlaw).
67See, e.g., Knasel
v. Ins. Co. of Ill., 627 N.E.2d 137, 140 (Ill. App. Ct. 1993); Daney v.
Haynes, 630 So. 2d 949, 95455 (La. Ct. App. 1993). For example, Nevada allows for two
separatecausesofaction:oneundertheUnfairPracticesinSettlingClaimsActthatsetsforth
thestandardforwhichaninsureristoprocessclaimsandprovidesaprivaterightofaction,
andthesecondundercommonlawthatprovidesanimpliedcovenantofgoodfaithandfair
dealing in every contract. NEV. REV. STAT. 686A.310(1) (2009); Pemberton v. Farmers Ins.
Exch.,858P.2d380,382(Nev.1993).Undertheselaws,thirdpartyclaimantshavenostanding
tosueforbadfaithsincethereisnoprivityofcontract,whichisrequiredforacommonlaw
cause of action. Gunny v. Allstate Ins. Co., 830 P.2d 1335, 133536 (Nev. 1992). For further
examples,seeASHLEY,supranote17,9:02.
68SeeinfraPartI.BD.
69SeeinfraPartI.BD.
70SeeSchwartz&Appel,supranote18,at1487&n.47(listingtheunfairinsuranceclaims
settlementpracticesstatutesofeachstate).
71Seesourcescitedinfranotes7475.
72See,e.g.,Craigv.IowaKemperMut.Ins.Co.,565S.W.2d716,722(Mo.Ct.App.1978).
73DouglasR.Richmond,TrustMe:InsurersAreNotFiduciariestoTheirInsureds,88KY. L.J.1,
Most states define the insurerpolicyholder relationship as somewhere

between a fiduciary and armslength,74 yet the developing trend is to
recognizeafiduciaryduty.75
C. StandardstoDetermineBadFaith
The duty owed to policyholders impacts the standard to bringa bad

faith claim.76 States that recognize a fiduciary duty require the insurance
companytoalwaysactinthepolicyholdersbestinterest,whilestatesthat
maintain the usual contract duty of good faith and fair dealing allow the
insurancecompanysomeflexibilityaslongasitsconductwasreasonable.77
States vary, however,as to the standard to defeat a badfaith claim.78 The
1(1999).
74Inanarmslengthbusinesstransactions,thereisnodutytoprotectorbenefittheother
party or to disclose facts that the other party could, by its own diligence, discover. John F.
Marianietal.,UnderstandingFiduciaryDuty,FLA. B.J., Mar.2010,at 20, 26 & n.73; seePeterv.
SchumacherEnters.,Inc.,22P.3d481,48587(Alaska2001)(notingthatinsurerpolicyholderis
not a fiduciary relationship, but recognizing four exceptions when the fiduciary principles
may apply); Peterman v. State Farm Mut. Auto. Ins. Co., 961 P.2d 487, 494 (Colo. 1998) (en
banc)(describingaquasifiduciarydutyowedtotheinsured);seealsoRawlingsv.Apodaca,
726P.2d565,571(Ariz.1986)(enbanc)(notingthatthereisnofiduciaryduty,butrecognizing
insurershavesomedutiesofafiduciarynature,includingequalconsideration,fairnessand
honesty);FarmersGrp.,Inc.v.Trimble,691P.2d1138,1141(Colo.1984)(enbanc)(explaining
the different insurerpolicyholder duties among jurisdictions); Trouten v. Heritage Mut. Ins.
Co., 2001 SD 106, 32, 632 N.W.2d 856, 864 (finding an insurerpolicyholder relationship is
similar to a fiduciary since an insurer must give at least as much consideration to the
insureds interest as it does to its own); Safeco Ins. Co. of Am. v. Butler, 823 P.2d 499, 503
(Wash.1992)(enbanc).
75See,e.g.,Frommoethelydov.FireIns.Exch.,721P.2d41,47(Cal.1986);Eganv.Mut.of
OmahaIns.Co.,620P.2d141,146(Cal.1979);FiremansFundIns.Co.v.ContlIns.Co.,519
A.2d202,204(Md.1987);Grewellv.StateFarmMut.Auto.Ins.Co.,162S.W.3d503,509(Mo.
Ct. App. 2005); Freeman v. Leader Natl Ins. Co., 58 S.W.3d 590, 598 (Mo. Ct. App. 2001);
Myersv.AmbassadorIns.Co.,508A.2d689,691(Vt.1986).SeegenerallyRichmond,supranote
73, at 3 n.12 (listing cases in Colorado, Illinois, Kansas, Louisiana, Montana, Nevada, New
Jersey,NewMexico,NewYork,Ohio,Pennsylvania,RhodeIsland,Vermont,andWisconsin
thathaverecognizedafiduciaryrelationship).
76SeeRichmond,supranote73,at1920(suggestingthatimposingafiduciarydutyisill
suited for the insurerpolicyholder relationship, especially considering the impact on the
standardforbadfaith).
77Seeid.at2021.
78ThisNotewillfocusonthreemainstandardsadoptedamongstates,althoughthereare
someotherstandardsadoptedbyafewstates,suchasunreasonableness,maliciousconduct,
grossnegligence,andstrictliability.See,e.g.,AetnaCas.&Sur.Co.v.BroadwayArmsCorp.,
664 S.W.2d 463, 465 (Ark. 1984) (malice); Gruenberg v. Aetna Ins. Co., 510 P.2d 1032, 1038
(Cal.1973)(unreasonableness);AetnaCas.&Sur.Co.v.Day,487So.2d830,832(Miss.1986)
(malice,grossnegligence,orrecklessdisregard);Jessenv.NatlExcessIns.Co.,776P.2d1244,
threemainapproachesdiscussedinthisNoteincludethedirectedverdict
standard, the fairly debatable standard, and the totalityofthe
circumstancesstandard.79
1. TheDirectedVerdictStandard
The directedverdict standard is the most restrictive standard for

policyholders bringing a badfaith claim.80 This standard was first
developed in Alabama81 and requires that the policyholder prove
entitlement to a directed verdict82 on the contract claim; otherwise the
insurance companys denial of the contract claim cannot constitute bad
faith as a matter of law.83 Under this standard, if the evidence offered by
either side creates an issue of fact as to the validity of the contract claim
andthelegitimacyoftheclaimdenial,thetortclaimmustfailandshould
not be submitted to the jury.84 A serious shortcoming of the directed
verdictstandardisthattheinsurancecompany,bydishonesty,cancreatea
factualdispute,whichrendersthecontractclaimunsuitableforadirected
verdict.85Bywayofillustration,ifaninsuranceadjustercommittedperjury
andtheperjuredtestimonywaswhollyrejectedbythejury,themerefact
that such testimony took the case to the jury would prevent a directed
verdict.86
1247(N.M.1989)(grossnegligence);Hayseeds,Inc.v.StateFarmFire&Cas.,352S.E.2d73,80
(W. Va. 1986) (malice). For a discussion of these standards not discussed in this Note, see
Dominick C. Capozzola, Note, FirstParty Bad Faith: The Search for a Uniform Standard of
Culpability,52HASTINGSL.J.181,196201(2000).
79SeediscussioninfraPartsI.C.13,II.B.
80SeeSkalingv.AetnaIns.Co.,799A.2d997,1004(R.I.2002)(rejectingthedirectedverdict
standardinrecognizingtheheavyburdenplacedonpolicyholders).
81SeeNatlSav.LifeIns.Co.v.Dutton,419So.2d1357,1362(Ala.1982).
82A directed verdict means that a reasonable jury would not have a legally sufficient
evidentiary basis to find for the party on a particular issue. FED. R. CIV. P. 50(a)(1). This
meansthepolicyholdermustshowthatadefendantsdefensetothecontractclaimisdevoid
ofanytriableissueoffactorreasonablyarguablequestionoflaw.SafecoIns.Co.ofAm.v.
Sims,435So.2d1219,1225(Ala.1983).
83Dutton,419So.2dat1362.
84Id.at1362.
85SeeinfraPartII.B.1.
86For example, in Skaling, the Rhode Island Supreme Court recognized factual disputes
cannot be determined as a matter of law, thereby making the directed verdict standard of
proof unworkable and unjust in this context. Skaling v. Aetna Ins. Co., 799 A.2d 997, 1003,
1008 (R.I. 2002) (If the claims examiners testimony is untruthful and rejected by the jury,
plaintiff has established a breach of the insurance contract; however, because the issue was
resolved by a finder of fact and not the trial justice at the close of evidence, the insurer is
insulated from bad faith, notwithstanding its reckless conduct and oppressive tactics.); cf.
Zilischv.StateFarmMut.Auto.Ins.Co.,995P.2d276,27980(Ariz.2000);Brewerv.Am.&
2. TheFairlyDebatableStandard
Theintermediateapproach,adoptedbymanyjurisdictions,isthefairly
debatablestandard,whichrequiresinsurerstoshow[1]theabsenceofa
reasonablebasisfordenyingbenefitsofthepolicyand[2]thedefendants
knowledge or reckless disregard of the lack of a reasonable basis for
denyingtheclaim.87Therootsofthefairlydebatablestandardflowfrom
Andersonv.ContinentalInsuranceCo.,wheretheWisconsinSupremeCourt
held insurers could contest a fairly debatable claim as a matter of fact or
law.88Underthefairlydebatablestandard,insurersmayarguetherewasa
reasonablebasistobelievethepolicyholderwasnotcoveredandthat,even
intheeventofanerroneousdenial,therewasnobadfaith.89Iftheinsurer
cannot show it was reasonable in denying the claim, then the badfaith
claimistriedbeforethejury.90Iftheinsurercanprovethatnobenefitswere
owedunderthepolicy,thentheinsurercouldnothaveactedinbadfaith
in its relationship with its policyholder.91 The fairly debatable approach,
however, ignores any wrongful conduct by the insurer outside of the
contractclaim,suchasthosefactorssetoutintheNAICmodellegislation,
including misconduct in investigation, denial, or litigation.92 Rather, this
approachsolelyfocusesonthereasonablenessoftheinsurerindenyingthe
claim.93
3. TheTotalityoftheCircumstancesStandard
Themostliberalapproach,adoptedbyaminorityofstates,allowsthe
badfaith claim to be heard even if the plaintiff does not prevail on the
breachofcontract claim.94 Under this standard, insurers are entitled to
challenge claims that are fairly debatable; however, this does not provide
anabsolutedefensetothebadfaithclaims.95Rather,theinsurersbeliefin
ForeignIns.Co.,837P.2d236,238(Colo.Ct.App.1992);Robinsonv.StateFarmFire&Cas.
Co.,583So.2d1063,1066(Fla.Dist.Ct.App.1991).
87Anderson v. Contl Ins. Co., 271 N.W.2d 368, 376 (Wis. 1978). Some jurisdictions
recognizeasimilarstandard,inwhichagenuinedisputeastowhethercoverageexistedisa
defensetoabadfaithclaim.See, e.g.,ChateauChamberayHomeownersAssnv. Associated
IntlIns.Co.,108Cal.Rptr.2d776,78485(Cal.Ct.App.2001).
88Anderson,271N.W.2dat376.
89See,e.g.,Skaling,799A.2dat1011.
90SeeAnderson,271N.W.2dat37677.
91Barlettv.JohnHancockMut.Life.Ins.Co.,538A.2d997,1000(R.I.1988).
92Seesourcescitedsupranote18andaccompanyingtext.
93Anderson,271N.W.2dat376.
94See, e.g., Zilisch v. State Farm Mut. Auto. Ins. Co., 995 P.2d 276, 28081 (Ariz. 2000);
FarmlandMut.Ins.Co.v.Johnson,36S.W.3d368,375(Ky.2000).
95Zilisch,995P.2dat279.
fair debatability of the claim is a question of fact for the jury.96 The
appropriate inquiry is whether there is sufficient evidence from which
reasonablejurorscouldconcludethatintheinvestigation,evaluation,and
processingoftheclaim,theinsureractedunreasonablyandeitherknewor
wasconsciousofthefactthatitsconductwasunreasonable.97
The totalityofthecircumstances standard considers all the
circumstancesinvolvedindenialofcoveragewhenevaluatingtheinsurers
liabilityforbadfaith.98Someofthesefactorsinclude:
[1] efforts or measures taken by the insurer to resolve the
coverage dispute promptly or in such a way as to limit any
potential prejudice to the insureds; [2] the substance of the
coveragedisputeortheweightoflegalauthorityonthecoverage
issue; [3] the insurers diligence and thoroughness in
investigating the facts specifically pertinent to coverage; and [4]
effortsmadebytheinsurertosettletheliabilityclaimintheface
ofthecoveragedispute.99
Iftherearedisputesovermaterialfactsrelatingtoanyofthesefactors,the
courtmustsubmitthebadfaithclaimtothejury.100
States that adopt this approach view the fairly debatable standard by
itself as too narrow and impose on insurance companies a duty to
investigate, negotiate, and attempt to settle the claim in a fair and
reasonable manner.101 Further, these states hold that the insurer can
breach the duty owed to the policyholder, even if there was no policy
coveragefortheloss.102Thisstandardrecognizesthatpolicyholdersrelyon
insurance companies and that insurance companies can cause harm to
policyholdersbeyondthelossofrecoveryunderthecontract.103
96Id.
97Id.at280.
98John J. Jerue Truck Broker, Inc. v. Ins. Co. of N. Am., 646 So. 2d 780, 783 (Fla. Dist. Ct.
App.1994).
99StateFarmMut.Auto.Ins.Co.v.Laforet,658So.2d55,6263(Fla.1995).Whilethiscase
listsfivefactorstoconsiderinevaluatingthirdpartyclaims,thefourlistedapplytofirstparty
claims.SeeRobinsonv.StateFarmFire&Cas.Co.,583So.2d1063,106668(Fla.Dist.Ct.App.
1991).
100JohnJ.JerueTruckBroker,Inc.,646So.2dat783.
101FarmlandMut.Ins.Co.v.Johnson,36S.W.3d368,375(Ky.2000).
102SeeLightv.AllstateIns.Co.,506S.E.2d64,71&n.15(W.Va.1998)(citingexamplesof
states that hold whether or not to bifurcate and stay a firstparty bad faith claim is a
discretionarydeterminationforthetrialcourt);Hatchv.StateFarmFire&Cas.Co.,842P.2d
1089,1099(Wyo.1992).
103See,e.g.,Johnson,36S.W.3dat37576.
D. ProceduralProblemswithBadFaithClaimDiscovery
In evaluating a breachofcontract claim and badfaith claim, courts

often face the difficult question of whether to stay discovery on the bad
faith claim or to allow simultaneous discovery.104 Policyholders often
request the claims file to prove bad faith and argue discovery should be
conducted simultaneously.105 Insurers argue the claims file should be
protected as it contains privileged information and comments about the
claimsthatcouldbeprejudicial.106Ifdiscoveryisallowedsimultaneously,
another issue the court must decide is whether to allow the breachof
contractandbadfaithclaimstobeheardtogetherorwhethertobifurcate
theclaimsfortrial.107Thetypicalprocedureallowssimultaneousdiscovery
onthebreachofcontractandbadfaithclaims,whilebifurcationallowsthe
breachofcontractclaimtobetriedbeforethebadfaithclaim.108
1. SimultaneousDiscoveryoftheBreachofContractandBad
FaithClaims
Somestatesallowsimultaneousdiscoverybasedontheoverwhelming
need for the information in the claims file.109 These states analogize the
badfaithactionstothosebyaclientagainstanattorney,whichcanonlybe
proven by showing exactly how the company processed the claim, how
thoroughly it was considered and why the company took the action it
did.110 For example, in Brown v. Superior Court Arizona rejected the
argumentthattheclaimsfileisprotectedbyaprivilegeandthatdiscovery
should be stayed.111 The Arizona Supreme Court held if a policyholder is
injured, an insurance company could not automatically assume that
litigation will result, as this construes Federal Rule of Civil Procedure
26(b)(3) too broadly.112 Rather, simultaneous discovery furthers judicial
economy in a number of ways, including: eliminating duplicative
discovery, allowing the badfaith portion of the trial to commence
immediatelyafterthecontractclaim,andavoidingdiscoverydisputesover
104Wolfv.GeicoIns.Co.,682F.Supp.2d197,199200(D.R.I.2010)(discussingthedebate
betweenallowingsimultaneousdiscoveryorstayingdiscovery).
105Seesourcescitedsupranote31andaccompanyingtext.
106See,e.g.,Skalingv.AetnaIns.Co.,799A.2d997,1010(R.I.2002);InreAllstateCnty.Mut.
Ins.Co.,209S.W.3d742,74647(Tex.App.2006).
107Seeinfranotes11419andaccompanyingtext.
108SeeWolf,682F.Supp.2dat199200.
109Seesourcescitedsupranote31.
110Brownv.SuperiorCourt,670P.2d725,734(Ariz.1983).
111Id.at73435.
112Id.at732.
whatrelatestothebadfaithclaim.113
Mostjurisdictionsbifurcatethecontractclaimandthebadfaithclaim
toavoidprejudicetotheinsurer.114Bifurcationleavesthelawsuitintactbut
allows the court to determine the issues without trying all controverted
issues simultaneously.115 The policy behind this approach is to avoid
prejudice to the insurer in cases where the badfaith claim could
improperlyinfluencethejurywithinflammatoryevidence.116Forexample,
prejudice could arise where the insurance company made an offer of
settlement.117 If evidence of the settlement offer is introduced in the
contract portion of the trial, the jury may conclude that the insurance
companyconcededliabilityunderthecontract.118Ifthereisnoevidenceof
the settlement offer, then this deprives the insurance company an
opportunitytoshowtheyactedreasonably.119
113Wolf,682F.Supp.2dat199.
114See, e.g., Brown v. Gen. Motors Corp., 407 P.2d 461, 46364 (Wash. 1965); see also Dan
Cytryn, Bifurcation in Personal Injury Cases: Should Judges Be Allowed to Use the B Word?, 26
NOVA L. REV. 249, 25354 (2001) (explaining that twentyfour states allow bifurcation on a
discretionary basis; ten states allow bifurcation in extraordinary situations, which includes
avoiding prejudice to the insurer; thirteen states have not taken a firm position, including
Alaska, Hawaii, Idaho, Kentucky, Mississippi, Missouri, Montana, New Hampshire, Rhode
Island, Utah, Vermont, Wisconsin, and Wyoming; New York mandates bifurcation in most
personalinjurycases;andIllinoisandTexasdonotallowbifurcation).ButseeLightv.Allstate
Ins. Co., 506 S.E.2d 64, 71 n.15 (W. Va. 1998) (citing cases in Montana, Idaho, Texas, and
Illinois, along with other states, that provide the trial court has discretion to bifurcate and
state a firstparty bad faith claim). Federal Rule of Civil Procedure 42(b) provides the legal
basisforbifurcation,whichgivescourtsdiscretionarypowertoseparateissues,butcautions
thatthisruleshouldnotbeexercisedliberallyorindiscriminately.FED.R.CIV.P.42(b).
115Hallv.CityofAustin,450S.W.2d836,83738(Tex.1970).
116RICHARD L. MCMONIGLE & MICHAEL J. FARRELL, UM/UIM SEVERANCE ISSUESINA POST
KOKEN ERA: THE DEFENSE PERSPECTIVE 34 (2009), available at http://www.postschell.com/

docs/publications/461.pdf.
117See,e.g.,AllstateIns.Co.v.Hunter,865S.W.2d189,19394(Tex.App.1993).
Therealproblemintryingalloftheseclaimstogetherisaninternal
conflict which may unfairly force the insurer to choose between 1)
insisting on its right to exclude evidence of settlement negotiations and
coveragedeterminations(therebylosingtheadvantageofshowingthatit
wasattemptingtobereasonableindefenseofthebadfaithclaims)and2)
putting on such evidence and risking a prejudicial inference that it has
admittedliabilityonthecontractaction.
Id.
118Id.
119Id.
2. StayingDiscoveryontheBadFaithClaims
The jurisdictions that stay discovery rationalize that the insurance

company should be protected from unfair prejudice and revealing
privileged information.120 These states also find judicial economy is
protected by avoiding needless discovery of the badfaith claim, since
discovery is then contingent on the plaintiff prevailing on the contract
claim.121 Procedurally, severance of a claim is essentially the same as
staying discovery, although only Rhode Island and Texas sever the
contract and badfaith claims.122 When discovery is stayed, the breachof
contract claim proceeds through discovery and trial, and if a jury
determines that there was a breach, only then can the badfaith claim
discoverytakeplace.123Theclaimsarethenbifurcatedfortrialandthebad
faithclaimgoesforwarddependingonwhetherthestandardtodetermine
badfaithismet.124
II. ProposedBrightLineRulesStatesShouldAdopttoHarmonizeFirst
PartyBadFaithLitigation
Statesmustadoptaclear,unifiedapproachwhenfacedwithbreachof
contractandbadfaithclaims.125Policyholdersneedprotectionfromunfair
treatment and excessive rates, especially since there is a fundamental
economic conflict between the insurer and the policyholderthe
insurancecompanydoesnotwanttopayandthepolicyholderwantstobe
completelyreimbursed.126Ontheotherhand,insurancecompaniesmustbe
protectedagainstfraudulentclaimstopreservesolvency.127Abalancemust
be struck between these two seemingly conflicting concerns for fairness
120SeeWolfv.GeicoIns.Co.,682F.Supp.2d197,199(D.R.I.2010)(citingcasesthatstayed
discoverybasedonattorneyclientprivilege,judicialeconomy,andavoidingprejudicetothe
insurance company); Skaling v. Aetna Ins. Co., 799 A.2d 997, 1010 (R.I. 2002) (noting the
significantproceduralprotectionsforinsurersinstayingdiscovery).
121Wolf,682F.Supp.2dat199.
122See,e.g.,Bartlettv.JohnHancockMut.LifeIns.Co.,538A.2d997,1002(R.I.1988);Hall
v.CityofAustin,450S.W.2d836,83738(Tex.1970).
123Clayton,supranote28,at35.
124SeeinfraPartII.B.
125Cf.Stewart&Stewart,supranote21,at43(arguingformorecertaintyintheinsurance
industry).
126Dietz & Preston, supra note 13 (quoting California Lieutenant Governor John
Garamendi,whowasCaliforniasInsuranceCommissionerfrom2002to2006).
127SeeSharonTennyson&WilliamJ.Warfel, TheLawandEconomicsofFirstPartyInsurance
Bad Faith Liability, 16 CONN. INS. L.J. 203, 21718 (2008); Insurance Fraud, INS. INFO. INST.,
http://www.iii.org/media/hottopics/insurance/fraud/(lastvisitedApr.23,2011).
and adequacy.128 In recognizing insurance companies duty of good faith

and fair dealing, states should embrace the totalityofthecircumstances
standard to determine whether bad faith has occurred, and when an
insurancecompanyhasengagedinbadfaithconduct,theclaimfileshould
bediscoverableuptothepointoftheclaimdenial.129
A. Responsibility.WhatsYourPolicy?130:InsuranceCompaniesOwe
TheirPolicyholdersaDutyofGoodFaithandFairDealing.
The typical duty implied in a contract is the obligation of good faith

and fair dealing in performing and enforcing a contract.131 This duty
assumes the insurer will not frustrate the policyholders right to receive
benefitsfromthecontractandthattheinsureristogivethepolicyholders
financial interests consideration equal to its own.132 Some courts have
expressed doubt as to whether there is any real difference between a
fiduciary duty and a duty of good faith in the insurance context.133
Therearemanyfactorsthatmaketheinsurancecontractunique,including:
insurance companies are in a superior bargaining position; insurance
contracts areadhesion contracts;134 policyholdersare vulnerable when the
claimissubmittedduetothephysicalinjuryoreconomicloss;135insurance
companies provide a quasipublic service and should be held to a higher
standard;136 and insurance companies hold adjudicatory responsibility
toward policyholders.137 Further, insurance companies often admit they
owefiduciaryobligationsduringlitigation.138Publicperception139andeven
128SeeinfraPartII.AC(analyzingthedifferentlitigationapproaches).
129SeeinfraPartII.AC.
130LIBERTY MUTUAL INS. CO., http://www.libertymutual.com/ (last visited Apr. 23, 2011)
(statingLibertyMutualInsuranceCompanysslogan).
131U.C.C.1304(2004);RESTATEMENT (SECOND)OF CONTRACTS205(1981);seesupraPart
I.B;supranote40andaccompanyingtext.
132SeeCraigv.IowaKemperMut.Ins.Co.,565S.W.2d716,722(Mo.Ct.App.1978);supra
textaccompanyingnote72.
133VanNoyv.StateFarmMut.Auto.Ins.Co.,16P.3d574,579n.2(Wash.2001).
134Eganv.Mut.ofOmahaIns.Co.,620P.2d141,146(Cal.1979).
135Dolanv.AidIns.Co.,431N.W.2d790,792(Iowa1988).
136William M. Goodman & Thom Greenfield Seaton, Foreword, Ripe for Decision, Internal
WorkingsandCurrentConcernsoftheCaliforniaSupremeCourt,62CAL.L.REV.309,34647(1974).
137Rawlings v. Apodaca,726P.2d565,570(Ariz.1986)(Theinsurerevaluates theclaim,
determineswhetheritfallswithinthecoverageprovided,assessesitsmonetaryvalue,decides
onitsvalidityandpassesuponpayment.).
138SeeANDERSONETAL.,supranote4,11.06(discussinghowinsurerswillarguethereisa
fiduciarydutywhenitisfavorableforthemtodoso,suchastoshiftresponsibility);Eugene
R. Anderson & James J. Fournier, Why Courts Enforce Insurance Policyholders Objectively
Reasonable Expectations of Insurance Coverage, 5 CONN. INS. L.J. 335, 38591 & nn.15063 (1998)
theadvertisementsbyinsurancecompaniespromoteafeelingofsafetyand
protection in customers, with insurers promis[ing] to the insured to
simplifyhislife,toputhimingoodhands,tobackhimupwithapiece
oftherockortobeonhisside,suggestingtheinsurerwillnotabandon
thepolicyholderduringthetimeofneed.140
Insurance contracts are also unique because policyholders are not
seeking a commercial advantage through coverage from an insurance
company,aswouldbethecaseinothercontractsintheordinarycourseof
business.141 Rather, policyholders are hiring the insurer to act in the
policyholders best interest in advising on risk management as well as
processing,litigating,andmonitoring claims.142 In thisway, the insurer is
anagentofthepolicyholder.143Underagencylaw,anagentowesfiduciary
dutiesofundividedloyaltytoitsprincipalandmustplacetheprincipals
interestsparamounttoitsowninterests.144Underthisview,theclaimsfile
isanalogoustothefileofaclientheldbyanattorney,andtheclienthasa
(citing court documents from Fireman Fund, Continental Casualty, Continental Insurance
Company, Nation Union, Liberty Mutual, Home, St. Paul Fire and Casualty, and Hartford
arguing they owe their policyholders a fiduciary duty to look after the interests of the
policyholder,dueinparttotheinsurersexpertiseinthebusiness).
1391JAMES J. LORIMER ET AL., THE LEGAL ENVIRONMENT OF INSURANCE3738(3ded.1987)
(While an insurance policy does represent a contractual commitment, the attitudes of the
general public, the legislatures, and the courts make clear that the insurance agreement is
viewedashavingbroaderramificationsthanamerecontract.).
140DAmbrosiov.Pa.NatlMut. Cas.Ins. Co.,396A.2d780,786(Pa.Super.Ct.1978);see
StateFarmFire&Cas.Co.v.Nicholson,777P.2d1152,1156n.6(Alaska1989);C&JFertilizer,
Inc. v. Allied Mut. Ins. Co., 227 N.W.2d 169, 178 (Iowa 1975) (We would be derelict in our
dutytoadministerjusticeifwewerenottojudiciallyknowthatmoderninsurancecompanies
haveturnedtomassadvertisingtosellprotection.);seealsoMarcS.Mayerson,FirstParty
InsuranceBadFaithClaims:MooringProceduretoSubstance,38TORT TRIAL & INS. PRAC. L.J.861,
866(2003).
141Crisciv.Sec.Ins.Co.,426P.2d173,179(Cal.1967)([P]laintiffdidnotseek...toobtain
acommercialadvantagebuttoprotectherselfagainsttherisksofaccidentallosses,including
the mental distress which might follow from the losses. Among the considerations in
purchasingliabilityinsurance...isthepeaceofmindandsecurityitwillprovideintheevent
of an accidental loss ....); McCorkle v. Great Atl. Ins. Co., 637 P.2d 583, 588 (Okla. 1981)
([O]ne of the primary reasons a consumer purchases any type of insurance (and the
insuranceindustryknowsthis)isthepeaceofmindandsecuritythatitprovidesintheevent
ofloss.).
142See Matthew D. Schultz, Bad Faith or No Faith? Finding a Place for Wrongful Refusal to
DefendinFloridasBadFaithJurisprudence,29FLA.ST.U.L.REV.1389,1428(2002).
143See Craig v. Iowa Kemper Mut. Ins. Co., 565 S.W.2d 716, 72324 (Mo. Ct. App. 1978)
(discussingagencylawandtheensuingfiduciaryduties).
144Comm.onChildrensTelevision,Inc.v.Gen.FoodsCorp.,673P.2d660,676(Cal.1983);
RESTATEMENT (THIRD) OF AGENCY 1.01 (2006); see also RESTATEMENT (SECOND) OF TRUSTS
170(1)&cmts.a,q(1959).
right of access to the claims file since it belongs to the client.145 Courts
haveexplainedthatthenatureofanattorneysresponsibilitytotheclient
creates a fiduciary relationship, and because an insurer is entrusted to
defendaclaimonbehalfoftheinsured,itseemsapparentthataninsurer
actsinafiduciarycapacity.146
While there is strong support to impose a fiduciary duty on insurers,
statesshouldnotgoasfarastorequirethisonerousduty.147Imposingthis
duty creates numerous practical issues for insurers in always putting
policyholdersinterestsbeforetheirown.148Insurerswouldhaveadifficult
time protecting themselves.149 In particular, insurers could not conduct
fraudinvestigation,whichwouldotherwiseservetoreducelitigationcosts
andpremiums.150Further,businesstransactionswouldbeseverelylimited
ifafiduciarydutywereimposedbecausetheinsurerwouldhavetouse
the utmost good faith and, if [the insurer gained] profits from the
transaction, the law presumes the agreement was entered into by the
beneficiary without sufficient consideration and under undue
influence.151Finally,ifafiduciarydutywereimposed,aninsurerwould
notabletochallengebadfaithclaims.152Insurerswouldnotbeabletofully
investigateclaimsanddenypayment,eveniftheyhadreasonablegrounds
to dispute.153 This is because any decision adverse to the policyholder
would be an actionable tort.154 Since good faith and fair dealing should
remainthedutyowedbyinsurerstopolicyholders,thenextissueisfixing
145Grewellv.StateFarmMut.Auto.Ins.Co.,102S.W.3d33,37(Mo.2003).
146Grewellv.StateFarmMut.Auto.Ins.Co.,162S.W.3d503,50809(Mo.Ct.App.2005).
147SeeRichmond,supranote73,at24(presentingsomeofthedifficultieswithimposinga
fiduciaryduty).
148Seeid.
149Seeid.
150See Time Ins. Co. v. Burger, 712 So. 2d 389, 393 (Fla. 1998) (Payment of illegitimate
claimsraisesthecostofinsuranceforallpolicyholders.);UniverseLifeIns.Co.v.Giles,950
S.W.2d 48, 60 (Tex. 1997) (Hecht, J., concurring) (Indeed, from a competitive viewpoint, an
insurer must pay only valid claims and must deny invalid claims to keep premiums to
customersataminimum.).
151Comm.onChildrensTelevisionv.Gen.Foods Corp.,673P.2d660,676(Cal.1983);see
also McCollough v. Rogers, 431 So. 2d 1246, 1248 (Ala. 1983) (explaining presumption of
undue influence); Prueter v. Bork, 435 N.E.2d 109, 112 (Ill. App. Ct. 1981) (describing a
rebuttable presumption that a transaction in which the trustee benefits is fraudulent); Von
Hakev.Thomas,705P.2d766,769(Utah1985)(explainingthatifaconfidentialrelationship
exists,anytransactionfromwhichthetrusteebenefitsispresumedfraudulent).
152SeeRichmond,supranote73,at24.
153Seeid.
154WilliamT.Barkeretal.,IsanInsureraFiduciarytoItsInsureds?,25TORT & INS. L.J. 1, 8
(1989).
afairstandardfordeterminingifaninsurerengagedinbadfaith.155
B. TheTotalityoftheCircumstancesStandardShouldBetheStandard
forDeterminingBadFaith.
The directedverdict standard, the fairly debatable standard, and the

totalityofthecircumstances standard provide different ways to defeat a
badfaithclaim.156Statesthatallowinsurerstochallengeabadfaithclaim
by the totalityofthecircumstances standard provide the most sensible
approach and the most protection for insurers and policyholders.157
Insurersareprotectedinrecognizingthatabadfaithclaimcanbedefeated
under the fairly debatable standard.158 Policyholders are protected since
insurers can still be liable for wrongful conduct during the investigation,
negotiation,andanyattemptstosettletheclaim.159
1. TheDirectedVerdictRuleIsTooRestrictivefor
Policyholders.
The directedverdict standard imposes an onerous burden on

policyholders.160Underthisstandard,theburdenisonthepolicyholderto
prove entitlement to a directed verdict on the contract claim, which
essentiallyinsulatestheinsurerfrombadfaithclaims.161Whenconsidering
whethertofollowthedirectedverdictstandard,theRhodeIslandSupreme
Courtexplained:
It makes little sense that an insurance company may deny a
claim, assert a coverage issue in a reckless and oppressive
fashion, fail to timely respond to its obligations, or otherwise
behave in a manner inconsistent with its implied duties of fair
dealing and be insulated from tort liability for its bad faith
conduct because it fortuitously survives a motion for
judgment....162
Ifthestandardtodenyabadfaithclaimissetsolowthatmereambiguity
createsafactissue,whichcausesthetortclaimtoautomaticallyfail,asitis
under the directedverdict standard, bad faith would no longer serve its
155SeeinfraPartII.B.
156SeesupraPartI.C.13.
157SeediscussioninfraPartII.B.3.
160Cf.Skalingv.AetnaIns.Co.,799A.2d997,1004(R.I.2002)(discussinghowthedirected
verdictisaheavyburdenonpolicyholders).
161SeeMurrayv.StateFarmFire&Cas.Co.,268Cal.Rptr.33,37(Ct.App.1990);seealso
Skaling,799A.2dat1005.
162Skaling,799A.2dat1005;seecasescitedsupranote86.
purposeofdeterringunreasonableconductbyaninsurer.163
Manystatesfindthedirectedverdictruleabsurdandunfair,inthatan
insurersclaimsadjustercouldprecludeadirectedverdictonthecontract
action by dishonestly disputing facts and thus preventing the badfaith
claim.164Indeed,theRhodeIslandSupremeCourtexplainedthatallowing
aninsurertoavoidabadfaithclaimbyfeigningignoranceoftheclaimor
misrepresenting the content of oral or written communications would
frustrate the purpose of the bad faith action.165 States that continue to
follow the directedverdict standard have had to establish rules that the
insurersthemselvescannotpresenttheevidencetocausethedisputedfact;
however, this exception essentially swallows the directedverdict rule.166
Thedevelopingtrendisforstatestoabandonthedirectedverdictruledue
totheunworkableandunfairpracticalaspects,includingAlabamawhere
the directedverdict standard was first implemented.167 It is clear the
directedverdictruleisnotadequateandmustberetired.168
2. TheFairlyDebatableStandardDoesNotProvideEnough
ProtectionforPolicyholders.
The fairly debatable standard is a practical approach to serve the

purpose of the badfaith tort, which is to provide counterweight to the
adverseeconomicinterestsbetweenaninsurerandpolicyholder.169Under
thisstandard,theinsurermustshow[1]theabsenceofareasonablebasis
163SeeWolfv.PrudentialIns.Co.ofAm.,50F.3d793,800(10thCir.1995).
164Skaling,799A.2dat1008;see,e.g.,Wolf,50F.3dat800([A]ninsurercouldintentionally
insert an ambiguous term into a policy and continually deny coverage based on that term,
....[andtheinsurer]wouldneverfaceabadfaithclaimbecauseitsambiguoustermwould
createalegitimatedispute.).
165Skaling,799A.2dat1008;seecasescitedsupranote86.
166See, e.g., Jones v. Ala. Farm Bureau Mut. Cas. Co., 507 So. 2d 396, 401 (Ala. 1986)
(holding the directed verdict rule does not defeat a badfaith claim when the insurers own
agentcreatedthefactualdisputeovercoverage);seealsoStephenD.Heninger&NicholasW.
Woodfield, A Practitioners Guide to Alabamas Tort of Bad Faith, 57 ALA. LAW. 277, 281 (1996)
(quotingLoyalAm.LifeIns.Co.v.Mattiace,679So.2d229,238(Ala.1996))(discussinghow
theexceptionshaveswallowedtherulefordirectedverdictsinceinsurerscouldnotrelyon
its chosen method of subjective underwriting to create its own legitimate reason for
denyingaclaim).
167CompareNatlSav.LifeIns.Co.v.Dutton,419So.2d1357,1362(Ala.1982)(origination
ofthedirectedverdictrule),withStateFarmFire&Cas.Co.v.Slade,747So.2d293,30506
(Ala.1999)(effectivelyabrogatingthedirectedverdictrule).
169SeeKranscov.Am.EmpireSurplusLinesIns.Co.,2P.3d1,12(Cal.2000);GrandSheet
MetalProds.Co.v.Prot.Mut.Ins.Co.,375A.2d428,430(Conn.Super.Ct.1977)(discussing
how the economic imbalance between insurers and policyholder is a paramount
consideration[]forthefirstpartybadfaithremedy).
for denying benefits of the policy and [2] the defendants knowledge or
reckless disregard of the lack of a reasonable basis for denying the
claim.170Policyholdersareprotectedbecauseinsurerscannotdenyaclaim
inarecklessoroppressivemanner.171Further,policyholdersareprotected
because the fairly debatable standard addresses the underlying policy to
deterandpunishintentionallyrecklessoroppressiveclaimdenialsthrough
extracontractual damages.172 Insurers are protected because they have an
opportunity to challenge claims they feel are debatable, and the intent
element protects against policyholders scaring insurers into paying
questionable claims because of the threat of a bad faith suit.173 A lax
standard, such as one that only considers reasonableness, would
potentiallyincreasefraudulentclaims.174
The problem with this approach, however, is that it does not address
problems when the insurer engages in wrongful conduct during the
investigations and negotiations of the claims.175 There are multiple
circumstances in which bad faith can occur and cause harm to
policyholders, such as during investigation or negotiations, but the fairly
debatable standard only covers aspects of applying the facts of a case to
coverage under the policy and denials, and policyholders are left
unprotected if insurers engage in wrongful conduct.176 Further, under the
fairlydebatablestandard,ifajuryfindstheclaimwasfairlydebatable,the
badfaithclaimfailsasamatteroflaw.177Thebetterpolicyisforcourtsto
gobeyondonlyholdinganinsurerliableforunreasonableinterpretationof
the policy coverage.178 Courts should allow for recovery for wrongful
conductandrecognizethatthedutyofgoodfaithandfairdealingapplies
totheinsurersbehavior.179
170Anderson v. Contl Ins. Co., 271 N.W.2d 368, 376 (Wis. 1978). Other jurisdictions
recognizeadefensetothebadfaithclaimunderasimilarstandardwhenthereisagenuine
issue as to whether coverage existed. See, e.g., Chateau Chamberay Homeowners Assn v.
AssociatedIntlIns.Co.,108Cal.2d776,784(Ct.App.2001).
172SeeCapozzola,supranote78,at20103.
174Cf.Skalingv.AetnaIns.Co.,799A.2d997,1010(R.I.2002)(decliningtoadoptthefairly
debatablestandard).
175SeeJohnN.Ellisonetal., BadFaithandPunitiveDamages:ThePolicyholdersGuidetoBad
Faith Insurance Coverage Litigation; Understanding the Available Recovery Tools, in COURSE OF
STUDY: ENVIRONMENTAL INSURANCE 295, 347 n.129 (Am. Law Inst.Am. Bar Assn 2006)
(listingwrongfulconductbyinsurancecompaniesininvestigation,denial,andlitigation).
176Seeinfranotes18489andaccompanyingtext.
177Seecasescitedsupranotes8991andaccompanyingtext.
3. TheTotalityoftheCircumstancesStandardProvidesthe
BestBalance.
Thetotalityofthecircumstancesstandardprovidesthebestapproach
in adopting the fairly debatable standard, while also recognizing insurers
should be liable for wrongful conduct.180 States should recognize a
separate intentional wrong, which results from a breach of duty imposed
as a consequence of the relationship established by contract.181 This
approach would refocus insurers on their overarching duty to pay for
claims where it would be reasonable, while best serving the interests of
bothinsurersandpolicyholders.182
Thetotalityofthecircumstancesstandardprotectspolicyholdersfrom
insurersbadfaithconductthatcan,insomecircumstances,extendbeyond
coverage.183 For example, in Hatch v. State Farm Fire & Casualty Co., the
WyomingSupremeCourtfoundtheinsurancecompanycouldbeliablefor
investigatorymisconduct,eventhoughsummaryjudgmentwasgrantedon
the badfaith claim.184 Specifically, the wrongful conduct by the insurance
companyincludedrequestingmoreinformationthanreasonablynecessary
todecidetheclaim.185Also,duringthefirstcontact,theinsurancecompany
representative told the plaintiff that he was not going to get what [he
thought he was] going to get and that he would regret retaining an
180Cf. Ellison et al., supra note 175, at 347 n.129 (discussing wrongful conduct common
amonginsurancecompanies).
181Andersonv.ContlIns.Co.,271N.W.2d368,374(Wis.1978).
182SeeFlemingv.SafecoIns.Co.ofAm.,206Cal.Rptr.313,318(Ct.App.1984)([T]hefirst
and primary duty of the insurer is to pay a claim to its insured if such payment would be
reasonableunderallofthecircumstances....).
183See, e.g., Hatch v. State Farm Fire & Cas. Co., 842 P.2d 1089, 109394, 109799 (Wyo.
1992).InHatch,thecourtfoundthattheplaintiff,whowasacquittedonanarsoncharge,did
notprovideevidencetoshowtheinsurancecompanysexpertwasmanipulatedinconcluding
thehousefirewasnotaccidental,resultinginagrantofsummaryjudgmentofthebadfaith
claimunderthefairlydebatablestandard;however,thecourtdidfindtheinsurancecompany
liable for violating the implied covenant of good faith and fair dealing by investigation
misconduct.Seeid.
184Seeid.at109798(quotingGlennE.Smith,UnderstandingtheNewTortofFirstPartyBad
FaithinWyoming:McCulloughv.GoldenRuleIns.Co.,26LAND & WATER L. REV.225,24468

(1991))(listingovertwentyexamplesofconductandtacticsthathaveresultedinliabilityfor
firstparty insurers). See generally Ellison et al., supra note 175, at 347 n.129 (discussing
differentissuesthatariseinprosecutingabadfaithclaimagainstaninsurancecompanyand
providing an extensive list of over thirtyeight examples of insurance company misconduct,
including asking for more information than necessary to decide a claim; accusing
policyholders of wrongdoing without a reasonable basis; spoliation of evidence; increasing
premiumsinretaliation;andexploitingpolicyholdersvulnerability).
185Hatch,842P.2dat1098.
attorney.186 Finally, the insurance company requested an extremely

detailedinventoryoftheitemsinthehousethatwerelostinthefire,such
as how many cornflakes were left in the cereal box before the fire;
threatenedthepolicyholderthathehadtodoeverythinghewastoldunder
the cooperation provision in the policy; engaged in unsupervised
investigations of the house, even after the investigation was complete,
during which personal items disappeared from the home, including
personal letters, photographs, financial documents, and diaries; and
demandedmedicalandcreditorreleases,employmentrecords,andmental
healthrecords.187Whiletherearemanyotherwaysinwhichaninsurance
companycouldengageinwrongfulconduct,theHatchfamilyexperience
is an example of extreme investigation misconduct that should allow for
recoverybeyondthepolicycoverage.188
In addition to protecting policyholders, insurers would be protected
sincetheycouldlitigatequestionableclaimsandarguetheyactedingood
faith.189 Some argue that this standard would result in [a]llowing full
disclosureoftheinsurersclaimfilebasedsolelyonplaintiffsallegationof
bad faith, which would invite all plaintiffs to include a badfaith claim
with every breachofcontract claim.190 However, applying the proposed
standard to three common grounds for alleging bad faith shows the
practicality of this standard and how the interests of both parties are
equallyserved.191
Thefirstgroundraisesaquestionastowhethertherewasaviolation
ofthepolicyinvolvingtheinterpretationoftheinsurancepolicy.192Inthis
situation,theinsurancecompanywouldarguethatitreasonablybelieved
thecontractlanguagedidnotcovertheclaim.193Ifthecoveragelanguageis
at issue, and the insurer reasonably interpreted the coverage language to
not include the particular injury, the insurer would not be liable for bad
faith.194 Rather, the insurer would be acting in good faith since the claim
was denied on a fairly debatable policy interpretation, even if that
186Id.
187Id.
188SeeEllisonetal.,supranote175,at347n.129.
189Seesupranotes17273andaccompanyingtext.
190Bartlettv.JohnHancockMut.LifeIns.Co.,538A.2d997,1002(R.I.1988).
191See News Release: NAIC Cites Top Insurance Complaints for 2008, NATL ASSN OF INS.
COMMRS (Mar. 6, 2009), http://www.naic.org/Releases/2009_docs/complaints_2008.htm

(listingthemostcommoncomplaintsbypolicyholdersthatraisequestionsastowhetherthere
was a violation of the insurance policy, including delays, denial of claims, unsatisfactory
settlementoffers,premiumratings,andpolicycancellations).
192See,e.g.,Millsv.RegentIns.Co.,449N.W.2d294,297(Wis.Ct.App.1989).
193See,e.g.,Andersonv.ContlIns.Co.,271N.W.2d368,37677(Wis.1978).
194Hummelv.ContlCas.Ins.Co.,254F.Supp.2d1183,1191(D.Nev.2003).
interpretation was wrong.195 Protecting the insurer is important, since

insurers argue the claims file is filled with attorneyclient privileged
materialsandworkproduct,andwithouttheseprotections,insurerscould
not adequately investigate suspicious claims and combat fraud.196
Policyholderswouldhaveanextraprotectionthatarisesfromtheseparate
duty of good faith and fair dealing implied from the special relationship
between the parties.197 This would arise, for example, if the insurers
unreasonablydelayedclaiminvestigationbeforeconcludingthattherewas
no coverage, and the policyholder suffered losses due to this delay.198
Accordingly, this example shows how the insurer would not have to
disclose the claims file on mere allegations of bad faith, and yet the
policyholder would still be protected if the insurer acted in bad faith
beyondthetermsofthecontract.199
Another common allegation is whether the insurer acted in bad faith
bynotpayingthepolicyholder.200Underthisscenario,thefairlydebatable
standardprotectsinsurers,asthepolicyholderwouldhavetoallegemore
thannonpaymenttogettheclaimsfilebecausenoteveryrefusaltopaya
claim is in bad faith.201 Specifically, a policyholder would have to show
absenceofareasonablebasisfortheinsurersdenialofthebenefitsoran
intentionalorrecklessfailuretoinvestigatetheclaim.202Also,similartothe
contract interpretation issue described above, policyholders would be
protected from bad faith that arises from the duty of good faith and fair
dealingunderthetotalityofthecircumstancesstandard.203
The third common issue alleged is whether the insurance company
acted in bad faith as it relates to the insurers investigation or litigation
conduct.204 Under this scenario, if the insurance company engaged in
egregious badfaith conduct, then the policyholder should get the claims
195SeeMills,449N.W.2dat297.
196SeeJebo,supranote8,at26162.
197SeeComunalev.Traders&Gen.Ins.Co.,328P.2d198,200(Cal.1958).
198Murrayv.StateFarmFire&Cas.Co.,268Cal.Rptr.33,37n.5(Ct.App.1990);seeEllison
etal.,supranote175,at347n.129(providingadditionalexamplesofwrongfulconduct).
200See,e.g.,Skalingv.AetnaIns.Co.,799A.2d997,1012(R.I.2002).
201Seeid.
202Id.;Andersonv.ContlIns.Co.,271N.W.2d368,37677(Wis.1978).
203SeeComunalev.Traders&Gen.Ins.Co.,328P.2d198,20001(Cal.1958)(Thereisan
implied covenant of good faith and fair dealing in every contract that neither party will do
anythingwhichwillinjuretherightoftheothertoreceivethebenefitsoftheagreement....
[T]he implied obligation of good faith and fair dealing requires the insurer to settle in an
appropriatecasealthoughtheexpresstermsofthepolicydonotimposesuchaduty.).
file.205 This is because the insurer would have knowingly or recklessly

disregarded the lack of a reasonable basis for denying the benefits of the
policy.206
Theseexamplesdemonstratehowastandardallowinginsurersto
challengeclaimsthatarefairlydebatablecanbestservetheinterestsofthe
insurers,whilethedutyofgoodfaithandfairdealingandrecoveryfor
wrongfulconductprotectspolicyholders.207Theseexamplesalsoshowthe
totalityofthecircumstancesstandardprovidesapracticalapproachthat
canadapttothespecialneedsinthevarioustypesofbadfaithclaimsthat
arisebetweeninsurersandpolicyholders.208
C. SimultaneousDiscoveryAvoidstheProceduralNightmareThat
OccurswhenDiscoveryIsStayed.
Iftheinsurancecompanydoesnotmeetthebadfaithstandardunder
thetotalityofthecircumstances,issuesoverthediscoveryofthebadfaith
claimmustbeconsidered.209Inrecognizingaspecialrelationshipbetween
insurers and policyholders under the duty of good faith and fair dealing,
withoutgoingasfarasimposingafiduciaryduty,policyholdersshouldbe
allowedaccesstotheclaimsfileuptothepointintimebeforetheclaimis
denied.210 Further, discovery of the badfaith claim should take place
simultaneously with the breachofcontract claim even if the claims are
bifurcatedfortrial.211
1. DiscoveryoftheClaimsFileShouldBeAllowedUntilthe
PointofDenial.
The claims file should be discoverable up to the point of denial in

every allegation that the insurance companys conduct breached the
contract.212 To prevent discovery of the claims file, insurance companies
argue every possible reason, such as irrelevance, privilege, or work
product,toprotecttheinsuranceadjustorscommentsabouttheclaimthat
205Seeid.at37677.
206Seeid.at377.
209SeesupraPartI.D.
210SeediscussionsupraPartII.A.
211SeeinfraPartII.C.12.
212See Thomas E. Workman, Plaintiffs Right to the Claim File, Other Claim Files and Related
Information: The Ticket to the Gold Mine, 24 TORT & INS. L.J. 137, 14344, 15253 (1988) (citing
casesandhighlightingthatasubstantialamountofcaselawsupportsdiscoveryoftheclaims
fileinbadfaithactions).
couldpotentiallybeusedprejudicially.213Asdiscussedabove,insurersand
policyholders have a mutuality of interests, similar to a fiduciary duty,214
and so insurers must act in the policyholders best interest in processing
andlitigatingtheunderlyingcontractclaim.215Sincethefiduciarynatureof
insurers to policyholders lies in the mutuality of interests, this makes the
claims file discoverable up until the point where the underlying contract
claim is denied, which then places the insurer and policyholder in
adversarialpositions.216
Also, in recognizing the fiduciary nature between an insurer and a
policyholder,workproductimmunityorattorneyclientprivilegedoesnot
apply to the insurers files.217 Insurers argue allowing discovery of the
material with a blanket allegation of bad faith ignores the principle[]
behindtheworkproductdoctrine,whichistoallowopencommunication
with the attorney.218 However, insurers would still be protected by the
workproduct doctrine and attorneyclient privilege, but only in the
information subsequent to the denial.219 The Ohio Supreme Court
addressed this issue in Boone v. Vanliner Insurance Co. and held that
materials prior to denial of coverage showing the lack of a good faith
effort to settle were undeserving of protection.220 This lack of privilege
protection was expanded by the Ohio Court of Appeals in Garg v. State
AutomobileMutualInsuranceCo.andUnklesbayv.Fenwicktoanyclaimsfile
material showing lack of good faith in processing,evaluating, or refusing
213SeegenerallyM.ElizabethMedagliaetal.,Privilege,WorkProduct,andDiscoveryIssuesin
BadFaithLitigation,32TORT&INS.L.J.1,1719(1996)(discussingstrategiesforassertingwork
productandattorneyclientprivilegeinbadfaithlitigation).
214SeesupraPartII.A.
215SeeSchultz,supranote142,at1428&n.222(citingDunnv.NatlSec.Fire&Cas.Co.,631
So. 2d 1103, 1109 (Fla. Dist. Ct. App. 1993) (permitting discovery over work product
objections); Stone v. Travelers Ins. Co., 326 So. 2d 241, 243 (Fla. Dist. Ct. App. 1976) (In
defendingpersonalinjurylitigation,aninsurancecompanyparticipatesnotonlyonbehalfof
itself,butalsoonbehalfofitsinsured.)).
216Cf.Garnerv.Wolfinbarger,430F.2d1093,110102(5thCir.1970)(describingafiduciary
relationship that can become adverserial in the context of stockholders and corporate
management).
218Jebo,supranote8,at262.
219SeeSkalingv.AetnaIns.Co.,799A.2d997,1010(R.I.2002)(statingthattheinsurerhas
aresponsibilitytoassembleallthefactsnecessaryforafairandcomprehensiveinvestigation
before it refuses to pay a claim and may not base a defense to bad faith on later acquired
information,andthereforeinformationafterdenialoftheclaimisnotrelevantasevidenceto
thebadfaithaction);seealsoIns.Co.ofN.Am.v.CitizensbankofThomasville,491So.2d880,
883(Ala.1986)([I]nformationreceivedbytheinsurerafterthedateofthedenialisirrelevant
tothedeterminationofwhethertheinsurerdeniedatthatdateinbadfaith.).
220744N.E.2d154,157(Ohio2001).
topayaclaim.221
Allowing discovery of the claims file best serves the interests of
policyholders since they would have access to the unique claims file that
contains information that is overwhelmingly necessary for their case
[e]veryone involved in bad faith litigation knows the claim file is the
case.222Insurersinterestswouldbeservedsincetheclaimsfilecouldstill
beprotectedafterthepointofthedenial,andinsurersalsowouldhavethe
chance to defeat a badfaith claim under the fairly debatable standard as
longastheywereactingreasonably.223Finally,judicialeconomyisserved
sincethedebateoverwhethertheclaimsfilematerialisprivilegedwould
beavoided.224
2. BadFaithClaimDiscoveryShouldBeSimultaneouswith
theContractClaim.
Along with recognizing that the contents of the claims file is

discoverableuptothepointwhentheclaimwasdenied,courtsshouldalso
allow discovery for the contract and badfaith claims simultaneously.225
Badfaith litigation is vigorously contested on both sides, involves
extensivemotionpractice,documentdisputes,privilegeissues,andcostly
depositions.226 With simultaneous discovery, judicial economy would be
furtheredsincethehotlycontesteddiscoverybattlesbetweenthepartieson
issues as to whether the discovery requests are extrinsic to the contract
claim would be avoided.227 Further, this eliminates the time and expense
burdensofconductingtwoseparatetrials.228Inmanycases,theevidenceof
both the contract and badfaith claims are inextricably intertwined,
especiallywhentheissueregardstheconductratherthaninterpretationof
221See Unklesbay v. Fenwick, 167 Ohio App. 3d 408, 2006Ohio2630, 855 N.E.2d 516, at
16;Gargv.StateAuto.Mut.Ins.Co.,155OhioApp.3d258,2003Ohio5960,800N.E.2d757,
at 2124. But see OHIO REV. CODE ANN. 2317.02(A)(2) (West Supp. 2010) (requiring the
policyholdertoshowprimafaciebadfaithratherthanautomaticallygivinguppredeclination
claimfilematerialonamereassertionofbadfaith).
223SeesupraPartII.B.3
224SeeinfraPartIII.
225SeesupraPartII.C.1.
226MCMONIGLE&FARRELL,supranote116,at4.
227Seeid.at5.
228SeeInreAllstateCnty.Mut.Ins.Co.,209S.W.3d742,74647(Tex.App.2006)(explaining
how bifurcation eliminates the need to conduct discovery a second time in the event the
insuredprevailsonitscontractualclaim,therebyreducingthedelayinadjudicatingallofthe
insuredsclaimsandfacilitatesthetrialcourtsdutytoexpeditiouslydisposeofthecaseson
itsdocket).
the contract language.229 If discovery is stayed, witnesses have to be

deposedtwice;however,simultaneousdiscoveryfurthersjudicialeconomy
sinceduplicativediscoverywouldbeavoided.230
Along with judicial economy, the interests of the parties would be
protected.231 After the close of simultaneous discovery, the judge would
determinewhethertobifurcatethetrialandwhatevidencetoexcludefrom
the breachofcontract litigation.232 This would serve as a protection to
insurers,whowouldstillhavetheiropportunitytochallengetheevidence
they believe is inflammatory or irrelevant to the contract claim.233 This
would also be more efficient than if discovery were stayed, since the
insurerwouldonlychallengethebadfaithevidenceonceratherthanwith
eachrequestbythepolicyholderfordocumentsandinformation.234Finally,
with discovery already having taken place, the badfaith claim would be
tried immediately after the breachofcontract claim, eliminating the
potential for yearlong or more gaps between the contract and badfaith
claims, avoiding duplicate testimony, and providing for decisions when
theevidenceisfreshinthejudgesminds.235
III. FittingthePiecesTogether:HowStatesCanImplementaUniform
andClearApproachtoFirstPartyBadFaithLitigation
The current procedures provide insurance companies with too much

protectionandnotenoughofadeterrentfrombadfaithbehavior.236Over
theyears,insurancecompanieshaveshiftedtheirfocusfrompolicyholder
protection to profit, causing a drop in the buyers ability to pay for
insurance.237 If the insurer engages in bad faith, the policyholders only
redressispotentiallyexpensivelitigation,whichmayforceapolicyholder
toabandonameritoriousclaim.238Insurershaveanadvantageandunequal
229See,e.g.,PeaceLakeTowers,Inc.v.IndianHarborIns.Co.,Nos.064522,065136,2007
WL925845,at*3(E.D.La.Mar.23,2007).
230See,e.g.,Gaffneyv.Fed.Ins.Co.,No.5:08CV76,2008WL3980069,at*23(N.D.Ohio
Aug.21,2008).
231SeeWolfv.GeicoIns.Co.,682F.Supp.2d197,199(D.R.I.2010).
232See,e.g.,Cookv.UnitedServs.Auto.Assn,169F.R.D.359,362(D.Nev.1996).
233See,e.g.,Skalingv.AetnaIns.Co.,799A.2d997,1010(R.I.2002)(notingthesignificant
proceduralprotectionsforinsurersinstayingdiscovery).
234See,e.g.,Cook,169F.R.D.at362.
235SeeGunnv.Auto.Ins.Co.,971A.2d505,510(Pa.Super.Ct.2009)([A]trialofthebad
faithclaimheldimmediatelyafter...islikelytobethemostefficientandfairestmethod...
becauseitavoidsduplicatetestimonyandpermitsthejudgetomakehisorherdecisionwhen
thejudgebestrecollectstherelevantevidence.).
236SeeRichmond,supranote73,at2324;seealsoBarkeretal.,supranote154,at67.
237SeeStewart&Stewart,supranote21,at43.
238SeeBarkeretal.,supranote154,at8.
bargainingpoweroverpolicyholderssinceinsurerscanmitigatelitigation
costs with higher premiums.239 Also, insurance companies are litigation
savvythedominantinsurancecompanieshaveovertensofthousandsof
briefs across the country in various contexts against policyholders and
enoughfundingtolitigatecases.240
Insurers and policyholders would both benefit from clear standards,
whichwouldreducetheneedforextensivediscoverylitigationandallow
insurancecompaniestochallengebadfaithclaimsthattheyfindarefairly
debatable, while providing policyholders with recovery against wrongful
conduct.241 It is important for insurers to have certainty, such as that
resulting from a uniform standard, since an insurer accepts many risks
thatmayleadtolosses.242Withclearproceduralrules,insurerswouldbe
able to evaluate risk and spread losses more accurately, which would be
beneficialtoinsurerswhofacecyclicalprofitsandlosses.243Insurerswould
also be able to understand the potential availability of tort damages in a
badfaithsuit,whichwouldprovideanincentivetoreasonablyinvestigate
claims before denial.244 Deterring insurers from arbitrarily denying claims
would promote protection of policyholders from unfair handling of
claims.245 Also, policyholders would have a clearer and more easily
understoodexpectationoftheirinsurers.246Ultimately,therewouldbeless
litigationsincetherewouldbefewercontroversiesoverwhatconstitutesa
policyviolation,whichwouldprovidemorecontroltoinsurerscostsand
premiumrates.247
In addition to setting a uniform standard for bad faith, a clear
approach to discovery would smooth the litigation process.248
Policyholders interests would be served because they would be able to
gain access to the essential piece to make their case for bad faiththe
240SeeAnderson&Fournier,supranote138,at383.
241SeediscussionsupraPartII.B.3.
242DavidR.Anderson&JohnW.Dunfee,NoHarm,NoFoul:WhyaBadFaithClaimShould
FailWhenanInsurerPaystheExcessVerdict,33TORT&INS.J.L.1001,1006(1998).
243See Financial and Market Conditions, INS. INFO. INST., http://www.iii.org/media/
hottopics/insurance/financialmar/ (last visited Apr. 23, 2011) (discussing some of the many
forces that influence the price of insurance, both external, such as the economy, natural
disasters,theamountoflitigation,orregulatoryactivities,andinternal,suchasmanagement
andcompetition).
244SeeAnderson&Dunfee,supranote243,at1006.
245Seeid.
246Seeid.
247SeePaulTetrault,BadFaithBillsAreBadIdeas,AM.AGENT&BROKER,Apr.2009,at50,50.
248SeediscussionsupraPartII.C.
claimsfile.249Insurancecompanieswouldbeprotectedbecausetheycould
stillchallengepotentiallyprejudicialevidencefrombeingheardduringthe
breachofcontractportionofabifurcatedtrial.250Finally,judicialeconomy
wouldbepromotedbecausetherewouldbefewerdisputesoverwhether
theclaimsfilewasprotectedbyprivilegeortheworkproductdoctrineup
to the point of denial.251 Together, a clear standard for bad faith and a
smootherdiscoveryprocesswouldreducetheamountofresourcestiedup
inbadfaithclaims.252
CONCLUSION
There must be reform in firstparty breachofcontract and badfaith

claims.253 Problems with the soaring costs of insurance are the result of
profitdriveninsurancecompanies,fraudulentclaims,andincreasingcosts
ofgoods,suchasmedicalexpensesorautomobileparts.254Statecourtsand
legislatures must reform the procedure for bringing a badfaith claim,
keepinginmindthateachpartoftheprocess,includingthedutyowedby
an insurer, the standard for bad faith, and the discovery procedure, is
intertwined and must be considered to maintain a practical approach to
litigation.255 The first hurdle to overcome is setting the appropriate duty
owed by insurance companies.256 A fiduciary duty holds insurance
companies to an onerous standard, which can result in a badfaith claim
even if the insurance company acts reasonably.257 This does not serve the
policy to deter and punish intentional wrongdoing by the insurance
company.258 Rather, the duty of good faith and fair dealing should be
maintained since it protects insurers as long as they act reasonably in
servingtheirpolicyholders.259
Inrecognizingthedutyofgoodfaithandfairdealing,thenextissueis
the standard for bad faith.260 The directedverdict standard insulates
insurersfrombadfaithalmostcompletely,thusitisimpracticalandfailsto
249SeesupraPartII.B.2.
250See,e.g.,Cookv.UnitedServs.Auto.Assn,169F.R.D.359,362(D.Nev.1996).
252Seeid.at261.
253SeesupraPartII.
254SeesupraPartIII.
255Seesupranotes76,113,123andaccompanyingtext.
256SeesupraPartI.B.
258SeeCapozzola,supranote78,at20103.
260SeesupraPartI.C.
meet the policy of deterrence behind badfaith claims.261 The fairly

debatable standard provides a better balance in examining both a
reasonableness element and a separate intent element when bringing a
badfaith claim, which protects insurers who acted reasonably.262
Expanding the fairly debatable standard to consider the totality of the
circumstances provides better protection for policyholders when insurers
engage in wrongful conduct, which would not otherwise be protected
againstunderthefairlydebatablestandard.263Finally,puttingthelastpiece
in place, discovery on both clams should be simultaneous and the claims
fileshouldbediscoverableuptothepointofdenial,asthisprovidesfora
seamless transition between the contract and badfaith claim, saving time
andresourcesforthecourtandparties.264
A smooth litigation procedure, which could be achieved by adopting
theproposedrules,wouldbestservetheinterestsofallparties.265Insurance
companies would be able to better define their price risks; policyholders
would have better expectations of what their insurance policies provide;
and there would be less litigation overall since there would be fewer
controversies over what constitutesa violation of the contract.266 Disputes
over discoverable documents would be eliminated, duplicative discovery
would be avoided, and the badfaith claim could immediately commence
after the breachofcontract claim.267 After more than forty years of state
experimentation,itisnowtimeforstatestoadopttheproposedbrightline
rulesforthisareaofinsurancelaw.268
264SeesupraPartII.C.12.
265SeediscussionsupraPartIII.
266SeesupraPartsIIIII.
267SeesupraPartII.
268SeesupraPartIII.

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FEENEYFINAL_685717.

686 NewEnglandLawReview v.45|685

2, 2007), available at http://transcripts.cnn.com/TRANSCRIPTS/0710/02/acd.02.html

Continues, HEALTH AFF., Mar. 2010, at 1, 6, available at http://www.politico.com/static/

2011 A Uniform First-Party Bad-Faith Standard 687

nine percent in California.11 Despite the astronomical cost of insurance,

688 NewEnglandLawReview v.45|685

litigation continues to increase,19 and with additional economic pressure,

JUST., http://www.justice.org/cps/rde/xchg/justice/hs.xsl/739.htm (last visited Apr. 23, 2011).

2011 A Uniform First-Party Bad-Faith Standard 689

procedural and substantive variations among states as a result of the

26McCarranFerguson Act, 15 U.S.C. 101115 (2006) ([T]he continued regulation and

Customers, NEWSINFERNO (Aug. 3, 2007, 9:30 AM), http://www.newsinferno.com/archives

690 NewEnglandLawReview v.45|685

The standard procedure in some companies is to procrastinate and

2011 A Uniform First-Party Bad-Faith Standard 691

discusses potential implications of adopting a uniform, brightline

Implied in a contract is the obligation to practice good faith and fair

40U.C.C.1304(2004);RESTATEMENT (SECOND) OF CONTRACTS205(1981).Anumberof

692 NewEnglandLawReview v.45|685

Badfaith claims have dramatically shifted the balance of insurance

StandardofCulpabilityandReformulatingtheRemediesbyStatute,26U.MICH. J.L. REFORM 1,11

2011 A Uniform First-Party Bad-Faith Standard 693

by the insurers superior bargaining position and the adhesive nature of

Colorado, Connecticut, Idaho, Iowa, Kentucky, Mississippi, Montana, Nebraska, Nevada,

DEVELOPMENTS IN THE WEST: AN UPDATE (2007), available at http://www.ccplaw.com/

694 NewEnglandLawReview v.45|685

In bringing a badfaith action, the core of statutes regulating unfair

publications/2007pdf/Bad_Faith_Developments_in_Western_States.pdf (highlighting the

2011 A Uniform First-Party Bad-Faith Standard 695

Most states define the insurerpolicyholder relationship as somewhere

The duty owed to policyholders impacts the standard to bringa bad

696 NewEnglandLawReview v.45|685

The directedverdict standard is the most restrictive standard for

2011 A Uniform First-Party Bad-Faith Standard 697

698 NewEnglandLawReview v.45|685

2011 A Uniform First-Party Bad-Faith Standard 699

In evaluating a breachofcontract claim and badfaith claim, courts

700 NewEnglandLawReview v.45|685

KOKEN ERA: THE DEFENSE PERSPECTIVE 34 (2009), available at http://www.postschell.com/

2011 A Uniform First-Party Bad-Faith Standard 701

The jurisdictions that stay discovery rationalize that the insurance

702 NewEnglandLawReview v.45|685

and adequacy.128 In recognizing insurance companies duty of good faith

The typical duty implied in a contract is the obligation of good faith

2011 A Uniform First-Party Bad-Faith Standard 703

704 NewEnglandLawReview v.45|685

154WilliamT.Barkeretal.,IsanInsureraFiduciarytoItsInsureds?,25TORT & INS. L.J. 1, 8

2011 A Uniform First-Party Bad-Faith Standard 705

The directedverdict standard, the fairly debatable standard, and the

The directedverdict standard imposes an onerous burden on

706 NewEnglandLawReview v.45|685

The fairly debatable standard is a practical approach to serve the

2011 A Uniform First-Party Bad-Faith Standard 707

708 NewEnglandLawReview v.45|685

FaithinWyoming:McCulloughv.GoldenRuleIns.Co.,26LAND & WATER L. REV.225,24468

2011 A Uniform First-Party Bad-Faith Standard 709

attorney.186 Finally, the insurance company requested an extremely

COMMRS (Mar. 6, 2009), http://www.naic.org/Releases/2009_docs/complaints_2008.htm

710 NewEnglandLawReview v.45|685

interpretation was wrong.195 Protecting the insurer is important, since

2011 A Uniform First-Party Bad-Faith Standard 711

file.205 This is because the insurer would have knowingly or recklessly