District of Idaho Grants Summary Judgment for Insurer on Bad Faith Claim Where Insured’s Claim for Policy Benefits Was “Fairly Debatable”

Becca Franco was involved in a car accident in 2015.  Franco submitted a claim to her insurer, State Farm, for underinsured motor vehicle and medical payment benefits.  Sixteen months later, Franco filed suit against State Farm asserting breach of contract and bad faith claims.  State Farm moved for summary judgment on her bad faith claim.

The court granted State Farm’s motion in Franco v. State Farm Mutual Automobile Insurance Company, No. 4:17-cv-00228-DCN (D. Idaho Aug. 7, 2018).  The court explained that to recover on a bad faith claim, the insured must show, among other things, that the claim was not “fairly debatable,” which means there was no “reasonable dispute or legitimate question over the eligibility, amount or value of the claim.”  The court acknowledged that “an insurer cannot wait until the full amount of a claim is certain to pay the claim” where portions of the claim are undisputed, but found that Franco had already received compensation for the portions of her claim that were undisputed through settlements from third-party insurers and medical payment coverage State Farm had previously provided.  The court determined that the other “portions of Franco’s claim for which Franco may have recovered funds from State Farm … were still ‘fairly debatable.'”

The court rejected the remainder of Franco’s arguments in support of her bad faith claim.  Franco argued that State Farm acted in bad faith by “assigning a value of $0 [to] Franco’s future pain and suffering and future medical expenses,” but Franco “made no specific demand on State Farm for potential future medical expenses or future pain and suffering.”  “Thus, the fact that State Farm valued these elements of recovery at $0 does not save her bad faith claim.” 

Franco also argued that State Farm violated Idaho’s Unfair Claim Settlement Practices Act, which sets forth insurance industry standards, but the court determined that “even assuming State Farm’s first offer was low for industry standards, Franco’s bad faith claim still fails” because “this fact does not change the reality that, at the time State Farm made the offer, there were portions of Franco’s claim that were still fairly debatable.”  In addition, the court noted that “as State Farm received additional medical records from Franco supporting a finding of additional damages, State Farm increased its offer and eventually paid the policy limit.”

Lastly, Franco argued that State Farm acted in bad faith by unnecessarily delaying payment.  However, Franco had “not shown that State Farm refused to pay undisputed claims.  Rather, State Farm did not offer to pay claims that were still fairly debatable.”  In fact, State Farm had “made settlement offers to pay portions of Franco’s claims that were still fairly debatable.”  The court found that “any delay caused by such settlement offers does not constitute bad faith because these amounts were not undisputed.”