Fairly-Debatable Defense to Denial of Dental Claim Should Not Be Resolved on Summary Judgment in Action for Breach by Insurer of Covenant of Good Faith and Fair Dealing

An insurer provided underinsured motorist coverage to a man with a policy limit of $30,000. The man was in a car accident. The accident was not his fault. The man suffered a number of physical injuries. He accepted the at-fault driver’s liability insurance policy limit of $25,000. He then filed an underinsured motorist claim with his insurance company.


The only disputed claim under the underinsured motorist policy involved the man’s teeth. Four years after the accident, the man visited a dentist. The dentist discovered extensive dental problems that he speculated were caused by the car accident and were simply neglected due to more pressing medical issues. He estimated the cost of repairing the man’s teeth to be $14,000.


The insurance company offered the man $5,000 for his underinsured motorist claim, which the man rejected. He argued he was entitled to $30,000. The case went to arbitration where arbitrators determined that the total award that the insurer owed the man was $18,500, which the insurer paid.


The man sued his insurance company for breach of contract, bad faith breach of contract, and intentional infliction of emotional distress. The insurance company argued that it did not breach its contract because the plaintiff's claim was “fairly debatable.” The insurance company posited that the “fairly debatable” defense must be resolved through summary judgment. The district court granted the insurer’s motion for summary judgment from which the plaintiff appealed.


The Supreme Court of Utah reversed and remanded holding that the fairly-debatable defense should not be resolved through summary judgment if reasonable minds could differ as to whether the defendant's conduct measures up to the standard required for insurance claim investigations. The fairly-debatable defense states that an insurer cannot be held to have breached the covenant of good faith on the ground that it wrongfully denied coverage if the insured's claim, although later found to be proper, was fairly debatable at the time it was denied. The court rejected the insurance company’s argument that if an insured cannot establish that he or she is entitled to summary judgment on the merits of his or her bad faith claim, that means the claim is fairly debatable.


Applying this rule to the facts before it, the court held that reasonable minds could differ regarding whether Mr. Jones's failure to complain of tooth damage earlier rendered his claim fairly debatable. Additionally, reasonable minds could differ as to whether the insurer’s reasoning regarding the plaintiff’s claim was consistent with the insurer’s duties to conduct a diligent investigation and evaluate claims fairly. Therefore, the court found that the plaintiff had presented a factual question for the jury regarding whether the insurance company evaluated his claim fairly under the articulated standard. The grant of the insurer's motion for summary judgment was reversed.


See: Jones v. Farmers Ins. Exchange,2012 UT 52, 2012 WL 3677052 (Utah, August 28, 2012) (not designated for publication).