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Does the Case Go To The Jury? Advice On Defending Or Prosecuting a Summary Judgment Motion in a Bad Faith Case

Bonny G. Rafel


When a consumer concludes that his insurance company has wrongfully denied him benefits pursuant to their contract he has various remedies available to him.  Once he obtains counsel, often the discussion turns to whether his damages are limited to the coverage that is due, or includes what is commonly referred to as 'bad faith' damages.  It is the job of the litigator to peel away the layers of the claim to examine the core of the dispute.  Not all contractual disputes with insurance companies are grounded in bad faith. The mere fact that an insurance company has wrongfully denied a claim does not in and of itself constitute a violation of the implied covenant. The "mistaken withholding of policy benefits, if reasonable or if based on a legitimate dispute as to the insurer's liability under California law, does not expose the insurer to bad faith liability." Tomaselli v. Transamerica Ins. Co. 25 Cal. App. 4th 1269, (1994) Chateau Chamberay Homeowners Ass’n. v. Associated Int’l Ins. Com. 108 Cal. Rptr. 2d 776, 784 (Ct. App. 2001)
An insurer is not liable if there is a legitimate or genuine dispute as to whether the insured is entitled to benefits. Id at 347.  But denials based on the failure of the company to, in good faith, fairly and honestly assess the proofs submitted by the claimant exposes the company to extracontractual bad faith damages. 
Once the decision is made to investigate the behavior of the insurance company and its employees with regard to the denial, the attorney must set up his claim with an eye towards winning the eventual motion for Summary Judgment that will arrive. Discovery must be focused on finding out what the insurance company should have done and finding out what the insurance company did.  The company will claim that it had a right to deny benefits because there was a fair dispute over the issues.  On the other hand, the insured must prove that there was no real, bona fide dispute over the facts and issues essential to the decision to pay the claim.  
It is vital to understand that an analysis of the company's actions must focus on the proofs available to the insurer at the time of the denial.  Thus, an insurance company’s attempts to create a 'fairly debatable' claim are limited to the proof in its possession at the time the claim was denied. Aetna Life Ins. Co. v. Lavoie, 505 So. 2d 1050, 1053 (Ala. 1987); Erwin v. State Farm Fire & Cas. Co., 618 F. Supp. 1040, 1042 (E.D. Mo. 1985); Amato v. Mercury Cas. Co., 61 Cal. Rptr. 2d 909, 914 (Ct. App. 1997); Chateau Chamberay Homeowners Ass’n. v. Associated Int’l. Ins. Co., 108 Cal. Rptr. 2d 776 (Ct. App. 2001); Skaling v. Aetna Ins. Co., 799 A.2d 997, 1008  (R.I. 2002).  The insurer is limited to introducing evidence that it actually relied upon and communicated to the insured when it denied the claim.  It may not enhance its defense by pointing to extraneous facts or arguments that it did not communicate to the insured when it refused payment.  The reasonableness of an insurer's decision is measured at the time it is made, and information that is gathered by the insurer after it has denied benefits is inadmissible to show the insurer's good faith.  Republic Ins. Co. v. Stoker, 903 S.W.2d 338, 340 (Tex. 1995); Wetherbee v. United Ins. Co. of America, 18 Cal. App. 3d 266, 270 (1971) (emphasis supplied). 
Ultimately, the covenant of good faith extends to the "assertion, settlement and litigation of contract claims and defenses," and the covenant is breached by "conduct such as conjuring up a pretended dispute, or asserting an interpretation of the contract contrary to one's own understanding." Riveredge Assoc. v. Metropolitan Life Ins. Co., 774 F. Supp. 897, 900 (D.N.J. 1991) (citing Comment e to Restatement § 205, entitled "Good faith in enforcement").
An insured embarking on a claim for bad faith, extra contractual damages, must prepare its arsenal for the onslaught of defenses fired up by the insurer as it seeks to diffuse the bad faith bomb.  Insurers seek cover from bad faith by hiding behind its right to "fairly debate" whether its insured's proofs of loss are enough to substantiate the claim. They will predictably resist demands for discovery of intimate company protocol, procedure and panoply and will limit the breath of discovery to merely the claim file if possible.  Yet, it is the company procedures that take the limelight in these actions.  As will be described below, the whos, whats, whys and wherefores are at centerstage.  
Often forgotten is the principle that the actions of the company are not extinguished when suit is filed, but continues into litigation.  Therefore, if it becomes clear through the exchange of additional evidence that the insurer should pay the claim, then it must do so. Otherwise it will be liable for continuing bad faith.  
The Development of Bad Faith

For decades policyholders were deprived of recovering the costs of litigating coverage claims. All the insurers risked were the payment of benefits if they lost the case. Insurers, blessed with this protective blanket, successfully hid from judicial scrutiny of their actions.  Wrongful and unreasonable claim practices of insurers ran amuck and the courts’ hands were tied from providing effective redress for policyholders, until the birth of Fletcher v. W. Nat’l Life Ins. Co., 10 Cal. App. 3d 376, 89 Cal. Rptr. 78 (Ct. App. 1970) and Gruenberg v. Aetna Ins. Co., 510 P. 2d 1032 ( Cal. 1973). These cases paved the way for the courts to hold insurers financially liable for their bad faith claim actions.
Since then, courts have further defined how the covenant of good faith must be integrated into everyday claim practice. An insurance company may not unreasonably withhold benefits.   An often cited forefather of first party bad faith law is  Anderson v. Continental Ins. Co., 85 Wis. 2d 675, 271 N.W. 2d 368 (1978).  In Anderson, the court assessed the “fairly debatable standard” and stated, “It was the duty of the insurer to assess claims as a result of an appropriate and careful investigation and that its conclusions should be the result of the weighing of probabilities in a fair and honest way…for an insurance company’s decision on a claim to be one made in good faith, it must be based upon a knowledge of the facts and circumstances upon which liability it predicated.” Id. at 375.  The court further stated:
“Whether a claim is fairly debatable also implicated the question of whether the facts necessary to evaluate the claim are properly investigated and developed or recklessly ignored and disregarded. “bad faith” is defined as “deceit; duplicity; insincerity” American Heritage Dictionary of the English Language. (1969), p. 471. The same dictionary defines “deceit” as deceptiveness in behavior or speech”. Id. at 376-377.

The court in the Anderson case outlines the test for bad faith:
“Bad faith is the absence of honest, intelligent action or consideration
based upon a knowledge of the facts and circumstances upon which a decision
with respect to liability is predicated…the knowing failure to exercise an honest and informed judgment constitutes the tort of bad faith.”  It is appropriate, in applying the test, to determine whether a claim was properly investigated and whether the results
of the investigation were subjected to reasonable evaluation and review.  Id. at 377… Implicit in that test is our conclusion that the knowledge of the lack of a reasonable
basis may be inferred and imputed to an insurance company where there is a reckless disregard of a lack of a reasonable basis for denial or a reckless indifference to facts
or to proofs submitted by the insured."

Anderson v. Continental Ins. Co., 271 N.W. 2d at 377.

    The California Supreme Court has concluded that every contract imposes on each party an implied duty of good faith and fair dealing. Kransco v. American Empire Surplus Lines Ins. Co. (2000) 23 Cal.4th 390, 400; Egan v. Mutual of Omaha Ins. Co. (1979) 24 Cal.3d 809, 818, 169 Cal. Rptr. 691, 620 P.2d 141.
"In the context of an insurance contract, . . . the insurer's responsibility to act fairly and in good faith with respect to the handling of the insured's claim '"is not the requirement mandated by the terms of the policy itself-to defend, settle, or pay. It is the obligation . . . under which the insurer must act fairly and in good faith in discharging its contractual responsibilities." ... 'Thus, allegations which assert such a claim must show that the conduct of the defendant, whether or not it also constitutes a breach of a consensual contract term, demonstrates a failure or refusal to discharge contractual responsibilities, prompted not by an honest mistake, bad judgment or negligence but rather by a conscious and deliberate act, which unfairly frustrates the agreed common purposes and disappoints the reasonable expectations of the other party thereby depriving that party of the benefits of the agreement. Just what conduct will meet these criteria must be determined on a case by case basis and will depend on the contractual purposes and reasonably justified expectations of the parties.' " Chateau Chamberay Homeowners Assn. v. Associated Internat. Ins. Co. (2001) 90 Cal App. 4th 335, 346; citing Gruenberg v. Aetna Ins. Co. (1973) 9 Cal.3d 566, 573-574, 108 Cal. Rptr. 480, 510 P.2d 1032; State Farm Fire & Casualty Co. v. Superior Court (1996) 45 Cal.App.4th 1093, 1105; Careau & Co. v. Security Pacific Business Credit, Inc. (1990) 222 Cal. App. 3d 1371, 1395, 272 Cal. Rptr. 387; and California Shoppers, Inc. v. Royal Globe Ins. Co. (1985) 175 Cal. App. 3d 1, 54, 221 Cal. Rptr. 171.


Therefore, once the policyholder has fully performed, the insurer must evaluate the performance in good faith, deal fairly with its insured and fulfill its promise of coverage. The insurer must not look for ways to insulate itself from paying the claim. Nor may the insurer fabricate extraneous reasons, not set forth in the policy terms for keeping the benefits from its insured. Once the tables are turned, and the stage lights are turned onto the insurance company, it must perform. Unfortunately, by then, the insurance company, rich with its premium dollars, often looks for ways to prevent disgorgement of its capital and keeps far too tight a fist around those dollars. The economic power imbalance in insurance relationships is a ‘paramount consideration in adopting a first party bad faith remedy. Kransco v. Am.Empire Surplus Lines Ins. Co., 2 P. 3d 1 (Ca. 2000) The insurance company starts as the generous benefactor selling something to the consumers that they really need. Consumers were made to feel that disability insurance was a necessary purchase in order to protect themselves against the disaster that would strike if they, a professional were unable to provide for their families. Like a tornado, the relationship swiftly twists from one of friendly service, e.g., “we are here when you need us, protecting everything you work for, “(UnumProvident logo), to one of an adversary relationship.  “The insurer’s promise to the insured to ‘simplify his life’, to put him ‘in good hands’ to back him with a ‘piece of the rock’, or to be ‘on his side’ hardly suggests that the insurer will abandon the insured in his time of need”. D’Ambrosio v. Pa. Nat’l Mut. Casualty Ins. Co., 396 F.2d 780, 785 (Pa. Super. Ct. 1978)
    If the guardians of the money invested by the insured are trained to find ways to support non-payment, the process is biased against the now vulnerable, financially deprived investor. The promises made to protect this investor require the insurance company promptly investigate the claim, denying coverage only where it has proper cause and a reasonable basis to do so. Chateau Chamberay Homeowners Ass’n. v. Associated Int’l Ins. Com. 108 Cal. Rptr. 2d 776, 784 (Ct. App. 2001)
As a recent scholarly law review article reasoned:
“Compensating insured separately for their damages from unreasonable clam denials is consistent with imposing the costs of externalities on the party best in the position to avoid the unreasonable conduct in the first place:  As between the insurance company and an innocent policyholder whose claim was improperly denied, the costs imposed by the claims handler’s unreasonable withholding of benefits more properly are borne by the insurance company employer. This is especially true for benefits unreasonably withheld pursuant to company policy or approval by management. See, e.g. Hudson Universal. Ltd, v. Aetna, Ins. Co., 987 F. Supp. 337, 342 n. 4 (D.N.J. 1997) noting “the court caution, however, that an insurer may not “create a debate by denying coverage on an issue for which it consistently declines coverage as a matter of policy.”)  Ordinarily, such would provide the basis for the imposition of punitive damages against the insurance company in many states. See generally, Trinity Evangelical Lutheran Church and School-Freisteadt v. Tower Ins. Co., N.W. 2d No. 01-1201, 2003 WL 21205367 (Wis. May 23, 2003); Neal v. Farmers Ins. Exch., 582 P. 2d 980 (Cal. 1978).


Discovery is the key to establishing the facts necessary to defeat a Motion for Summary Judgment


There are certain predicates to passing through the SJ gate and getting to the jury. 
•    Establish the companys' own "standard of care"; what it trains and expects its employees to do with this type of claim. Obtain claim manuals on processing and handling claims, internal procedural memorandum, and agendas of how these claims are to be managed.  Take the depositions of the persons most knowledgeable from the company regarding setting the standards for this claim. 
•    Establish whether the adjusters followed the company protocol.
•    Establish the company unfairly evaluated the claim, searching for support for denial. The insurance company must look for coverage. A carrier is not entitled to draw inferences against its policyholder and disregard favorable evidence for coverage.  To do so evidences bad faith.  Lucas v. State Farm Fire & Cas. Co., 963 P.2d 357 (Idaho 1998); Aetna Life Ins. Co. v. Lavoie, 505 So. 2d 1050 (Ala. 1987).   The “good faith standard requires more than proof of sincerity; the evaluation of the case by the insurance company must be honest, intelligent and objective”.  U.S. Fire Ins. Co. v. Royal Ins. Co., 759 F.2d 306, 310 (3d Cir. 1985)  In Brown v. Superior Court, 137 Ariz. 327, 670 P.2d 725 (1983), the court noted that, in general, the nature of the issues involved in bad faith actions establishes substantial need for discovery of certain materials in an insurer's claim files because it cannot be obtained through other means of discovery.  In fact, even the mental impressions, conclusions and opinions of an attorney or other representative of the defendant insurer can also be subject to discovery if the material sought is central to a party's claim or defense. Brown, at 735-6. 
•    Establish the company interpreted the policy unreasonably to support its position.  If an insurer adopts a construction of policy language in favor of denying coverage, its decision to do so may establish bad faith liability, since insurance companies are required to construe ambiguous policy language in favor of coverage, and to construe the facts and circumstances in the light most favorable to coverage.   See, 2 Eric Mills Holmes & Mark S. Rhodes, Holme’s Appleman on Insurance, 2D Section 6.1 at 147 (1996).  Discovery of training manuals, claims manuals, company policy memoranda and correspondence, drafting history documents relevant to the interpretation of the policy terms that resulted in the decision to deny the claim are germane to the interpretations of such policies. Champion International Corp. v. Liberty Mutual Insurance Co. , 129 F.R.D. 63 (S.D.N.Y. 1989)   An insurer's failure to follow its own clearly delineated business guidelines can certainly constitute evidence of bad faith. 
•    Establish the bias of the experts who evaluated the claim on behalf of the insurance comapny Hangartner provides a good example of establishing the bias of the experts:
HOW TO GET YOUR CASE TO THE JURY AND BEAT THE SUMMARY JUDGMENT MOTION

Unless you can win the sure to be filed summary judgment motion on your bad faith claim, a directed verdict in favor of the insurance company will defeat your claim.  The two standards of review, the "fairly debatable" standard and the "genuine dispute" doctrine have some similarities. Both are intended to weed out those cases where the decision of the insurance company is entitled to deference because, although it might have been wrong, was based on the judgment of the insurance company when decided. However, the fairly debatable standard, if strictly construed, deprives the insured of a fair and complete assessment of the factors underlying the decision. 
If the law protects an insurance company from extra-contractual exposure simply because it announces it was debating the issues, then the law in its application must be scoured for it cannot be sensible. Its literal application cloaks and insulates an insurance company from bad faith as a matter of law. The incentive for an insurance company to deal fairly with its policyholder is the real threat of extra contractual liability, but if that is merely illusory and procedural law insulates it from that concern, the insurance company will continue its bad acts with impunity.  Fortunately, courts are now backing away from a strict construction of the directed verdict rule in favor of a far fairer procedural remedy. 
I.  Why Bad Faith is Alive and Well in States with the Fairly Debatable Standard
"The Wearing Away of the Fairly Debatable Standard"
RHODE ISLAND: 
In Skaling v. Aetna Ins. Co., 799 A. 2d 997 (R.I. 2002), the court evaluated the directed verdict rule, confronted with the question of whether, in the context of first-party claims, “an insurer is insulated from a claim of bad faith simply because plaintiff was unable to obtain a judgment as a matter of law in the underlying breach of contract action.”  The court reasoned:
The issue is particularly compelling in cases in which the issue rests upon a disputed fact or the claim is denied based upon a disputed oral conversation between the insured and the claims examiner.  These factual disputes cannot be determined as a matter of law.  We are of the opinion that the directed verdict standard of proof in this context is unworkable and unjust, a situation that has been recognized in other jurisdictions. 

Id. at 1002 (emphasis supplied).

The court further reasoned, “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 summary judgment as a matter of law, yet is ultimately found to have breached the insurance contract.”  Id. at 1005.  "We decline to hold that a plaintiff, to litigate his bad faith claim, must establish entitlement to a JML on the breach-of-contract claim…That is, bad faith is established when the proof demonstrates that the insurer denied coverage or refused payment without a reasonable basis in fact or law for the denial.”  Id. at 1010.
ALABAMA

Likewise in Alabama, the courts have restricted the application of the directed verdict
rule on a contract claim to normal or ordinary bad faith acts and articulated that a different standard be applied in certain unusual or extraordinary cases.  Nat’l. Ins. Ass'n. v. Sockwell, 829 So.2d 111 (Ala. 2002).  The court emphasized that not all bad faith claims are estopped by an inability to obtain a directed verdict. In Alabama, “the plaintiff in a ‘bad faith refusal case has the burden of proving:  (a) an insurance contract between the parties and a breach thereof by the defendant; (b) an intentional refusal to pay the insured's claim; (c) the absence of any reasonably legitimate or arguable reason for that refusal (the absence of a debatable reason); (d) the insurer's actual knowledge of the absence of any legitimate or arguable reason; ... . In short, [the] plaintiff must go beyond a mere showing of nonpayment and prove a bad faith nonpayment, a nonpayment without any reasonable ground for dispute. Or, stated differently, the plaintiff must show that the insurance company had no legal or factual defense to the insurance claim." National Sec. Fire & Casualty Co. v. Bowen, 417 So. 2d 179, 183 (Ala. 1982) (emphasis in original). The plaintiff's burden in making a bad-faith claim is a "heavy" one. Liberty Nat'l Life Ins. Co. v. Allen, 699 So. 2d 138, 142 (Ala. 1997).    The Alabama Supreme Court  has divided bad-faith claims into two categories: "normal" bad-faith claims and "unusual" or "extraordinary" bad-faith claims. In "normal" bad-faith cases, the Court has applied a "directed-verdict-on-the-contract-claim" standard whereby "the proof offered must show that the plaintiff is entitled to a directed verdict on the contract claim and, thus, entitled to recover on the contract claim as a matter of law. Ordinarily, if the evidence produced by either side creates a fact issue with regard to the validity of the claim and, thus the legitimacy of the denial, the plaintiff loses his right to submit his tort claim to the jury.   National Sav. Life Ins. Co. v. Dutton, 419 So. 2d 1357, 1362, (           )  In that setting, summary judgment would be granted.  See, e.g., S & W Properties v. American Motorists Ins. Co., 688 So. 2d 529, 533 (Ala. 1995) ("All of the evidence ... suggests a dispute over a genuine issue of material fact. Therefore, the plaintiffs did not show that American Motorists had no legal or factual defense to the insurance claim....[and] the judge properly entered the summary judgment for the insurer." ) Fortunately, the directed -verdict standard does not apply to an "unusual" or "extraordinary" bad-faith claims.  See National Ins. Ass'n v. Sockwell, 829 So. 2d 111, 128 (Ala. 2002). The courts define "unusual”  bad-faith claims to four types: "those instances in which the plaintiff produced substantial evidence showing that the insurer (1) intentionally or recklessly failed to investigate the plaintiff's claim; (2) intentionally or recklessly failed to properly subject the plaintiff's claim to a cognitive evaluation or review; (3) created its own debatable reason for denying the plaintiff's claims; or (4) relied on an ambiguous portion of the policy as a lawful basis to deny the plaintiff's claim." Id. at 129-30 (citing State Farm Fire & Cas. Co. v. Slade, 747 So. 2d 293 (Ala. 1999)). It is the plaintiff's burden to establish that her bad-faith claim is an "unusual" one. Id. at 129.  In Nobles v. Rural Community Insurance Services, 2004 U.S. Dist. LEXIS 2807 (M. D. Ala. 2004), Nobles and Hales asserted the insurance company failed altogether to investigate their insurance claim. However, the court declined to permit the plaintiff to overstep the directed verdict threshold, because they did not argue that any part of their bad-faith claim should be categorized as "unusual." The court reasoned, “In fact, beyond asserting in their complaint that RCIS failed to investigate their insurance claim, Nobles and Hales have nowhere argued nor provided any evidence that RCIS failed to investigate their claim, and have presented no evidence whatsoever to support their failure-to-investigate claim. As such, the court will treat both Nobles and Hales's "refusal to pay" claim and their failure-to-investigate claim as "normal" bad-faith claims under Alabama law, subject to the directed-verdict-on-the-contract-claim standard.” *39. To the contrary, defendants produced affidavits from its employees documenting the investigation that indeed occurred. The lesson here is that the plaintiff must prove the substance of its bad faith claim before petitioning the court to pass through the “directed verdict” threshold without proving bad faith as a matter of law.
ARIZONA
In Zilisch v. State Farm Mut. Ins. Co., 196 Ariz. 234, 995 P.2d 276 (2000), the court held that the insured is not required to establish a right to directed verdict on the breach of contract claim.  The court reasoned, “the appropriate inquiry is whether there is sufficient evidence from which reasonable jurors could conclude that in the investigation, evaluation and processing of the claim, the insurer acted unreasonably,” and whether there is proof that the insurer “either knew or was conscious of the fact that its conduct was unreasonable”. Id at 280.  Following Zilisch’s lead, the Supreme Court of Kentucky rejected the fairly debatable claim standard and held that the existence of jury issues on the contract claim does not defeat the bad faith claim. Farmland Mut. Ins. Co. v. Johnson, 36 S.W. 3d 368, 375 (Ky. 2000).
IOWA
In Chadima v. Nat'l. Fidelity Life Ins. Co., 848 F. Supp. 1418 (8th Cir. 1995), where the court reasoned, “the insurer’s interpretation of Iowa law as requiring the Court to first decide whether the insurer had an objectively reasonable basis for denying a claim is really only the flip-side of whether the insured has met its burden of producing evidence that the insurer has no reasonable basis for denying the claim.  Only when there is no evidence from which a reasonable juror could make a necessary finding, is the insurer entitled to judgment as a matter of law.  Otherwise, the question goes to the jury.”  See in accord, Nassen v. Nat'l. States Ins. Co., 494 N.W. 2d 231, (Iowa 1993) where the insurer had ignored crucial information in the company’s own claim files, and had “shunned any information that plaintiff’s representatives sought to provide on this question,” the court held the question of bad faith was for the jury to decide; and Kiner v. Reliance Ins. Co., 463 N.W. 2d 9 (Iowa 1990) where the court held that if a reasonable factfinder could conclude that the insurer failed to exercise an honest and informed judgment in denying the claim, a jury question is generated on the bad faith issue because such a conclusion would support a finding that the insurer’s denial was not fairly debatable.
NEW JERSEY
New Jersey courts have moved away from applying the directed verdict rule in cases alleging that  insurance companies have committed the tort of bad faith toward their insureds.  In Massachusetts Mut. Life Ins. Co. v. Orenyo, 1998 WL 1297799 (D.N.J. July 24, 1998) (unpublished opinion) the court refused to dismiss the bad faith claim arising out of the denial of disability policy benefits, even though the insured could not establish a right to summary judgment on his substantive claim against the disability insurer. Mr. Orenyo was an attorney who filed for disability benefits due to a psychiatric condition.  Massachusetts Mutual, after paying benefits for some time, contested Mr. Orenyo’s truthfulness in his initial application for the disability policy, claiming material misrepresentations.  The court denied Mass Mutual’s motion for summary judgment on the bad faith claim, reasoning:
Giving Orenyo the benefits of all favorable inferences, there is a question of fact whether Mass Mutual had a reasonable basis for denying benefits. Mass Mutual argues that its decision to suspend, reinstate and then terminate benefits was supported by a “fairly debatable” reasons...Orenyo argues that Mass Mutual acting in knowing and reckless disregard of the facts supporting his claim…. The jury could find that Mass Mutual would have lacked a reasonable basis for its actions. A reasonable jury could also find that Mass Mutual’s failure to pay was in knowing or reckless disregard of the facts. Id. at *8. 

Judge Bassler also denied Mass Mutual's motion to dismiss Orenyo’s punitive damages claim, citing as authority, Pickett, 131 N.J. at 476. Mass Mutual, supra at *9 (and pg. 26 of the Court Opinion).  See also, Nestle Foods Corp. v. Aetna Cas. & Sur. Co., 842 F. Supp. 125 (D.N.J. 1993), where Judge Fischer refused to dismiss a bad faith claim arising out of a denial of liability policy benefits, even though the insured could not establish a right to summary judgment on its substantive claim against the liability insurer.   
The judiciary have expressed exasperation over the draconian application of the directed verdict rule in New Jersey.  In Tarsio v. The Provident Ins. Co., 108 F.Supp.2d 397 (D.N.J. 2000), the District Court articulated its extreme displeasure with the standard established in Pickett 131 NJ 457 (1993), calling it "peculiar" at best. Tarsio v. The Provident Ins. Co. at 401.  Judge Wolin’s reasoning resonates the decisions of other jurisdictions that have rejected a procedural application of directed verdict:
"The Court points out it can envision other valid methods of determining
 'bad faith' and considers the New Jersey Supreme Court's rule somewhat
 anomalous.  Indeed such a rule is odd in that it requires the Court to examine
a cause of action (plaintiff's first cause of action) which is not the subject of the
instant motion.  Moreover, and more significantly, the jury may ultimately reject
the insurer's evidence and find that the insurer possessed no basis to reject plaintiff's claim.  Certainly, after rejecting such evidence, other evidence may suggest that the insurer acted in 'bad faith.'  Yet, the jury is precluded from deliberating 'bad faith' simply because the trial court finds an issue of fact as to the underlying claim."

Tarsio v. The Provident Ins. Co., 108 F. Supp. 2d at 401 (emphasis supplied).  The Court concluded by reasserting its displeasure with the Pickett standard stating, it "doubts the wisdom of this standard". Id. at 401. 
In Miglicio v. HCM Claim Management Corp., 288 N.J.Super. 331 (1995), the court held that since a jury could conclude that no reasonable basis existed for denying the claim, the issue of bad faith should go to the jury.  Miglicio further held that extracontractual damages could be awarded as consequential damages and punitive damages as well.   The court recognized that limiting liability to the amount of loss plus interest encouraged insurance companies to take advantage of the insured by delaying payments.  Id. at 340 (citing Polito v. Continental Cas. Co., 689 F.2d 457, 461 (1982)).  The Miglicio court notes that egregious circumstances surrounding an insurer's actions warrant the award of punitive damages. Miglicio v. HCM Claim Management Corp., 288 N.J.Super. at 339. 
    Recently, in Kelly v. Equitable, Judge Russello denied defendant’s motion for summary judgment on bad faith, determining the jury should decide whether the facts supported a finding of bad faith.  As reported in the New Jersey Lawyer in September, 2003,
    “A Bergen County judge has served notice to insurance companies that if they look more at the bottom line than at honoring their polices, therer may be ahefty price to pay. In a ruling that opens up the possibility of punitive dmages, Judge Mark M. Russello redently denied a motion by insurance company defendants for summary judgment against a chiropractor who claims she is disabled but wsa denied disability benefits because of a focus on corportate profits, not in the nature of her injury. The judge let two counts in the case go forward One alleges the defenedatns acted egregiously in their denial. The other alleges the denial was made in bad faith.”

The case subsequently settled.  The aforesaid caselaw and decisions of the various jurisdictions, including New Jersey, demonstrate rejection of the harsh application of the directed verdict rule in favor of a far fairer procedural remedy, thus allowing a plaintiff's claim for bad faith to proceed forward for consideration by a jury of his peers.
II.    Defeating a Motion for Summary Judgment under the  Genuine Dispute Doctrine

    It is likely that the insurance company will assert a 'genuine issue' defense to bad faith and punitive damages claims.  In this way, the company will claim its denial of benefits was reasonable as a matter of law.  The insurer will seek to insulate itself from bad faith simply by carving out reasons for its decision. But in order to succeed in a motion for Summary Judgment, it must persuade the court that there are no triable issues of material fact. Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826, 850-851  In order to succeed in these motions plaintiffs must establish there are factual disputes that must be determined by a jury.  Further, plaintiff must prove that the outcome of investigations performed by the insurance company are entitled to no weight because the people performing the investigations were biased, and the analysis of any third party examiners, such as medical doctors fraught with conflict.  Hangarter example, cite to that. In order to establish a tortious violation of the implied covenant, the insured is required to prove that the insurer acted unreasonably or without proper cause. Gourley v. State Farm Mut. Auto Ins. Co. (1991) 53 Cal.3d 121, 127, 822 P.2d 374.