In Norman-Nunnery v. Artisan & Truckers Casualty Co., No. 2013AP1465, 2015 Wisc. App. LEXIS 149, 2015 WL 789731 (Wis. Ct. App. Feb. 26, 2015), the Wisconsin Court of Appeals affirmed summary judgment on a bad faith claim against an auto insurer. The plaintiff was involved in two car accidents approximately six months apart. After the second accident, the insurer deemed the automobile a total loss and paid the amount owed under the policy to the vehicle’s lienholder rather than the insured or the collision repair shop. The insured commenced an action alleging breach of contract and bad faith. She argued the insurer acted in bad faith by paying the lienholder and by declaring the automobile a total loss without any reasonable basis for doing so.
Finding the policy’s Loss Payable Clause ambiguous, and noting that “total loss” was not defined, the trial court found the insurer breached the contract. Specifically, it found that the insured’s vehicle was not a total loss. Thus, at summary judgment, the court held payments should have been made jointly to the insured and the lienholder. However, the court went on to note that the insurer’s interpretation of the provision was reasonable and therefore, there was no viable bad faith claim.
On appeal, the court noted that a claim for bad faith has an objective reasonableness prong and a subjective knowledge prong. The insured argued that the question of reasonableness should have been submitted to a jury because the insurer’s interpretation was “unreasonable on its face.” The court, however, rejected this argument stating the reasonableness of the action depended on interpretation of the contract – a question of law. As a result, the court, not a jury was to decide the issue.
How does your state evaluate the reasonableness of an insurer’s denial of coverage for purposes of a bad faith cause of action? What’s the likelihood a bad faith claim in your jurisdiction will be allowed to get to the jury?