... in Same Case.
In Download Gaylord v. Nationwide Mut. Ins. Co. (E.D. Cal. Case No. 1.10.CV.620, Order on Defendants' Motion for Summary Judgment Filed March 4, 2011) PUBLIC ACCESS, also published as 2011 WL 836459 (E.D. Cal. March 4, 2011) (authorized password required to access Westlaw), the Court was confronted with claims both for First-Party Bad Faith and for Third-Party Bad Faith. The Court granted the Insurance Companies' motion for summary judgment on all the Bad Faith Claims.
The Federal Court listed many hornbook rules of law in a lengthy opinion, including these rules of California Insurer Bad Faith law:
If a loss is not covered and no benefits are due, there can be no tort liability for breach of the implied covenant, even if the investigation was negligent. Benavides v. State Farm General Ins. Co., 136 Cal.App.4th 1241, 1250-51 (2006). The “ultimate test” in bad faith liability claims is whether the insurer's denial/conduct was unreasonable. See Nieto, 181 Cal.App.4th at 86. Where there is a “genuine issue” or “genuine dispute” as to the “insurer's liability under the policy for the claim asserted by the insured, there can be no bad faith liability imposed on the insurer for advancing its side of that dispute.”
Id. at *17. Most if not all Courts in other jurisdictions also apply these rules to Insurer Bad Faith claims; however, while "reasonableness" is a hallmark of First-Party Bad Faith exposure, Third-Party Bad Faith does not depend on "reasonableness" for its "ultimate test". The Federal Court apparently applied these rules to both sets of claims in this case, those based on assertions of First-Party Bad Faith and those involving alleged Third-Party Bad Faith.
It is also significant to Insurer Bad Faith Law that this case involved reliance on Expert opinions which the Insurance Companies received in connection with their denial of a First-Party Claim and in connection with their refusal to defend a Third-Party Claim against the insured. In this case, their reliance was reasonable in the eyes of the Federal Court, in fact, so reasonable that it was part of the reason that the Court granted the motion for summary judgment.
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