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Reasonableness in Bad Faith Cases: A Question for the Jury?

As the law of insurer bad faith evolves, the question of whether policyholders are entitled to a jury trial of their claims, or parts of their claims, comes increasingly into focus. In cases where the policyholder alleges bad faith in the manner in which a claim is investigated or handled ' so-called “procedural” bad faith ' factual issues for the jury often abound. But when an insurer timely and clearly declines coverage following an adequate investigation, should the “reasonableness” of that declination be submitted to a jury? From both a practical and a policy perspective, the answer in most cases should be no.

Practically speaking, the issues raised by the insurer's declination will often turn on the insurer's analysis of the policy, the controlling law, or optimal negotiation or litigation strategy. The typical bad faith declination case is inherently “litigation about law” that is outside the jury's purview. Even if a jury were allowed to hear evidence of the law, the state of prevailing precedent makes it difficult to imagine laypersons passing upon whether a coverage position meets the legal standard of being “fairly debatable” (or as some jurisdictions describe the standard, having a “reasonable basis”). It is hardly radical to suggest that the scope afforded in the law for fair debate about complex coverage questions is a question for the court.

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