Opinion ID: 2218734
Heading Depth: 1
Heading Rank: 2

Heading: Sufficiency of the Evidence on the Bad-Faith Claim.

Text: National States urges that the trial court erred in failing to grant its motion for a directed verdict on the bad-faith claim. In support of this contention, it argues that the legal efficacy of its attempted rescission of plaintiff's policy was fairly debatable and thus not actionable under the standard this court adopted in Dolan v. AID Insurance Co., 431 N.W.2d 790, 794 (Iowa 1988). The reason articulated by National States for denying plaintiff's claim and for its attempted rescission of her policy was the failure on her part to disclose two preexisting health conditions on the insurance application. The basis for this contention was a diagnosis contained on a hospital record of November 10, 1987, which was furnished to National States as part of plaintiff's claim. That diagnosis indicated confusion and hypothyroidism. A reading of the physician's discharge summary for that hospitalization (a document also furnished to National States as part of plaintiff's claim) would have revealed that these conditions were suspected diagnoses at the time of plaintiff's admission, but were not confirmed during her stay in the hospital. Clearly, National States had no basis for contending that plaintiff had intentionally misrepresented vital health information on her insurance application. However, in considering the merit of National States' motion for directed verdict, we will assume that any material misrepresentation of preexisting health conditions on the application would have justified rescission even if made unintentionally. The fairly debatable test approved in Dolan required plaintiff to establish to the satisfaction of a reasonable fact finder that National States' decision to rescind her policy was not based on an honest and informed judgment. National States based its decision on a single reference found among several pages of hospital records. Any question concerning the validity of the references to confusion and hypothyroidism contained in the November 10, 1987 hospital record could have been cleared up by a reading of the company's own claim file. National States ignored crucial information in that file and shunned any information that plaintiff's representatives sought to provide on this question. Under the circumstances, the question of bad faith was for the jury to decide.