Opinion ID: 1866184
Heading Depth: 2
Heading Rank: 2

Heading: Fairly Debatable.

Text: When considering first party bad faith claims, we have consistently stated that where a claim is fairly debatable, the insurer is entitled to debate it. See Dirks v. Farm Bureau Mut. Ins. Co., 465 N.W.2d 857, 861 (Iowa 1991); Kiner v. Reliance Ins. Co., 463 N.W.2d at 12; Kirk v. Farm & City Ins. Co., 457 N.W.2d 906, 910 (Iowa 1990); Dolan v. Aid Ins. Co., 431 N.W.2d at 794; Hoekstra v. Farm Bureau Mut. Ins. Co., 382 N.W.2d 100, 111 (Iowa 1986); Pirkl v. Northwestern Mut. Ins. Ass'n, 348 N.W.2d 633, 635 (Iowa 1984); Higgins v. Blue Cross of Western Iowa and South Dakota, 319 N.W.2d 232, 236 (Iowa 1982); M-Z Enters., Inc. v. Hawkeye-Sec. Ins. Co., 318 N.W.2d 408, 415 (Iowa 1982). The trial court denied motions for a directed verdict upon the contract claim made by both parties because the court concluded a jury issue was raised as to the necessity and reasonableness of the medical expenses incurred by Reuter. In the court's ruling upon the motion for a directed verdict on the bad faith claim, the court stated: [t]his Dolan case does place the court in a quandary as it must determinethe court must determine the issue of whether a claim is fairly debatable rather than submit the issue to the jury. Now, actually, submission of such issue (breach of contract) to a jury in and of itself would establish that the issue of proper denial was debatable.... Applying the Dolan case to this situation, the court has no alternative than to sustain the defendant's motion for a directed verdict of count II (bad faith) of the plaintiff's petition. The court's reasoning is similar to that applied by the Alabama Supreme Court in National Savings Life Insurance Co. v. Dutton, 419 So.2d 1357 (Ala.1982). After recognizing that when a claim is fairly debatable, the insured is entitled to debate it, the Alabama court stated: [i]n the normal case in order for a plaintiff to make out a prima facie case of bad faith refusal to pay an insurance claim, 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 thereof, the tort claim must fail and should not be submitted to the jury. In M-Z Enterprises, 318 N.W.2d at 415, we observed that the insurer's defense on the contract claim was fairly debatable as the trial court must have determined when it submitted the issue to the jury. Likewise, in Higgins, 319 N.W.2d at 236, we stated that the evidence adduced by defendants in support of their defense of misrepresentation clearly made plaintiff's contract claim `fairly debatable,' and trial court must have determined this was so when it denied plaintiff's motion for a directed verdict on that claim. Not all states follow the Dutton rule. See, e.g., Fowler v. Great Am. Ins. Co., 124 Ariz. 111, 602 P.2d 492 (App.1979) (court concluded the nature of the proofs is sufficiently different so that the failure to prove one would not necessarily mean the failure to prove the other). Even the Alabama court does not always apply the directed verdict rule. See Thomas v. Principal Fin. Group, 566 So.2d 735, 749-50 (Ala. 1990). We do not agree that the mere denial of a plaintiff's motion for a directed verdict automatically establishes that the issue is fairly debatable. The trial court should carefully review the facts and the particular circumstances in making its determination as to what is the precise issue or issues that are debatable.