Opinion ID: 1866184
Heading Depth: 2
Heading Rank: 3

Heading: Insurer's Duty to Investigate Claim.

Text: Reuter argues State Farm must properly investigate and evaluate the medical expense claim before it can urge the claim is fairly debatable. In response, State Farm cites Pirkl where in a first-party case, we said the insurer has no clearly defined duty to investigate and may require the insured to present adequate proof of loss before paying the claim. Pirkl, 348 N.W.2d at 633. If an objectively reasonable basis for denial of a claim actually exists, the insurer, as a matter of law, cannot be held liable for bad faith. Thus, an insurer's intentional, reckless, or negligent failure to investigate or evaluate a claim is only an element by which the insured may prove that no lawful basis for refusal existed. The insurer's subpar investigation cannot in and of itself sustain a tort action for bad faith. The lack of proper investigation and evaluation is significant in proving the crucial element of a bad-faith tort, namely knowledge by the insurer of the lack of a debatable reason for denial. See Gulf Atl. Ins. Co. v. Barnes, 405 So.2d 916, 924 (Ala.1981); State Farm Fire & Casualty Co. v. Balmer, 891 F.2d 874, 877 (11th Cir.1990), aff'g, State Farm Fire & Casualty Co. v. Balmer, 672 F.Supp. 1395 (M.D. Ala.1987). Although subjective bad faith may be inferred from an insurer's flawed investigation, an improper investigation, standing alone, is not sufficient cause for recovery if the insurer in fact has an objectively reasonable basis for denying the claim. Pace v. Insurance Co. of N. Am., 838 F.2d 572, 584 (1st Cir.1988).