Opinion ID: 1345823
Heading Depth: 1
Heading Rank: 3

Heading: Second Question The Applicable Standard

Text: We believe the appropriate test to determine bad faith is the objective standard whether the validity of the denied claim was not fairly debatable. As this test was further examined by Justice Heffernan in Anderson, 271 N.W.2d at 376-77, he added: Whether a claim is fairly debatable also implicates the question whether the facts necessary to evaluate the claim are properly investigated and developed or recklessly ignored and disregarded. To show a claim for bad faith, a plaintiff must show the absence of a reasonable basis for denying benefits of the policy and the defendant's knowledge or reckless disregard of the lack of a reasonable basis for denying the claim. It is apparent, then, that the tort of bad faith is an intentional one.          The tort of bad faith can be alleged only if the facts pleaded would, on the basis of an objective standard, show the absence of a reasonable basis for denying the claim, i.e., would a reasonable insurer under the circumstances have denied or delayed payment of the claim under the facts and circumstances. See, Hilker, supra, and Alt v. American Family Mut. Ins. Co., 71 Wis.2d 340, 237 N.W.2d 706 (1976). Thus, the utilization of this objective standard of whether appropriateness of the denial of the claim is fairly debatable will form the focus of this tort. The Alabama court substitutes the word arguable for debatable. King v. National Foundation Life Ins. Co., 541 So.2d 502 (Ala. 1989). The logical premise of the debatable (or arguable) standard is that if a realistic question of liability does exist, the insurance carrier is entitled to reasonably pursue that debate without exposure to a claim of violation of its duty of good faith and fair dealing. White, 730 P.2d at 1018; Fehring v. Republic Ins. Co., 118 Wis.2d 299, 347 N.W.2d 595 (1984). Moreover, this decision today should not be interpreted as opening the floodgates for awarding punitive damages in each case where the claim of the bad faith tort may be submitted for trial determination. [11] Although we recognize this tort, we believe that the awarding of punitive damages for the tort of bad faith should remain consistent in Wyoming law and require wanton or willful misconduct. See Mayflower Restaurant Co. v. Griego, 741 P.2d 1106 (Wyo. 1987); Weaver v. Mitchell, 715 P.2d 1361 (Wyo. 1986); Arnold, 707 P.2d 161; and Waters v. Trenckmann, 503 P.2d 1187 (Wyo. 1972). Cf. Oukrop v. Wasserburger, 755 P.2d 233 (Wyo. 1988). This posture is also consistent with the Wisconsin application in Anderson and other cases where both bad faith and punitive damage may have been claimed. We do not conclude, however, that the proof of a bad faith cause of action necessarily makes punitive damages appropriate.    For punitive damages to be awarded in addition to compensatory damages for the tort, there must be a showing of an evil intent deserving of punishment or something in the nature of special ill-will or wanton disregard of duty or gross or outrageous conduct. In the specific context of the intentional tort of bad faith, exemplary damages are not necessarily appropriate although the plaintiff be entitled to compensatory damages. For punitive damages to be awarded, a defendant must not only intentionally have breached his duty of good faith, but in addition must have been guilty of oppression, fraud, or malice in the special sense defined by Mid-Continent v. Straka [47 Wis.2d 739, 178 N.W.2d 28 (Wis. 1970)]. See also, Silberg v. California Life Ins. Co., supra, 11 Cal.3d [452] at 462, 113 Cal. Rptr. 711, 521 P.2d 1103 [(C.A. 1974)]. Anderson, 271 N.W.2d at 379. Likewise, see Fehring, 347 N.W.2d 595. Cf. Annotation, Recoverability of Punitive Damages in Action by Insured Against Liability Insurer for Failure to Settle Claim Against Insured, 85 A.L.R.3d 1211 (1978) and J. McCarthy, supra, § 1.57.