Insurance companies often find themselves embroiled in coverage disputes. One of the primary defenses available is the reasonable dispute doctrine. This doctrine has provided a shield for insurers against innumerable dubious claims.
Every professional who handles insurance defense or related matters should have a thorough understanding of this significant law. In this post, we will examine the critical tenets of the reasonable dispute doctrine and discuss how it applies to coverage disputes.
The reasonable dispute doctrine: what to know
Insurance providers owe a duty of good faith and fair dealing to their clients. When an insurer denies a claim, plaintiffs often assume that their insurer breached these duties. Bad faith is one of the most common grounds for plaintiffs’ suits. One of the most valuable aspects of the reasonable dispute doctrine is its utility as a defense against claims of bad faith.
The reasonable dispute doctrine holds that when an insurer denies a claim based on a genuine dispute of a customer’s coverage, the insurer cannot be said to have acted in bad faith—even if a court rules that the provider’s decision was in the wrong. Also called the genuine dispute doctrine, it ensures that insurance providers are not held in bad faith simply for arriving at a decision that may be incorrect.
The future of the reasonable dispute doctrine
In recent years, courts have begun to issue summary judgments for cases involving the genuine dispute doctrine. Summary judgments can benefit insurance carriers greatly, as juries frequently award extracontractual damages to plaintiffs. Granted, this does not mean that insurance providers and their counsel should become complacent. Any allegation of bad faith or breach of contract requires assertive defense, both to avoid an unfavorable outcome and to prevent precedent-setting verdicts that may affect insurers in the future.