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Sampson v. American Standard Insurance Co.7/29/1998
96 (Iowa 1995). Thus, when an objectively reasonable basis for denying the claim exists, the insurer as a matter of law cannot be held liable for bad faith. Id. The debate may involve a dispute concerning an issue of fact or of law. Id. The reasonable basis for denying the claim, however, must exist at the time the claim is denied. See Morgan, 534 N.W.2d at 96; Central Life Ins. Co. v. Aetna Cas. & Sur. Co., 466 N.W.2d 257, 263 (Iowa 1991). "The absence of a reasonable basis for denying the claim is an objective element." Morgan, 534 N.W.2d at 96.
In Thompson we discussed whether the "fairly debatable" issue in a bad-faith case is a question of law for the court or a question for the jury. 559 N.W.2d at 290. We stated that the answer to this question depends on the facts of the individual case. Id. Based on the facts as presented in Thompson, we concluded that the fairly debatable issue was a question appropriately decided by the court. As explained below, we conclude that under the facts of the present case, the fairly debatable issue was also a question of law for the district court.
B. Application of the law to present case.
We first point out that the situation here is not one where the insurer has flatly denied the insured's claim for benefits. Cf. Morgan, 534 N.W.2d at 95 (insured filed claim for uninsured motorist benefits, which insurer denied after its claims committee reviewed insured's medical records). In fact, American Standard made payments to Sampson under the policy provisions; it reimbursed Sampson for lost wages under UM coverage and also paid Palmer Clinic under the medical coverage provisions for Sampson's treatment immediately after the accident, in March 1996, and again in September 1996, after Sampson filed her petition. Nothing in the record shows that American Standard refused to pay any bills submitted by Sampson. Rather, American Standard refused Sampson's demand to settle the claim for the full limits of UM coverage under the policy.
The question we must consider is whether American Standard had a reasonable basis for refusing to honor Sampson's settlement demand for the full limits of UM and medical coverage under the policy. Upon our review of the record, we conclude that it did.
1. The record presents several facts showing that Sampson's claim was fairly debatable, thus giving American Standard a reasonable basis for refusing to honor Sampson's demand for the full limits of UM and medical coverage. First, the parties seem to agree that the records American Standard had in its possession at the time attorney Soble made his settlement demand included: (1) copies of Sampson's postaccident records from Palmer Clinic; (2) copies of Dr. Milas's letters addressed to attorney Soble concerning Sampson's diagnosis; and (3) the MRI film.
The fact that the Palmer Clinic records, that American Standard initially received, started on page forty-nine suggested that Sampson had received chiropractic treatment at Palmer Clinic prior to the November 30 accident, a fact later confirmed by Dr. Illingworth's May 23, 1996, letter. This fact raised a question in American Standard's view as to causation concerning Sampson's medical complaints, as conveyed to Dr. Milas, and whether those complaints could be attributed to the November 30 accident. In other words, whether the November 30 accident caused Sampson's present medical complaints was "fairly debatable." We thus conclude that American Standard therefore had a reasonable basis for refusing to settle Sampson's claim for the full policy limits of UM coverage. Cf. Dolan, 431 N.W.2d at 794 (no bad faith where insured's previous back injury raised a fairly debatable issue concer
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