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Galbraith v. Allied Mutual Insurance Co.6/24/2005
hird-party tort action is fairly debatable as to either the facts or the law, this circumstance provides a reasonable basis for denial of underinsured-motorist benefits. Wetherbee v. Econ. Fire & Cas. Co., 508 N.W.2d 657, 661-62 (Iowa 1993). The fact that a reasonable trier of fact could return a verdict on the tort claim in excess of other available insurance does not establish that a claim is not fairly debatable if a reasonable trier of fact could also return a verdict that would not implicate the underinsured coverage. Id.
In reviewing the decision of the district court, the court of appeals concluded that it was not proper to rely on the date of the signed settlement agreement in the underlying tort action in determining when Allied became responsible for paying the Galbraiths the benefits to which they were entitled under their underinsured-motorist insurance. The court opined that a jury could find that a binding oral settlement agreement had been reached between the parties at an earlier date. The court of appeals stated the issue as follows:
In order to uphold the district court's conclusion it must appear, as a matter of law based upon undisputed facts, that no settlement agreement occurred prior to June 25, the date Allied tendered the underinsured motorist policy limit. If there is a disputed issue of material fact regarding whether an enforceable settlement agreement was reached prior to this date, the district court must be reversed.
We must respectfully disagree with the court of appeals.
In situations in which an underinsured-motorist claim has been paid by the insurer but a bad-faith claim is made with respect to the timing of the payment, factors other than the strength of the underlying tort suit may be of crucial significance on the issue of the insurer's bad faith. That is the situation here. An underinsured-motorist carrier cannot be expected to make payment to its insured prior to the time that the underlying tort litigation has been fully resolved and a determination has been made concerning the presence or absence of liability insurance available for payment of the claim. The insurer is not required to accept the insured's word as to such matters and may demand adequate documentation.
The fact that the Galbraiths may have been able to enforce an earlier oral agreement if no written agreement had been forthcoming did not defeat Allied's right to insist on a signed written agreement as documentation for payment of the Galbraiths' claim. Moreover, it appears that throughout the negotiations both the Galbraiths and Allied were proceeding on the basis that the Guy affidavit was essential to the conclusion of any settlement. Allied was not advised as to the obtaining of the Guy affidavit until June 15, the time at which its earlier settlement offer was rejected. The insurer was not required to accept this affidavit as true on its face and could reasonably take additional time to investigate the provisions of Guy's liability policy with another company that had been identified in the affidavit. As the district court correctly concluded, the timing of the negotiations and the settlement were such as to preclude a determination of bad faith on Allied's part with respect to the time at which it paid the Galbraiths' underinsured-motorist claim.
We have considered all issues presented and conclude that the decision of the court of appeals must be vacated. The judgment of the district court is affirmed.
DECISION OF COURT OF APPEALS VACATED; DISTRICT COURT JUDGMENT AFFIRMED.
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