959 F. Supp. 2d 1226
C.D. Cal.2013Background
- wildfire near Keshishes' home in late Aug/early Sep 2009; claim for smoke damage filed Oct 2, 2009; Allstate assigned claim to adjuster and paid $7,582.09 after initial estimate, deductible applied
- ServiceMaster conducted independent damage review after insured objected to initial estimate; its estimate was substantially lower than the initial estimate
- Plaintiffs retained a hygienist; the report was not disclosed to Allstate during the claim but later discussed in appraisal
- Appraisal process delayed by timing and umpire payment issues; hygienist report later provided to appraisers
- Appraisal panel valued loss at $42,950, Allstate paid the full appraisal award on March 23, 2012; Allstate sought summary judgment on the remaining implied covenant claim
- Court analyzes whether there was a genuine dispute over the amount owed and whether Allstate conducted a thorough investigation under the implied covenant
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Genuine dispute over amount owed precludes bad faith | Keshishes contend there was a genuine dispute that justified withholding benefits | Allstate relied on ServiceMaster; disparity supported a genuine dispute | Yes; the dispute was genuine and precluded bad faith |
| Reliance on ServiceMaster insulates insurer from bad faith | Reliance shows biased investigation by Allstate | Reliance alone does not cure bad faith; facts show thorough review | No; reliance alone did not defeat genuine dispute |
| Difference between plaintiffs' estimate and appraisal award establishes genuine dispute | Large gap shows bad faith denial | Difference, while substantial, supported reasonableness given appraisal | No; appraisal difference supports genuine dispute, not per se bad faith |
| Thoroughness of investigation forecloses bad faith | Allstate failed to meet with counsel/contractors; investigation inadequate | Experts and independent review show thorough investigation | No; no triable issue as to thoroughness |
| Judicial estoppel bar to Allstate argument | Appraisal proceedings create inconsistent positions | No inconsistency; not quasi-judicial proceeding and positions not inconsistent | No; judicial estoppel not applicable |
Key Cases Cited
- Maynard v. State Farm Mut. Auto. Ins. Co., 499 F. Supp. 2d 1154 (C.D. Cal. 2007) (genuine dispute requires reasonable grounds for denial)
- Rappaport-Scott v. Interinsurance Exchange of Auto. Club, 146 Cal.App.4th 831 (Cal. Ct. App. 2007) (large gap between claimed and arbitrator’s award can show genuine dispute)
- Chateau Chamberay Homeowners Ass’n v. Associated Intern. Ins. Co., 90 Cal.App.4th 335 (Cal. Ct. App. 2001) (genuine dispute doctrine evaluates insurer's actions at time of decision)
- Guebara v. Allstate Ins. Co., 237 F.3d 987 (9th Cir. 2001) (expert testimony does not automatically insulate from bad faith claims)
- Fraley v. Allstate Ins. Co., 81 Cal.App.4th 1282 (Cal. Ct. App. 2000) (reliance on experts supports genuine dispute; not per se bad faith)
- Behnke v. State Farm General Ins. Co., 196 Cal.App.4th 1443 (Cal. Ct. App. 2011) (arbitration award gap can defeat bad faith; contextual differences matter)
- Love v. Fire Ins. Exchange, 221 Cal.App.3d 1136 (Cal. Ct. App. 1990) (insurer may consider its own interests in evaluating claims)