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Keywords

settlementarbitrationgood faithbad faith
good faithbad faith

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Zilisch v. State Farm Mutual Auto. Ins. Co., 196 Ariz. 234, 995 P.2d 276, 317 Ariz. Adv. Rep. 21

Facts

Zilisch was a passenger in a car that was struck by a drag-racer, resulting in her permanent injuries and the death of her fiancé. After recovering $146,500 from the at-fault drivers, she demanded the $100,000 policy limits from State Farm, which delayed its evaluation and ultimately offered only $55,000. Following arbitration, Zilisch was awarded $387,500, leading her to sue State Farm for bad faith, alleging that the insurer had a practice of underpaying claims and acted unreasonably in handling her case.

Zilisch was a passenger in a car that was struck by a drag-racer, resulting in her permanent injuries and the death of her fiancé.

Issue

Did State Farm act in bad faith by refusing to pay the policy limits of Zilisch's underinsured motorist claim despite evidence of her permanent injuries?

Did State Farm act in bad faith by refusing to pay the policy limits of Zilisch's underinsured motorist claim despite evidence of her permanent injuries?

Rule

An insurer may defend a claim that is fairly debatable, but it must exercise reasonable care and good faith in the investigation and evaluation of the claim. The determination of whether an insurer acted unreasonably is a question for the jury.

An insurer may defend a claim that is fairly debatable, but it must exercise reasonable care and good faith in the investigation and evaluation of the claim.

Analysis

The court found sufficient evidence for a jury to conclude that State Farm acted unreasonably in its handling of Zilisch's claim. Despite having multiple medical opinions confirming the permanency of her injuries, State Farm delayed its evaluation and offered a settlement significantly lower than what was deemed reasonable. The court emphasized that the insurer's belief in fair debatability does not absolve it from the duty to act in good faith and promptly process claims.

The court found sufficient evidence for a jury to conclude that State Farm acted unreasonably in its handling of Zilisch's claim.

Conclusion

The Supreme Court vacated the appellate court's decision and remanded the case for further consideration, affirming that the jury should determine whether State Farm acted unreasonably in its claims handling.

The Supreme Court vacated the appellate court's decision and remanded the case for further consideration.

Who won?

Zilisch prevailed in the case as the court recognized that there was sufficient evidence for a jury to find that State Farm acted unreasonably and in bad faith regarding her claim.

Zilisch prevailed in the case as the court recognized that there was sufficient evidence for a jury to find that State Farm acted unreasonably and in bad faith regarding her claim.

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