Genuine Dispute & Fairly Debatable
In the insurance bad faith context, a dispute is not legitimate unless it is founded on a basis that is reasonable under all the circumstances. Under the genuine dispute rule, bad faith cannot be established where the insurer’s withholding of benefits is reasonable or is based on a legitimate dispute as to the insurer’s liability. Of course, an insurer must investigate thoroughly a claim by an insured before denying the claim in good faith. If an insurer denies a claim it has not investigated reasonably, then the insurer is subject to tort liability.
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