In Cedillo v. Farmers Ins. Co., 408 P.3d 886 (Idaho 2017) the insured sued Farmers Insurance for bad faith arising out of the presentation of a UIM claim. In this case, Farmers did not dispute that its policy provided UIM coverage to the insured. The dispute between the insurer and its insured centered upon the amount of coverage that was available to pay the insured’s loss. The parties arbitrated the issue, which resulted in an arbitration award valuing the UIM claim at $100,332 after offsets. Then, after adding prejudgment interest, the total award was increased to $101,135. While the arbitration was proceeding, the insured sued Farmers for bad faith in the district court. Farmers filed a motion for summary judgment, asserting that the insured had failed to make out a prima facie case of bad faith because the value of the claim, i.e., the amount owed to be paid, was fairly debatable. Summary judgment was granted to Farmers after the trial court determined that the “fairly debatable” standard applied not only to the question of whether a claim should be paid, but also as to a dispute regarding the amount that was owed. The court acknowledged the presence of a fairly debatable issue regarding value, finding that the insured had not known that she was entitled to payment in the amount of the full policy limits that the insured was not forthcoming in providing relevant medical records, and that the insured had a complicated medical history that required the arbitrator to apportion medical expenses between those caused by the accident and those which were not.
On appeal, the Idaho Supreme Court held that there was a continuing dispute between the parties about the amount of claimed damages and, in fact, the arbitrator had reduced the initial award so that the insured’s pre-existing condition could be taken into account. It was the obligation of the insured to point out why the insured felt the claim was not fairly debatable.