When Claims are Fairly Debatable There is No Bad Faith
Post 4986
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Homeowners appealed from the district court’s denial of their breach-of-contract, consequential-damages, and bad-faith claims in Donnie Paul Bradley and Melanie Yvonne Bradley v. Allstate Insurance Company, No. 23-1397, Court of Appeals of Iowa on January 23, 2025 resolved the disputes.
BACKGROUND:
Donnie and Melanie Bradley appealed from the district court’s summary judgment ruling and final judgment following contractual disputes against Allstate Insurance Company. The Bradleys alleged errors in the district court’s interpretation of the insurance policy for their breach-of-contract claim and the granting of summary judgment to Allstate on their consequential damages and bad-faith claims. The dispute arose as a result of:
1. The Bradleys purchased an Allstate insurance policy in 2014 for their Cedar Rapids home.
2. The policy included actual cash value (ACV) and replacement cost value (RCV) coverage.
3. The August 2020 Derecho windstorm caused significant damage to their home.
4. The Bradleys reported the damage, and Allstate acknowledged the losses were covered under the policy.
5. The Bradleys, unhappy with Allstate, demanded appraisal in November 2020.
6. The parties signed an appraisal for the ACV in September 2021, and Allstate paid the Bradleys in accordance with the insurance policy.
7. The Bradleys claimed breach of contract for Allstate denying RCV coverage, alleged bad faith, and demanded consequential and punitive damages.
8. The Bradleys spent more on repairs than Allstate paid out and they continued with litigation.
9. The Bradleys ultimately paid for the repairs by refinancing their home to establish a home equity line of credit and taking out a loan against a retirement account.
10. Allstate was to reimburse the Bradleys for repair costs in excess of ACV-the equivalent of the RCV-if repairs were completed within 180 days of the ACV payment.
CLAIMS AND PROCEEDINGS:
The district court granted summary judgment to Allstate on the consequential damages and bad-faith claims but denied it for the breach-of-contract claim.
The Bradleys withdrew their request for a jury trial, and Allstate eventually paid the RCV from the appraisal.
APPEAL:
The Court of Appeals upheld the district court’s decision that consequential damages were not available under Iowa law.
The Court of Appeals agreed with the district court that the bad-faith claim was fairly debatable and that the Bradleys did not set forth a valid bad-faith claim.
DISPOSITION:
The question of whether the Bradleys were entitled to RCV payments was found to be fairly debatable as a matter of law. The Court concluded that the undisputed facts establish that there was no unreasonable delay in the ACV payment. Allstate reasonably disputed coverage as to the RCV payments on the basis that the explicit terms of the policy require repair to be completed for an RCV payment to be made.
The claim was, in the opinion of the Court of Appeals, fairly debatable because replacement was not completed within 180 days of the ACV payment. The Court of Apeals concluded that the Bradleys could not succeed on their bad faith claim.
ZALMA OPINION
The Iowa Court of Appeals educated the Bradleys and their counsel holding that an insurance policy is a contract with conditions. The Allstate policy provided, as a condition, that to receive the difference between ACV payment and the RCV the repairs must be completed within 180 days of the ACV payment. Although there was a dispute over when the repairs were completed Allstate paid both the ACV and the RCV making the entire claim moot and the other claimed damages were fairly debatable and no evidence to support a bad faith claim.
(c) 2025 Barry Zalma & ClaimSchool, Inc.
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ZIFL – Volume 30, Issue 9 – May 1, 2026
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THE SOURCE FOR THE INSURANCE FRAUD PROFESSIONAL
ZIFL – Volume 30, Issue 9 – May 1, 2026
Zalma’s Insurance Fraud Letter (ZIFL) continues its 30th year of publication dedicated to those involved in reducing the effect of insurance fraud. ZIFL is published 24 times a year and is written by Barry Zalma.
DOJ Creates National Fraud Enforcement Division
Will the Feds Take on Insurance Fraud? Possibly as Part of a National Anti-Fraud Effort
On April 7, 2026, the Acting Attorney General, Todd Blanche, issued a memorandum establishing the Department of Justice National Fraud Enforcement Division (NFED). The memo describes an ambitious, but perhaps redundant, vision for this ...
When Abalone Died As a Result of Multiple Causes The Efficient Proximate Cause Requires Payment
Post number 5345
Read the full article at https://www.linkedin.com/pulse/efficient-proximate-cause-doctrine-saves-claim-barry-zalma-esq-cfe-yndlc, see the video at and at and at https://zalma.com/blog plus more than 5300 posts.
In American Abalone Farms, LLC v. Star Insurance Company et al., H052643, California Court of Appeals, Sixth District (April 27, 2026) the Court of Appeals dealt with an insurance coverage issue that required application of the efficient proximate cause doctrine.
FACTS
American Abalone Farms, LLC ("American Abalone" ) operates an aquaculture farm in Santa Cruz County, California, raising abalone in tanks. In August 2020, the CZU Lightning Complex Fires led to a prolonged power outage and road closures near the farm. As a result, the farm’s water pumps failed, causing the death of most of the ...
Breach of a Specific Condition Precedent Is a Complete Defense
See the video at and at and at https://zalma.com/blog plus more than 5300 posts.
In United Services Automobile Association and State Farm Mutual Automobile Insurance Company v. Anthony Wenzell, 2026 CO 25 (Colo. Apr. 27, 2026) Anthony Wenzell was rear-ended in a car accident. He had a significant prior 2014 accident that required back surgery.
Wenzell claimed underinsured-motorist (UIM) benefits under three policies: (1) the tortfeasor’s liability policy, (2) his own primary UIM policy with State Farm, and (3) an excess UIM policy issued by USAA (under his brother’s policy, which contained an “other insurance” clause making USAA’s coverage excess over any collectible insurance).
After receiving the claims, both USAA and State Farm repeatedly requested that Wenzell execute comprehensive medical-release authorizations so they could obtain his full medical records and ...
It is Fraud to Make the Same Claim Twice
Read the full article at https://www.linkedin.com/pulse/fraud-make-same-claim-twice-barry-zalma-esq-cfe-c4g8c and at https://zalma.com/blog.
Chutzpah: After Being Paid for a New Roof Insured Makes Second Claim For Same Damages
Post number 5347
No One is Entitled to be Paid for the Same Loss Twice
In Mohammed Ali Khalili v. State Farm Lloyds, No. 14-25-00611-CV, Court of Appeals of Texas (April 30, 2026) Khalili maintained a State Farm Lloyds homeowners insurance policy for decades. In 2008 he filed a roof-damage claim; State Farm paid him to replace the entire roof (shingles and gutters). Khalili never replaced the roof and repeated his claim.
BACKGROUND
In 2021 he filed a second roof claim. State Farm’s inspectors found the roof “very old” with extensive non-storm-related damage. The claim was denied because (1) the damage did not exceed the deductible and (2) State Farm had already paid for a full roof replacement.
PROCEDURAL HISTORY
State Farm filed motion for summary...
It is Fraud to Make the Same Claim Twice
Read the full article at https://www.linkedin.com/pulse/fraud-make-same-claim-twice-barry-zalma-esq-cfe-c4g8c and at https://zalma.com/blog.
Chutzpah: After Being Paid for a New Roof Insured Makes Second Claim For Same Damages
Post number 5347
No One is Entitled to be Paid for the Same Loss Twice
In Mohammed Ali Khalili v. State Farm Lloyds, No. 14-25-00611-CV, Court of Appeals of Texas (April 30, 2026) Khalili maintained a State Farm Lloyds homeowners insurance policy for decades. In 2008 he filed a roof-damage claim; State Farm paid him to replace the entire roof (shingles and gutters). Khalili never replaced the roof and repeated his claim.
BACKGROUND
In 2021 he filed a second roof claim. State Farm’s inspectors found the roof “very old” with extensive non-storm-related damage. The claim was denied because (1) the damage did not exceed the deductible and (2) State Farm had already paid for a full roof replacement.
PROCEDURAL HISTORY
State Farm filed motion for summary...
What Must be Done after Notice of a Claim is Received by the Insurer
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A first party property policy does not insure property: it insures a person, partnership, corporation or other entity against the risk of loss of the property. Before an insured can make a claim for indemnity under a policy of first party property insurance the insured must prove that there was damage to property the risk of loss of which was insured by the policy. The obligation imposed on the insured ...
