As noted in a previous post, there is no comprehensive list of acts of bad faith by an insurance company under Oklahoma law. Further, the legal definition of bad faith leaves a lot of gray area to be filled in based on the facts of each case. As a result, the question of whether an insurance company committed bad faith with regard to any particular claim is, from a practical standpoint, answered by applying the “smell test.”
In other words, it often happens that a policyholder believes his insurance company has acted in bad faith in handling a claim, while on the other hand the insurance company believes it acted in good faith. In these situations, there is often no clear cut rule in the law that says the insurance company’s conduct was bad faith or not. When this happens, the lawyers representing the policyholder and the insurance company attempt to cast the facts of the case in the light most favorable to their respective clients.
Oftentimes, the definition of bad faith found in Badillo v. Mid-Century (discussed in a previous post) must be applied to facts that lend themselves to interpretation by both sides. Therefore, whether the insurance company acted in bad faith is most times left to a jury to decide. A jury in a bad faith case, as in all civil cases, is made up of citizens of the venue where the case is being tried who have been called to jury duty. They represent the collective wisdom of the community in which they live. When it gets right down to it, the jury must weigh the evidence and determine if they believe the insurance company’s conduct amounted to more than “simple negligence” (or an honest mistake). They do not have to decide the insurance company’s conduct rose to the level of “reckless.”
How does a jury of regular people decide this? The apply their fundamental sense of fairness and their knowledge of the difference between right and wrong. In other words, the “smell test.”