Under the "genuine dispute" doctrine, an insurer is not liable for bad faith if its denial of a claim was reasonable. In Ghazarian v. Magellan Health, Inc., 53 Cal. App. 5th 171 (2020), a California appellate court reversed a ruling of summary judgment in favor of a defendant insurer, finding that the "genuine dispute" doctrine did not apply where the insurer conducted a flawed investigation, but its ultimate denial could be deemed reasonable.
In so holding, the court explained that "to avoid bad faith liability, it is not enough that an insurer's ultimate decision might be considered reasonable at first glance." Rather, the court clarified, the insurer's actual investigation and basis for the denial had to be reasonable.
In Ghazarian, the defendant medical insurer ("Ghazarian") initially approved 157 hours of medically necessary ABA therapy for an autistic child. When the child turned seven, however, Ghazarian determined instead that only 81 hours per month were medically necessary. The parents of the child requested that the Department of Managed Health Care conduct an independent review of the denial. Pursuant to this review, two of the three independent physician reviewers disagreed with the denial, while the other agreed. As a result, the Department ordered Ghazarian to reverse the denial and authorize the...
