Anderson v. Cont'l Ins. Co. - 85 Wis. 2d 675, 271 N.W.2d 368 (1978)

Rule:

Upon the pleading of appropriate facts, an insured may assert a cause of action in tort against an insurer for the bad faith refusal to honor a claim of the insured.

Facts:

Plaintiffs obtained a home owner’s insurance policy from defendant insurance company, which, among other things, provided coverage for loss occasioned by fire, lightning, explosion, or smoke. While the policy was in effect, the plaintiffs returned to their home to discover that the walls, carpeting, furniture, draperies, and clothing in the house were covered with an oil and smoke residue, which allegedly was the result of a fire or an explosion in the furnace. On the following day, defendant was given notice of the damage. Defendant refused to accept the sworn proof of loss. Plaintiffs filed suit against the defendant, seeking compensatory and punitive damages for the company's allegedly tortious conduct in failing to fulfill its contractual obligations. The trial court dismissed the suit on the company's motion to dismiss for failing to state a claim for which relief could be granted, and the insured appealed.

Issue:

Could an insured assert a cause of action in tort against an insurer for the bad faith refusal to honor a claim of the insured? 

Answer:

Yes.

Conclusion:

The court reversed and remanded, concluding that, upon the pleading of appropriate facts, an insured could assert a cause of action in tort against an insurer for the bad faith refusal to honor a claim of the insured. The court reasoned that the tort of bad faith was a separate intentional wrong resulting from a breach of duty imposed as a consequence of the relationship established by contract. A plaintiff had to show an unreasonable basis for denying benefits of an insurance policy and the insurer's knowledge or reckless disregard of an unreasonable basis; in this case, the insured adequately pled that claim.