Not long after Valteri issued a denial and closed the claim, the insured sued for coverage and alleged bad-faith claim handling. The insurer is employing the

• A. Lack of standing defense.
• B. Advice of counsel defense.
• C. Debatable reasonable basis defense.
• D. Statute of limitations defense.

Answer: (C)

In a bad-faith claim handling defense, the insurer can argue there was a debatable reasonable basis for the denial. This means there was a genuine, arguable dispute over coverage based on the policy language and the facts of the claim. If the denial could reasonably be supported as a legitimate interpretation or application of the policy, the insurer isn’t automatically acting in bad faith—even if a court later finds coverage or if the claim is eventually denied again. Here, after Valteri issued a denial and closed the claim, the insured sued alleging bad faith. The insurer would lean on the fact that there was a reasonable, debatable basis for the denial, showing the denial was not made with a disregard for the lack of a reasonable basis.

Lack of standing would challenge the claimant’s right to sue in the first place, not the reasonableness of the denial. Advice of counsel would require the insurer to show it relied on an attorney’s legal opinion to deny, which isn’t stated here. Statute of limitations would raise a timing issue with the lawsuit, not the defensible basis for denial.