Informational only. Not legal advice. No attorney-client relationship is created by reading this post. Consult a licensed attorney in your jurisdiction.
Alabama bad faith law rests on a single tort with two methods of proof — and Brechbill permanently collapsed the distinction between them. Understanding exactly what the Alabama Supreme Court said, and what it did not say, is essential for plaintiffs' counsel trying to keep a failure-to-investigate case alive.
I. The Doctrinal Architecture Before Brechbill
The Alabama tort of bad faith traces to Chavers v. National Security Fire & Cas. Co., 405 So. 2d 1 (Ala. 1981), where the court recognized that an insurer's "intentional refusal to settle a direct claim" without any reasonably legitimate or arguable reason could give rise to extracontractual liability. Chavers described what later courts labeled "normal" bad faith: the insurer had a claim it knew it owed, yet refused to pay it.
Over the following two decades, Alabama courts recognized a second mode of proof — "abnormal" bad faith — applicable where the insurer did not simply decline to pay, but rather intentionally or recklessly failed to investigate. The foundational "abnormal" decision is State Farm Fire & Cas. Co. v. Slade, 747 So. 2d 293 (Ala. 1999). Slade held that a plaintiff need not satisfy the directed-verdict-on-the-contract prerequisite in four discrete circumstances: (1) intentional or reckless failure to investigate; (2) intentional or reckless failure to subject the claim to cognitive evaluation or review; (3) manufacture of a debatable reason to deny; or (4) reliance on an ambiguous policy provision as the basis for denial.
The practical significance of the "abnormal" track was significant. Under the standard "normal" path, the insured must first show entitlement to a directed verdict on the underlying contract claim before the bad faith tort can proceed. Abnormal bad faith offered a route around that gateway, particularly useful when the insurer's claims-handling was demonstrably deficient even if the underlying coverage question remained genuinely contested.
II. Brechbill: The Facts and the Holding
In State Farm Fire & Cas. Co. v. Brechbill, 144 So. 3d 248 (Ala. 2013), Shawn Brechbill filed a homeowners claim after he alleged wind damage to his residence. State Farm conducted multiple inspections and assessments, denied the claim, and attributed the apparent damage to preexisting conditions. Brechbill sued for breach of contract, normal bad faith, and abnormal bad faith based on the theory that State Farm's investigation was inadequate. The trial court granted summary judgment to State Farm on the normal bad faith count — specifically finding as a matter of law that State Farm had a reasonably legitimate or arguable reason for denial — but allowed the abnormal bad faith count to proceed to the jury. The jury returned a verdict for Brechbill on the abnormal count, awarding compensatory and punitive damages.
The Alabama Supreme Court reversed. The court held that there is "only one tort of bad-faith refusal to pay a claim, not two 'types' of bad faith or two separate torts." Brechbill, 144 So. 3d at 258. The critical passage:
"Regardless of whether the claim is a bad-faith refusal to pay or a bad-faith refusal to investigate, the tort of bad faith requires proof of the third element, absence of legitimate reason for denial. . . . [I]f a lawful basis for denial actually exists, the insurer, as a matter of law, cannot be held liable in an action based upon the tort of bad faith."
Because the trial court had already determined — on the normal bad faith summary judgment — that State Farm possessed a reasonably legitimate or arguable reason for its denial, that finding became law of the case. It barred the abnormal bad faith claim from proceeding at all. Id. at 259.
The court also clarified that the insurer's earlier finding of arguable reason must have existed at the time of the denial, not developed after the fact. Evidence of post-denial investigation, standing alone, cannot retroactively supply the arguable basis.
III. The Normal vs. Abnormal Framework After Brechbill
Brechbill did not abolish the Slade categories. It did something more subtle and, for plaintiffs, more constraining: it confirmed that the absence of an arguable reason is a universal element of the tort, regardless of the investigative theory on which the plaintiff relies. Restated analytically:
Normal bad faith (four elements):
- Insurance contract between the parties and breach thereof by the insurer;
- Intentional refusal to pay the claim;
- Absence of any reasonably legitimate or arguable reason for refusal (the "debatable reason" element); and
- Insurer's actual knowledge of the absence of any arguable reason.
Abnormal bad faith (same four elements, plus a fifth):
- The insurer's intentional failure to determine whether any legitimate or arguable reason existed — i.e., the failure to investigate was itself the mechanism by which the insurer achieved knowledge of the absence of any arguable reason, or manufactured the appearance of one.
The practical merger in Brechbill is this: if the insurer can show — even on a pretrial motion — that an arguable basis for denial existed at the time of the denial, the court will enter judgment as a matter of law on the bad faith claim regardless of whether the plaintiff's theory is normal or abnormal.
The court also quoted the foundational definition from Gulf Atlantic Life Ins. Co. v. Barnes, 405 So. 2d 916, 924 (Ala. 1981): "Bad faith . . . is not simply bad judgment or negligence. It imports a dishonest purpose and means a breach of known duty, i.e., good faith and fair dealing, through some motive of self-interest or ill will." Imperfect investigation without dishonest purpose is negligence, not bad faith.
IV. The Directed-Verdict Prerequisite and Its Mechanics
Under normal bad faith, the directed-verdict prerequisite functions as a gatekeeping rule: the plaintiff must demonstrate, as a predicate matter, that the insurer was entitled to a directed verdict against it on the underlying contract claim. This typically means that the coverage question was not genuinely disputed and the insurer's denial was thus without any arguable legal or factual foundation.
Brechbill confirmed that this prerequisite applies even in the abnormal case when the trial court has previously ruled — even at the summary judgment stage — that the insurer possessed a debatable reason. The earlier ruling becomes dispositive; the case-within-a-case structure does not permit the plaintiff to obtain a second bite at the arguable-reason question by relabeling the claim as abnormal.
This creates an important sequencing issue. Defense counsel routinely seek summary judgment on the normal bad faith count first, precisely to establish law of the case on the arguable-reason element before the abnormal count reaches the jury. Plaintiff's counsel must anticipate this tactical maneuver and structure the record accordingly.
V. What Survives Brechbill: Residual Vitality of the Failure-to-Investigate Theory
Notwithstanding Brechbill's unifying language, the failure-to-investigate theory retains meaningful life in three scenarios:
1. No arguable reason at the time of denial. Where the insurer denied before conducting any investigation, or where the investigation was so inadequate that no arguable reason could fairly be said to have existed at the moment of denial, Brechbill does not immunize the insurer. The issue becomes whether the investigation was so deficient that no reasonable inference of arguable basis can be drawn.
2. Manufactured debatable reason. Slade recognized that an insurer who constructs a post-investigation rationale designed to defeat the directed-verdict test — rather than genuinely discovering a coverage defense — remains exposed. Brechbill did not disturb this. The evidentiary challenge is proving that the "reason" was manufactured rather than legitimately found.
3. Post-denial failure to investigate new evidence. Alabama courts have recognized, at least in dictum, that an insurer who learns of new evidence supporting coverage and fails to reconsider may face abnormal bad faith exposure even if the original denial was defensible. See, e.g., Ex parte Simmons, discussed in subsequent appellate decisions. The theory is that the "time of denial" clock restarts when the insured presents material new information.
VI. Punitive Damages and the Brechbill Ceiling
The practical importance of Brechbill is amplified when considering punitive damages. Under Ala. Code § 6-11-21 (1975), punitive damages are available in bad faith cases as compensation for oppressive, malicious, or fraudulent conduct. Because Brechbill requires the plaintiff to show the insurer acted with dishonest purpose or ill will — not mere negligence — the element aligns with the punitive damages standard. A plaintiff who clears the Brechbill threshold has, in effect, already built the scaffolding for a punitive damages submission.
The Alabama Supreme Court's reservation in Chief Justice Moore's special concurrence — warning that the judicially created bad faith tort may constitute "an unconstitutional usurpation of legislative powers" — has attracted no majority support in subsequent decisions and should not be treated as live authority. The tort remains valid; the concurrence's warning is historical.
VII. Practice Notes
Pleading. After Brechbill, plaintiffs should avoid pleading "abnormal bad faith" as a separate count. The better practice is to plead a single count for bad faith and allege both the absence of any arguable reason and the failure-to-investigate facts in the alternative. Structuring the complaint this way prevents the defense from seeking summary judgment on a "normal" count and then arguing that the adverse ruling disposes of a separately labeled "abnormal" count as law of the case.
Discovery. Document the investigation file comprehensively. The claims log, adjuster's notes, engineering reports, reserve entries, and supervisor approvals are critical. The question of whether an arguable basis existed at the time of denial turns on what information the insurer actually had — not what it might have found through a proper investigation.
Timing. Gather evidence before filing. Once the complaint is filed, the insurer can move for partial summary judgment on the arguable-reason element. If the plaintiff has not yet completed discovery of the claims file, the motion can succeed before the full picture is developed. Consider Rule 56(d) affidavits to establish the need for further discovery before any summary judgment ruling.
Expert witnesses. In cases involving complex causation (structural damage, environmental claims, medical necessity), a claims-handling expert who can opine that the investigation was objectively deficient — and that no arguable reason existed at the time of denial — is often essential to surviving summary judgment and reaching the jury.
*The Waters problem. Brechbill addressed first-party bad faith. Alabama law on third-party bad faith failure to settle remains analytically distinct, with some courts applying a totality-of-the-circumstances standard derived from Waters v. American Casualty Co.*, 73 So. 2d 524 (Ala. 1954), rather than the arguable-reason test. Practitioners should take care not to conflate the two frameworks.
VIII. Open Questions
Brechbill resolved the structural question — one tort, one arguable-reason element — but left open several important subsidiary issues. The Alabama Supreme Court has not definitively addressed whether the arguable-reason element must be the exclusive reason for denial (i.e., whether a mixed-motive denial, partly arguable and partly not, defeats the claim). Lower courts continue to wrestle with how imperfect an investigation must be before it negates any arguable basis. And the application of Brechbill to UIM bad faith — which the Eleventh Circuit treated as a quasi-adversarial relationship permitting the insurer to "stand in the shoes" of the tortfeasor — remains a contested and unsettled area of Alabama practice.
Talk to Yates Anderson
If you are litigating a matter in this area — or weighing whether to — the working analysis above only goes so far. Request a case evaluation and a Yates Anderson attorney will respond within one business day.
Informational only. Not legal advice. No attorney-client relationship is created by reading this post. Consult a licensed attorney in your jurisdiction.