KIRSCH, J.
Following the jury verdict, Clancy assigned his claims against Allstate to the Goads who, on May 30, 2007, filed a complaint alleging, among other things, that Allstate’s decision not to offer a $100,000 policy limit to Mr. Goad in addition to $100,000 for Mrs. Goad was made in bad faith. In its answer, Allstate stated the following affirmative defense:
[t]he emotional distress claim(s) of Robert Goad in Cause No. 45D11-0209-CT-200 and whether insurance coverage existed for such claims is fairly debatable.
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The Goads filed a motion to compel Allstate to turn over the withheld documents, arguing that Allstate’s affirmative defense calling the nature of Mr. Goad’s claim “fairly debatable,” amounted to reliance on the advice of counsel defense. By implicitly raising the advice of counsel defense, the Goads argued, Allstate waived attorney-client privilege. . . . .
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Just as the advice of counsel is a defense to a claim of bad faith, the argument that a claim is fairly debatable is a good faith defense to a bad faith claim. If the claim is fairly debatable, then the insurer has a reasonable basis to deny the claim:
If an insured’s claim is fairly debatable either in fact or law, an insurer cannot be said to have denied the claim in bad faith. The fact that the insurer’s position is ultimately found to lack merit is not sufficient by itself to establish that the insurer had a reasonable basis to deny the claim. The focus is on the existence of a debatable issue, not on which party was correct.
Dakota, Minn. & E. R.R. Corp. v. Acuity, 771 N.W.2d 623, 630 (S.D. 2009) quoting 46A C.J.S. Insurance § 1873 (2008). Some states require a review of whether the insurer’s actions were unreasonable or whether the claim was fairly debatable at the time the insurer made the decision to deny or litigate the claim. See, id.
The defense that the claim was ‘fairly debatable’ was discussed in Bellville v. Farm Bureau Mutual Insurance Co., 702 N.W.2d 468 (Iowa 2005), an appeal involving the issue of the sufficiency of the evidence to support a finding of bad faith. After noting that a successful bad faith claim was composed of an objective element, i.e., the lack of a reasonable basis and a subjective element, i.e., the knowledge of the lack of a reasonable basis, the Iowa Supreme Court stated the following:
A reasonable basis exists for denial of policy benefits if the insured’s claim is fairly debatable either on a matter of fact or law. A claim is “fairly debatable” when it is open to dispute on any logical basis. Stated another way, if reasonable minds can differ on the coverage-determining facts or law, then the claim is fairly debatable. The fact that the insurer’s position is ultimately found to lack merit is not sufficient by itself to establish the first element of a bad faith claim. The focus is on the existence of a debatable issue, not on which party was correct. Whether a claim is fairly debatable can generally be decided as a matter of law by the court. That is because where an objectively reasonable basis for denial of a claim actually exists, the insurer cannot be held liable for bad faith as a matter of law. As one court has explained, courts and juries do not weigh the conflicting evidence that was before the insurer; they decide whether evidence existed to justify denial of the claim. . . .Even when the insurer lacks a reasonable basis for its denial of a claim, liability for bad faith will not attach unless the insurer knew or should have known that the basis for denying its insured’s claim was unreasonable.
702 N.W.2d at 473-474 (internal citations, quotations, and emphases omitted). Allstate has expressly waived the advice of counsel defense and this conclusion, i.e., a fairly debatable issue exists, can be reached without access to the privileged information between attorney and client.
We hold that the “fairly debatable” defense, absent any other connection to reliance upon advice of counsel, is tantamount to a good faith defense and insufficient in and of itself to waive attorney-client privilege. Accordingly, we reverse the trial court’s order compelling discovery of the challenged documents.
FRIEDLANDER, J., concurs.
ROBB, J., dissents with separate opinion:
When an insurer asserts that a claim is “fairly debatable” to indicate a factual issue affects the claim’s strength or legitimacy, it does not necessarily rely on the advice of counsel and therefore does not necessarily waive the attorney-client privilege. Such factual issues would arise, for example, when the policy is clear but coverage is not clear because of an issue as to whether a person lives in the same home as the insured, whether the insured was speeding, or the severity of an injury.
Alternatively, when an insurer asserts that a claim is “fairly debatable” refers to a legal issue, it necessarily relies on advice of counsel and waives the attorney-client privilege. . . . .
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Here, Allstate’s affirmative defense refers to a legal issue: whether the policy’s per-person liability limit precluded Mr. Goad from recovering damages. The record reveals Allstate’s “fairly debatable” affirmative defense refers to this legal uncertainty, not a factual uncertainty. . . . .
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Based on the reasoning above and the facts in the record, I would conclude that Allstate’s affirmative defense that Mr. Goad’s coverage was “fairly debatable” necessarily referred to advice of counsel, thereby waiving Allstate’s attorney-client privilege.