Kraus

MEMORANDUM ***

As we read California law in Guebara v. Allstate Insurance Co., the plaintiff has to show two things to establish a breach of the implied covenant of good faith and fair .dealing: (1) benefits due under the policy were withheld; and (2) the reason for withholding benefits was unreasonable or without proper cause. 1 The California Court of Appeal puts the question as “whether the refusal to pay policy benefits was unreasonable.” 2 Where there is a refusal to pay benefits, it is still incumbent upon the insured to show “that the insurer acted unreasonably or without proper cause.” 3 “[WJhere there is a genuine issue as to the insurer’s liability under the policy for the claim asserted by the insured, there can be no bad faith liability imposed on the insurer for advancing its side of that dispute.” 4 This is so whether *371 the dispute is about legal issues or factual issues.

Though Dr. Kraus was entitled to, and was awarded, benefits under his insurance contract, the district court correctly granted summary judgment against his claim for punitive damages based on bad faith. Dr. Kraus failed to establish either element of his claim — nonpayment or…