A Second Look at Fakhoury: "Don't sue if it's true"
One more thing about Fakhoury: it ends with the insured giving the insurer a consent judgment of $968,214.33 to be paid in low monthly payment (to escalate if the Fakhoury's ever got more money) and by liquidating the Fakhoury's real property. This is a matter of public record because the parties in Fakhoury obligingly put it on PACER. It's Case 1:12-cv-00268-WDQ, Document 66.
Going out on a limb, I suspect the case settled because it became apparent that should there be a trial, the insurer was going to prove that the insureds really had arranged for someone to burn down their house as an insurance fraud scheme. (To recap, the alleged bad faith was that the insurer had wrongly denied coverage based on an unsupported allegation that the insureds had arranged for their house to be burned down.)
If I am right, this reminds me of Wilde v. Marquess of Queensbery. In Wilde v. Marquess of Queensbery, (the) Oscar Wilde sued the Marquess of Queensbery (famous for inventing the modern rules of boxing) for calling him a "sondomite" as a result of a long and bitter feud. (At that time, being gay was a felony in Britain.) Oscar's friends advised him not to bring the suit because Oscar was, in point of fact, gay. Oscar, not listening, brought the suit anyway, allowing the Marquess to prove the Oscar was gay in open court. This bankrupted Oscar under Britain's loser-pays fee shifting scheme and eventually led to England prosecuting and imprisoning their best playwright. It was, in short, an entirely avoidable tragedy. The moral of story: don't sue for defamation when it's true.
(Of course, people never learn. Alger Hiss made the same mistake when he sued Chambers for saying that Hiss was a communist spy. This gave Chambers a platform to put Chamber's evidence behind his claim in the public view, which in turn led to Hiss being tried for perjury (since the statute of limitations on espionage had run.) The same moral applies.)
The same advice is apparently good when insurance companies accuse you of insurance fraud. Suing is like going double or nothing. If you sue, the insurance company will press the insurance fraud issue and you might end up worse off than before.
(Of course, I can imagine situations where suing is your only option. If the insurer was coming after Plaintiffs, suing first might have been the best option. Every case is different and you cannot really know what the best move was without being there. That's why people need lawyers for this kind of thing.)