Summary judgement applies when the facts not in dispute are sufficient to reach a legal conclusion. If there is a material dispute of facts, no matter how obvious the evidence is, it must go to trial. Further, summary judgement only reduces the cost (for both sides); it does nothing to act as a deterent.

> How would that even be defined?

That depends on how claiment friendly you want to be.

The key piece would be: "based on what the defendant knew when they refused the request for payment". Standard evidenciary rules apply for showing that the defendant knew something. In this case, the key evidence would be a police report and pictures sent to the insurance company, so I don't think there would typically be a dispute here.

The harder part is defining "ought". Courts already have a reasonable person test they apply to other situations. You could also apply the clear and convincing evidence standard to the applicable evidence (or, if you really wanted to, either preponderance or beyond a reasonable doubt).

The real answer is that in this hypothetical the legislature would pass a law, and then the appellate courts will spend decades clarifying the law until the legislature changes it again.