Monthly Archive for March, 2011

MARCH 2011 BAD FAITH CASES
COURT DENIES MOTION FOR RECONSIDERATION AFTER GRANTING SUMMARY JUDGMENT TO INSURED ON BAD FAITH BASED ON UNREASONABLE CONDUCT IN HANDLING CLAIM (Western District)

The insured was involved in a motor vehicle accident in 2001, suffering injuries to both of her knees.  She filed a claim with her insurer, whose adjuster initially believed the First Party Medical Benefits limit under the policy to be $5,000, and the insurer paid the insured’s medical bills for months until it reached that limit.

The insured then submitted a claim for uninsured motorist benefits after hiring an attorney and learning that the tortfeasor responsible for the accident (the driver of the other automobile) was not insured.  Additionally, although she initially did not mention any wage losses, the insured in her second application  also submitted a claim for income loss, alleging that she worked for the U.S. Postal Service.  After an investigation, the original adjuster for the insurer offered to settle the uninsured motorist claim for $7,798, and the insurer denied the income loss claim.  The case was then referred to a more experienced adjuster, who determined the policy limits to be $50,000 and eventually increased the settlement offer to $9,000.  The insured then filed suit after obtaining new counsel, asserting claims for breach of contract and bad faith.  Before the trial occurred, the insurer realized that due to stacking, the policy limit would actually be $100,000, and it made a settlement offer for that amount, but the case proceeded to trial.

The insured had alleged that the insurer acted in bad faith in handling both the first party income loss claim and the uninsured motorist claim.  The court granted summary judgment to the insurer on the count concerning income loss, as it felt that the insurer’s requesting of further documentation before providing an answer was reasonable, and based on the evidence the insurer could have reasonably denied the wage loss claim.

Concerning the uninsured motorist claim, however, the court granted summary judgment to the insured, as the insurer’s conduct was “intentional and unreasonable and [the insured showed] by clear and convincing evidence that [the insurer] did act in bad faith in regard to the handling and settlement of her claim.”  It specifically determined that the insurer acted in bad faith by “misrepresenting the uninsured motorists policy coverage limits; by refusing to arbitrate [the insured’s] uninsured motorist claim in direct conflict with its own policy language; by misleading [her] regarding their intentions to appeal an arbitration award; by proffering unreasonably low settlement offers; and in unreasonably delaying payment of the settlement funds and attempting to have [her] waive future claims against them for bad faith.”

The insurer then filed a motion for reconsideration, which the current opinion addressed.  In a short opinion, the court denied the insurer’s motion.  It felt that the insurer simply presented the same arguments and evidence that it did previously, with a couple small and unimportant differences that did not convince the court to change its ruling.  Therefore, the court upheld its granting of summary judgment to the insured on the bad faith claim relating to the insurer’s handling of the uninsured motorist claim.

Date of Decision:  March 16, 2011

Wisinski v. Am. Commerce Group, Inc., Civil No. 07-346 Erie, United States District Court for the Western District of Pennsylvania, 2011 U.S. Dist. LEXIS 26846, (Mar. 16, 2011) (Cohill, Jr., J.)

The original opinion can be found at :

Wisinski v. Am. Commerce Group, Inc., Civil No. 07-346 Erie, United States District Court for the Western District of Pennsylvania, 2011 U.S. Dist. LEXIS 320, (Jan. 4, 2011) (Cohill, Jr., J.)

The blog entry for the original opinion can be found here.

MARCH 2011 BAD FAITH CASES
INSURER HAS TO DEFEND BECAUSE (1) PROFESSIONAL LIABILITY EXCLUSION NOT APPLICABLE TO ALL CLAIMS; AND (2) NO FRAUD IN APPLYLING FOR POLICY (Philadelphia Federal)

The insured was a health care company that managed a personal care home.  In an underlying law suit, the plaintiff alleged that the insured breached its duty of care to her deceased husband by leaving him unsupervised and allowing him to leave the facility undetected.  The husband was eventually found with severe injuries, and the plaintiff claimed that his weakened physical condition contributed to his death less than two years later.  The plaintiff asserted that the insured was negligent in failing to provide a safe residential environment, failing to allow the decedent to access his living quarters (which led to him leaving the facility), and failing to maintain sufficient staffing to supervise the premises.

The insured was covered by the insurer under a business liability insurance policy.  The insurer brought the current action seeking a declaration that it has no duty to defend or indemnify the insured in the underlying negligence suit.

The policy stated that the insurer would compensate the insured for damages due to bodily injury, property damage, or personal and advertising injury.  It specifically excluded, however, claims “arising out of the rendering of or failure to render any professional service.”  The insurer alleged that the claims against the insured were for professional negligence, which would fall under the exclusion.

The court therefore had to determine whether the law dictated that the insurer had to defend the insurer under the language of the policy.  The insured felt that the allegations in the underlying action did not involve professional services, but the insurer believed they did.  The court recognized that the duty to defend is broader than the duty to indemnify, noting that “all doubts as to coverage [are] resolved in favor of the insured.”

It decided that because the exclusion for professional services included only a non-exhaustive list of examples, it was ambiguous, and therefore had to be construed against the insurer.  In one section of the Complaint in the underlying suit, the plaintiff alleged that the insured deviated from acceptable professional standards when treating the decedent.  These claims did fall under the professional services exclusion, and the court held that the insurer had no duty to defend and indemnify the insured for those claims.  The remainder of the original Complaint, however, contained several allegations that did not arise from rendering professional services.  For example, monitoring the premises (including patient rooms) and knowing where the residents were did not require special professional training.  These non-professional services led the court to conclude that the exclusion did not apply to the rest of the Complaint.

Finally, the insurer argued that the insured falsely represented the nature of its business when applying for the policy, but the court did not believe that based on the evidence presented about the policy application and related testimony about the subject.  The court therefore ruled that the insurer was not relieved of its duty to defend and indemnify the insured, and it denied the insurer’s Motion for Summary Judgment.

Date of Decision:  March 16, 2011

Hartford Cas. Ins. Co. v. New Hope Healthcare, Civil Action No. 09-5056, United States District Court for the Eastern District of Pennsylvania, 2011 U.S. Dist. LEXIS 26987, (Mar. 16, 2011) (Savage, J.)

MARCH 2011 BAD FAITH CASES
BAD FAITH CLAIM DISMISSED AFTER INSURER AND INSURED PROVIDE SIGNIFICANTLY DIFFERENT ESTIMATES OF COST OF REPAIRS & INSURER ACTED DILIGENTLY IN CONDUCTING INVESTIGATION (Philadelphia Federal)

The insured suffered losses to her house in a bad storm, and she had a homeowner’s insurance policy with the insurer.  The insurer’s representative inspected the house shortly after the storm and initially estimated the cost of repairs to be around $3,000, the insured hired a public adjuster who estimated that repairs would cost almost $40,000.

The insurer’s representative had concluded that the storm was not the cause of many claimed areas of damage around the house, while the insured’s public adjuster attributed nearly all of the damage in the house to the storm.  After a second inspection, the insurer’s representative adjusted his estimate to about $10,000, and the insurer paid that amount, but it was still significantly less than the insured sought.

The insured then filed suit in state court, alleging breach of contract and bad faith.  After the case was removed to federal court on diversity jurisdiction, the insurer filed a motion for summary judgment to dismiss both counts.  The court first refused to dismiss the breach of contract count, as there was a “fundamental dispute over whether the claimed damage in certain areas . . . [could] be attributed to the storm or to other causes,” and the public adjuster submitted an affidavit stating that he made no material misrepresentations.  It was therefore the fact-finder’s job to determine whether a breach of contract occurred, as the judge could not rule on the issue as a matter of law.

While the breach of contract claim survived summary judgment, the bad faith claim did not.  The insurer’s representative inspected the house twice and revised his estimate after the second inspection.  Additionally, he kept open lines of communication with the public adjuster and responded to all letters and phone calls.  The court therefore could not find any clear and convincing evidence that the insurer acted in bad faith when it denied coverage, and it granted summary judgment to the insurer on the bad faith count.

Date of Decision:  March 3, 2011

Kling v. State Farm Fire & Cas., Civil Action No. 10-101, United States District Court for the Eastern District of Pennsylvania, 2011 U.S. Dist. LEXIS 21835, (Mar. 3, 2011) (Fullam, J.)

MARCH 2011 BAD FAITH CASES
COURT DISMISSES BREACH OF CONTRACT CLAIM AFTER INSUREDS ALREADY HAD VOLUNTARILY WITHDRAWN BAD FAITH COUNT WITHOUT PREJUDICE (Philadelphia Federal)

The insureds owned a property in Darby, Pennsylvania that suffered severe damage when a wall on the neighboring property collapsed.  At the time of the incident, the insureds had a property insurance policy with the insurer, and they submitted a claim for coverage under the policy shortly after the damage occurred.  An independent adjuster inspected the property, and the insurer rejected the insureds’ claim only days after they submitted it.

The insurer had determined that the losses sustained fell under a provision in the policy that excludes “losses caused directly or indirectly from settling, shrinkage, bulging or expansions of foundations, walls, floors, roofs, or ceilings.”  The insureds were not satisfied with the insurer’s decision, and they hired their own investigator to inspect the property.  He asserted that the collapse of the bearing wall was “the direct result of additional retained soil places behind the retaining wall,” which would not trigger the exclusion mentioned above.

The insureds eventually sued the owner of the neighboring property, and they ended up recovering $140,000 in damages.  After later selling their property, the insureds filed the instant suit against the insurer based on the information their investigator gave them, alleging breach of contract and bad faith.  The insurer filed a motion for summary judgment, after which the insureds voluntarily withdrew the bad faith count without prejudice.

Because the parties did not dispute any key facts, the court simply had to interpret the insurance policy to determine whether the insurer breached its contract.  It noted that if a provision in a policy is ambiguous, then it should be construed in favor of the insured, but a mere disagreement about an interpretation of a provision does not mean that the provision is ambiguous.  In fact, the court here felt that the language of the policy exclusion mentioned above was clear and unambiguous.  It had no choice but to give effect to the language of the exclusion and hold that the exclusion applied.  The court therefore granted the insurer’s motion for summary judgment on the breach of contract after acknowledging again that the bad faith count was voluntarily dismissed without prejudice.

Date of Decision:  March 4, 2011

Gillin v. Universal Underwriters Ins. Co., Civil Action No. 09-5855, United States District Court for the Eastern District of Pennsylvania, 2011 U.S. Dist. LEXIS 22590, (Mar. 4, 2011) (Tucker, J.)

MARCH 2011 BAD FAITH CASES
THIRD CIRCUIT PERMITS EVIDENCE OUTSIDE COMPLAINT TO SHOW EXCEPTION TO EXCLUSION DID NOT APPLY IN AFFIRMING SUMMARY JUDGMENT ON BAD FAITH (Third Circuit)

The insured family owned a golf cart which struck a child.  The child’s family sued the insureds, and the insureds submitted a claim to their insurer for defense and indemnification from the lawsuit.

The homeowner’s insurance policy that the insureds had included a “Motor Vehicle Exclusion.”  The policy excluded from coverage liability caused by recreational motor vehicles like golf carts, unless they were used “solely to service the residence premises.”

The insurer’s investigation led it to discover that the golf cart was not used solely to service the residence premises.  Therefore, citing the policy exclusion, the insurer refused to indemnify or defend the insureds in the lawsuit against them.

The insured then sued the insurer, asserting claims for both breach of contract and bad faith.  The district court granted summary judgment to the insurer, and the insured appealed to the Third Circuit.  It argued on appeal that (1) the district court incorrectly ruled that the insurer had no duty to defend or indemnify the insured, and (2) it incorrectly allowed the insurer to rely on extrinsic evidence when it sought declaratory judgment.

The Third Circuit agreed with the district court on all issues.  The insureds had admitted that the golf cart was a recreational vehicle, and the court held that the victim’s family’s complaint clearly fell within the Motor Vehicle Exclusion.  Also, the court determined that the exception to the exclusion for using the vehicle solely to service the residence premises did not apply.

Finally, because the extrinsic evidence the insurer relied upon was used to show that the exception to the policy’s exclusion did not apply, the court ruled that the district court did not err in allowing the insurer to use that evidence.  The Third Circuit therefore held that the district court properly granted summary judgment to the insurer and affirmed the ruling.

Date of Decision:  March 9, 2011

Haines v. State Auto Prop. & Cas. Ins. Co., No. 10-1946, United States Court of Appeals for the Third Circuit, 2011 U.S. App. LEXIS 4684 (3d Cir. Mar. 9, 2011) (Aldisert, J.)

MARCH 2011 BAD FAITH CASES
INSURER OWES A COMMON LAW DUTY OF GOOD FAITH AND FAIR DEALING EVEN WHERE NOT STATUTORY BAD FAITH PLEADED (Western District)

The insured was riding his motorcycle in Pennsylvania when the driver of a car crossed into the lane in which he was traveling and struck his motorcycle.  The insured suffered severe injuries, and the insurer of the driver of the other car paid the policy limits of its liability coverage to the insured.  State Farm (“the insurer”) covered the insured, and the insured notified the company of his intent to pursue a claim for underinsured motorist (“UIM”) benefits.  His policy with the insurer consisted of $100,000 of UIM benefits for the vehicle in the accident, two other motorcycles, and one car, and he paid a premium to the insurer for stacking coverage, so the total amount of UIM benefits available was $400,000.

The insured provided medical records and reports to the insurer and made written demands for the full $400,000 available to him, but the insurer only paid $150,000 over the course of two payments.  The insured eventually filed a Complaint for breach of contract, seeking the remaining $250,000 available under the policies.  He alleged in the Complaint that the insurer did not objectively and fairly evaluate his claim and therefore violated its obligations under the policies, which amount to bad faith allegations.  He did not, however, assert a claim for bad faith under Pennsylvania law, and the insurer filed a motion to strike the paragraphs in the Complaint that discussed potential bad faith violations.

The insured responded by agreeing to strike the word “fiduciary” from the Complaint, as he realized that the case did not involve the insurer’s handling of a third-party claim.  On the other hand, the insured argued that while he did not assert a claim for statutory bad faith, the allegations in question were proper because the insurer owed him a duty of good faith and fair dealing with regard to his claim for the full amount of UIM coverage.  The court agreed with the insured, citing prior Pennsylvania case law and holding that “an insurance company’s duty to its insured is one of good faith and fair dealing.”  It therefore denied the insurer’s motion to strike the paragraphs of the complaint dealing with bad faith in their entirety.

Date of Decision:  February 28, 2011

Sartoris v. State Farm Mut. Auto. Ins. Co., Civil Action No. 11-119, United States District Court for the Western District of Pennsylvania, 2011 U.S. Dist. LEXIS 19414, (Feb. 28, 2011) (Standish, J.)

MARCH 2011 BAD FAITH CASES
SUMMARY JUDGMENT FOR INSURER ON BAD FAITH CLAIM AS IT HAD REASONABLY DENIED COVERAGE BECAUSE INSURED AND VICTIMS FAILED TO PROVIDE TIMELY NOTICE OF THE INCIDENT (Philadelphia Federal)

In Nationwide Mutual Fire Insurance Company v. Nova Real Estate LLC, a fire occurred at a property in Philadelphia.  At the time, a woman and her family occupied the house, and her son died in the fire.  The woman initially filed a lawsuit against various defendants from whom she alleged that she leased the property, and she claimed that the fire was caused by a faulty electrical system that the property owner negligently failed to repair.  The defendants in that action asserted, however, that the woman and her family never signed a lease and were living at the property illegally as squatters at the time.  They also claimed that the woman and her family caused the fire themselves.  Despite the defendants’ initial claims, the parties in the initial suit eventually settled for $3 million.  The realty company paid $50,000 directly to the family, and it assigned its rights to proceed against its insurers for the remaining balance.

For various reasons, the family did not notify the insurer in the current action of the fire, lawsuit, and settlement until three and one-half years after the fire occurred.  The policy with the insurer initially entered into by the realty company was a business owner’s policy with limits of $500,000 on any one occurrence.  The insurer denied coverage under an exclusion in the policy exempting “bodily injury due to rendering or failure to render any professional service.”  It also claimed that it did not consent to the payment made or expenses incurred by the realty company.

The insurer then filed the current action, seeking declaratory judgment.  It asserted that it had no obligations to cover losses sustained by the family or the realty company.  The court first concluded that neither the realty company nor the family, who eventually became the beneficiary of the policy, provided timely notice of the claims, clearly violating the policy.  The policy stated that a claim must be submitted “as soon as possible,” and the insurer was not notified of the incident until three and one-half years after the fire.  Attorneys for the family even requested about two years after the fire that the realty company notify the insurer, but it provided no notice at that time and the attorneys took no initiative to provide notice on their own.

The court then determined that insurer was prejudiced by untimely notice of the claims.  It noted that the insurer’s interests were not considered in the settlement negotiations, and the insurer was deprived of any opportunity to involve its own counsel in the matter.  Additionally, it concluded that the untimely notice was not excused by extenuating circumstances, as the family and realtor both had many opportunities to easily notify the insurer throughout the process and simply failed to do so.

Finally, the realty company had filed a claim for bad faith after the insurer denied coverage.  The court quickly dismissed that claim at the end of its opinion, as it had determined that the insurer had no obligation to provide coverage for the initial settlement and therefore could not have acted in bad faith in denying coverage.  The court therefore granted the insurer’s Motion for Summary Judgment and gave the insurer a declaratory judgment, stating that the insurer was not legally obligated to cover the remaining balance of the settlement.

Date of Decision:  March 1, 2011

Nationwide Mut. Fire Ins. Co. v. Nova Real Estate LLC, Civil Action No. 09-0303, States District Court for the Eastern District of Pennsylvania, 2011 U.S. Dist. LEXIS 20601, (Mar. 1, 2011) (Surrick, J.)

MARCH 2011 BAD FAITH CASES
COURT FORGOES SUMMARY JUDGMENT RULING ON BAD FAITH CLAIM ON REMAND WHEN IT CANNOT DETERMINE WHETHER OR NOT DEFENDANT INSURER EXHIBITED BAD FAITH AS A MATTER OF LAW (Philadelphia Federal)

A partnership (“Franklin Mills”) began developing the Franklin Mills Mall in 1988.  Franklin Mills entered into a Master Declaration and Agreement that governed all stores in the mall, under which occupants could not use or permit the use of their property for anything detrimental to the operation of the mall (for example, uses which emitted obnoxious odors or noises, uses that physically damage any part of the mall property, or and creating a nightclub on the premises).

Around two months after the Master Declaration was signed, a company named PMI Associates purchased a parcel of the Mall from Franklin Mills.  The parties signed a Declaration of Restrictions, which included an Operating Covenant that required the property to be operated as a general merchandise retail store/pharmacy for three years after opening the business on the property.  After three years, the buyer could use the property for more general retail uses, as long as the use was permitted under the Master Declaration.  Another provision in the Declaration of Restrictions gave Franklin Mills the option to repurchase the property if, after the three-year covenant expired, the buyer  “desire[d] to cease conducting business to the public in its building.”

In 2001, PMI took out a $3.5 million loan from Nationwide Life Insurance Company (“Plaintiff”), using the property at the mall as security.  In connection with the mortgage, Plaintiff purchased a title insurance policy from Commonwealth Land Title Insurance Company (“Defendant”).  The policy covered Plaintiff against various losses and damages, but it contained an exception for damages caused by breaching the Master Declaration or Declaration of Restrictions.

PMI eventually defaulted on its loan, and in 2003, it conveyed the property to Plaintiff.  Plaintiff then attempted to recoup its losses by selling the property to another entity for $3.8 million.  The new buyer had planned to lease the property to a tenant that would open a technical school.  Franklin Mills, however, did not consent to the sale of the property because the prospective buyer’s plans would violate the Declaration of Restrictions.  After unsuccessfully attempting to sell the property to other buyers and attempts to sell the property back to Franklin Mills, Plaintiff submitted a claim to Defendant, alleging that Franklin Mills’ rights of refusal were covered restrictions that made the property unusable and unsalable.

After Defendant denied its claim, Plaintiff filed a lawsuit seeking declaratory judgment and damages.  The District Court dismissed the litigation, holding that the policy expressly excepted any loss or damage arising from the Declaration of Restrictions.  The Third Circuit reversed the decision, reinterpreting the policy to consider its purpose and industry custom/practice.  Plaintiff then filed an Amended Complaint to the District Court, alleging claims for breach of contract and bad faith, and both parties filed motions for summary judgment.

The court’s lengthy opinion discussed many issues, but it ultimately reached to a few important conclusions.  It determined that the policy issued to Plaintiff “covers- without exclusion- the loss suffered . . . as a result of its inability to sell the subject Property.”  Therefore, it granted Plaintiff summary judgment on its breach of contract claim and entered a declaratory judgment in favor of Plaintiff.  It was unable to precisely determine the amount of damages available at this stage, however, as there were still many issues of material fact.

With respect to the bad faith claim, Plaintiff had alleged that Defendant deviated from its standard practices when it denied Plaintiff’s claim based on its interpretation of the policy’s exceptions.  Defendant responded by asserting that the Third Circuit only held that its interpretation of the policy was incorrect, and it did not mention that it was unreasonable.

The court first recognized the “clear and convincing standard” under Pennsylvania’s Bad Faith Statute, 42 Pa.C.S. § 8371.  The statute requires an insured to show clear and convincing evidence that the insurer (1) lacked a reasonable basis for denying coverage, and (2) knew or recklessly disregarded its lack of a reasonable basis.

Applying the bad faith standard to this case, the court held that neither party could prevail as a matter of law at the present stage.  The fact that the district court agreed with Defendant’s interpretation of the policy and the Third Circuit agreed with Plaintiff’s showed that this case presented a “novel issue of law,” and no party was unreasonable in its interpretation of the contract.  Because it could not find any evidence of bad faith or any evidence of an absence of bad faith by Defendant, the court decided to forgo a summary judgment ruling with respect to the bad faith claim.

Date of Decision:  February 17, 2011

Nationwide Life Ins. Co. v. Commonwealth Land Title Ins. Co., Civil Action No. 05-281, United States District Court for the Eastern District of Pennsylvania, 2011 U.S. Dist. LEXIS 16446, (Feb. 17, 2011) (Buckwalter, S.J.)

Judge Buckwalter denied a Motion for reconsideration on March 23, 2011 (2011 U.S. Dist. LEXIS 29692).

 

MARCH 2011 BAD FAITH CASES
BAD FAITH AND BREACH OF CONTRACT CLAIMS SURVIVE DISMISSAL AS INSURED SUFFICIENTLY PLEADS INSURER UNREASONABLY FAILED TO PAY OR DELAYED PAYMENT OF LIFE INSURANCE BENEFITS (Philadelphia Federal)

The dispute concerned an insurer’s obligation to pay out benefits on a life insurance policy.  The decedent was issued a $500,000 life insurance policy in December 2000, and he transferred all rights and interest in the policy to the defendant insured in May 2001.  The insurer did not object to the transfer or raise any concerns upon receiving notice of the transfer.

The insured paid premiums on the policy totaling over $100,000 until the decedent policyholder’s death in January 2009.  It submitted a claim for death benefits a month later, and it provided the necessary documentation.  However, the insurer allegedly “refused to pay the death benefits” and “failed to timely make a decision on its claims” despite receiving at least three demands from the insured for payment after it filed the initial claim.

In this case the insurer commenced the proceedings by filing a suit for declaratory judgment action to determine whether the decedent purchased the policy with the intent of selling his interest to the insured as part of a stranger-oriented life insurance (“STOLI”) scheme, which it claimed would void the policy under Pennsylvania law.  The insured answered the initial Complaint and filed counterclaims, asserting both breach of contract and bad faith by the insurer for failing to pay benefits under the policy.  The insurer then filed a motion to dismiss the counterclaims for failure to state a cause of action under Fed. R. Civ. Pro. 12(b)(6).

The court first addressed the breach of contract counterclaim.  It noted that the policy included a contestability clause, which provided a two-year period, starting on the issuing date, where it could contest the validity of the policy.  The two-year period expired in 2002, and under Pennsylvania law, insurers generally cannot contest the validity of life insurance policies after the contestability period is over unless there is an explicit exception (for example, the failure to pay premiums).  Courts had not addressed whether an insurer could dispute the validity of a policy for being part of a STOLI scheme, so it still was an open question as to whether the delay and refusal of paying benefits constituted a breach.  The court therefore determined that the issue could not be resolved on a motion do dismiss, and it concluded that the insured sufficiently pleaded its breach of contract claim.

With respect to the bad faith claim, the court noted that Pennsylvania’s bad faith statute, 42 Pa. Cons. Stat. § 8371, includes “causes of actions arising out of the bad faith handling or non-payment of claims” in addition to the literal act of denying a claim.  Therefore, even though the insurer never expressly denied the claim, the bad faith statute would be triggered if the insurer had no basis for refusing to pay or extending the delay of payment and knew or recklessly disregarded that fact.

The court held that the insured sufficiently pleaded that such refusal or delay was without reasonable basis, as it alleged that the insurer had notice of the transfer of interest from the decedent to the insured and raised no objections, and it conveniently waited until the decedent passed away before questioning his intentions.  Finally, the lack of responses by the insurer to the insured’s multiple demands could constitute bad faith if proven to be true and unreasonable.

The court determined that the insured also sufficiently pleaded a bad faith claim, and it therefore denied the insured’s motion to dismiss both the breach of contract and bad faith claims.

Date of Decision:  February 16, 2011

Reassure Am. Life Ins. Co. v. Midwest Res., Ltd., Civil Action No. 09-5590, United States District Court for the Eastern District of Pennsylvania, 2011 U.S. Dist. LEXIS 15966, (Feb. 16, 2011) (Yohn, Jr., J.)