MARCH 2015 BAD FAITH CASES: BAD FAITH CLAIM STATED FOR FAILURE TO PAY FULL SURRENDER VALUE OF INSURANCE POLICY (Western District)

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In First National Bank of Pa. v. Transamerica Life Ins. Co., the dispute involved payment of the surrender value of certain insurance policies. The parties were approximately $2.6 Million apart on the amount of the surrender value.  The insured pleaded that the insurer, with the “assistance, cooperation and manipulation” of a consultant/agent, used “a manufactured, superficial technicality to avoid its legal obligation under the Policies” to avoid paying the full amount due, and that this was “on its face an act of bad faith.” The insured also raised a breach of fiduciary duty claim and breach of contract claim.

The court found that the insured set forth a statutory bad faith claim. It found that the facts averred in the complaint sufficiently alleged that the insurer did not pay the entire amount that the insured was owed under the policies, that the denial was unreasonable, and that the insurer knew that it lacked a reasonable basis in denying the claim.  The breach of fiduciary duty claim against the insurer, however, was dismissed as duplicative of the statutory bad faith claim; rather than as redundant with the breach of contract claim.

Date of Decision:  January 23, 2015

First Nat’l Bank of Pa. v. Transamerica Life Ins. Co., Civil Action No. 14-1007, 2015 U.S. Dist. LEXIS 7854 (W.D. Pa. January 23, 2015) (Reed Eddy, J.)

Summary judgment was ultimately entered for the insurer.

 

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