MAY 2015 BAD FAITH CASES: NO BAD FAITH IN FIRST PARTY CASE WHERE DECISION NOT TO PAY LIFE INSURANCE BENEFITS WAS FAIRLY DEBATABLE (New Jersey Federal)

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In Barratt v. Metropolitan Life Insurance Company, the insured asserted a breach of the covenant of good faith and fair dealing for failure to pay life insurance proceeds.  The carrier defended by arguing the policy has lapsed for non-payment of premiums.  The court granted the insurer summary judgment on the bad faith claim.

As a first party claim, a finding of bad faith against an insurer in denying an insurance claim cannot be established through simple negligence or by mere failure to settle a debatable claim.  Rather the insured must show no fairly debatable basis for denying the claim.  In this case, the insurer offered its facts to show non-payment, which would preclude summary judgment and thus it defeated the insured’s argument that no fairly debatable basis existed to deny the claim.

Date of Decision:  March 26, 2015

Barratt v. Metro. Life Ins. Co., Civ No. 2:12-6734 (KM)(MAH), 2015 U.S. Dist. LEXIS 39510 (D.N.J.  March 26, 2015) (McNulty, J.)

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