APRIL 2016 BAD FAITH CASES: ESTATE CAN BRING BREACH OF FIDUCIARY DUTY, BREACH OF GOOD FAITH AND FAIR DEALING, AND STATUTORY BAD FAITH CLAIMS AGAINST INSURER FOR GIVING BAD ADVICE TO INSURED CONCERNING STATUS OF BENEFICIARY (Western District)

In MONY Life Insurance Company v. Snyder, there was a dispute over whether life insurance proceeds were to be paid to an ex-spouse or current spouse.  The insurer brought an interpleader action and paid the money into court, saying it had no stake in the outcome, while recognizing payment was due.  The current spouse, as executrix of her husband’s estate, filed three counterclaims against the insurer, on the basis of its failure to properly advise the deceased insured as to the beneficiary under the policy it issued: breach of fiduciary duty, breach of the covenant of good faith and fair dealing, and violation of the Unfair Insurance Practices Act (UIPA). The insurer sought to dismiss these claims.

The court recognized that typically a sale of insurance is treated as an arm’s length transaction, but this is not an absolute rule, and a tort claim for breach of fiduciary duty may be a viable cause of action in the context of the insured-insurer relationship.

Next, while there is no tort claim in Pennsylvania against an insurer for the breach of good faith and fair dealing, this is a legitimate contract cause of action, and the breach of good faith claim was allowed to proceed as such.

Finally, prior to hearing the motion, the executrix sought to change the third cause of action from a UIPA violation to a statutory Bad Faith claim.  The court granted leave to amend to restate that claim.

Date of Decision:  March 17, 2016

MONY Life Ins. Co. v. Snyder, 2016 U.S. Dist. LEXIS 34371 (M.D. Pa. Mar. 17, 2016) (Caldwell, J.)