BAD FAITH CLAIM STATED WHERE COMPLAINT MAKES OUT CLAIM INSURER KNOWINGLY DENIED BENEFITS DUE (Philadelphia Federal)

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This case involves a discrepancy over whether an insured timely renewed his life insurance policy, two months before his death.  There was a dispute of fact over the date when the premium payment was mailed and received.

The carrier insisted the premium check was not mailed and received before the date necessary to maintain the policy. It deposited the insured’s payment check, but later returned the payment sum and deemed the policy lapsed on the basis the payment was outside the policy’s grace period. The beneficiary children, through their mother, alleged the check in fact was mailed and received within the grace period for premium payments. They sued for breach of contract and bad faith.

The insurer moved for judgment on the pleadings as to both counts.

First, the court denied judgment on the pleadings regarding the breach of contract claim. There was a dispute of fact over the mailing and receipt dates that could not be resolved via a motion for judgment on the pleadings.

Judge Slomsky then rejected the motion to dismiss the bad faith claim.

The plaintiffs alleged the insurer denied their claims without a reasonable basis, knowing that it had in fact received the insured’s premium payment during the grace period for continuing the policy. Further, the plaintiffs adequately alleged the insurer “knew of or recklessly disregarded the lack of reasonable basis because it knew [payment was timely] when it received and deposited the July Payment [from the deceased insured].”  Despite this knowledge, the insurer “refused to pay the Policy’s benefits and never issued a denial letter.”

In denying the motion, Judge Slomsky concluded that, “[a]t this stage, viewing the facts in the light most favorable to Plaintiffs, they are sufficient to raise an inference that [the insurer] refused to pay under the Policy in bad faith.”

Date of Decision: January 21, 2021

Mullin v. Reliastar Life Insurance Company, U.S. District Court Eastern District of Pennsylvania No. CV 20-1438, 2021 WL 210962 (E.D. Pa. Jan. 21, 2021) (Slomsky, J.)

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