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“All too often, we tend to demonize someone who sees things in a different light. But a disagreement can be honest. Two different people can view the same facts and reach different conclusions. Insurance law recognizes this principle and commands that substantive disagreements do not amount to bad faith. Instead, to show an insurance company’s bad faith, an insured has to show that the insurer ignored its duties as an insurer. The claim tends to focus on process, not substance.”  Hon. Joshua D. Wolson (2/9/22)

This case includes a number of other important principles, e.g., the insurer’s investigation need not be perfect, so long as it is reasonable; and reasonable differences in expert opinions cannot form the basis of a bad faith claim.

In the above quote, however, Judge Wolson underscores the deeper point underlying these, or any, legal principles: to the extent possible for any of us, judges and juries must put aside pre-existing mental and emotional filters that tilt the playing field before the game starts.

He also offers a point of reflection for all parties and counsel, in any kind of case, for measuring their claims, defenses, discovery positions, etc., and how they perceive each other’s motivations and conduct.

This case involved claims for disability benefits.  The insurer defendants engaged two doctors to review the insured’s disability file. These two doctors concluded the insured was no longer disabled after two years, and could find work.  The insured’s doctors disagreed.  The insurers followed their doctors’ opinions, and ended plaintiff’s benefits.

The insured sued for breach of contract and bad faith.  The carrier moved to dismiss the bad faith claim.

The insured argued the two doctors’ medical review processes and the insurer’s reliance thereon constituted bad faith. The insured also claimed that at least one of the doctors was not as highly qualified as one of her experts, which also indicated bad faith.

Judge Wolson disagreed and dismissed the claim, setting out the following points.

  1. Addressing the reasonableness element of statutory bad faith, Judge Wolson stated that the two doctors’ reports gave the carriers a reasonable basis to deny benefits.
  2. Addressing the intent element of bad faith, Judge Wolson observed: “In addition, the fact that two doctors conducted independent reviews of [the insured’s] file and provided … their best analysis suggests that [the insurer] neither knew that it lacked a reasonable basis nor that it recklessly disregarded a lack of a basis for its determination.”
  3. An insurance company’s expert “does not have to be ‘the best qualified’ or ‘have the specialization that the court considers most appropriate.’”
  4. An expert “just has to have enough competence to justify the insurance company’s decision to rely on him.”
  5. While the insurers’ experts could have done a physical examination, instead of only a paper review of the insured’s case, nothing requires the insurers’ doctors to conduct a physical examination in all circumstances: “Maybe [the insurers] should have investigated further, but they were justified to rely on [the two medical experts], particularly given the detail in their reports.”
  6. There is no requirement that the insurers’ experts contact the insured’s experts before reaching a determination.
  7. Insurers are “not required to give greater credence to opinions of treating medical providers”, following the principle that an insurer does not have to wholly submerge its own interests in evaluating a claim.
  8. A dispute in expert conclusions can only result in bad faith if the insured can demonstrate that the insurer’s reliance on its expert was unreasonable, and then that the insurer knowingly or recklessly disregarded its unreasonable reliance.

In sum, “[w]hile [the insurers] could have done more to investigate [the] claim, they did not have to do more. What they did satisfied their legal obligation, and [the insured’s] criticisms do not demonstrate that reckless disregard or willfulness necessary for a bad faith claim.”

Date of Decision:  February 9, 2022

Schultz v. Union Security Insurance Company, U.S. District Court Eastern District of Pennsylvania No. 2:21-CV-03511, 2022 WL 394755 (E.D. Pa. Feb. 9, 2022) (Wolfson, J.)