JANUARY 2018 BAD FAITH CASES: BAD FAITH POTENTIAL EXISTS WHERE INSURER ALLEGEDLY DID NOT INVESTIGATE AND THERE WERE INCONSISTENCIES IN THE CLAIMS FILE (Philadelphia Federal)
The insured’s policy provided income loss benefits and medical benefits up to $277,500. The insured was injured in a motor vehicle accident one month after purchasing the policy, and underwent physical therapy. The physical therapy notes indicated that, while he was still able to work 8 hours per day, the insured normally worked 12-hour days. The insured submitted his federal tax returns to the insurer, which showed a significant income decrease. Additionally, the insured was diagnosed with cancer in the same year; however, at the time of the accident, the cancer was in remission and the insured was no longer undergoing treatment.
Two years later, the insured submitted a formal demand of $465,000 in income loss benefits. The insurer denied the claim, arguing that the insured failed to provide disability documentation or other documentation stating that he was unable to work. The insured then filed suit for breach of contract and bad faith, and the insurer moved for summary judgment.
In ruling on the bad faith issue, the Court denied summary judgment, stating that while the insurer may have had a reasonable basis for denying the income loss claim, bad faith liability could lie because the insurer failed to properly investigate the insured’s claim. The Court took note of discrepancies in the insured’s claim file, and held that these discrepancies and contradictions “should have prompted [the insurer] to investigate . . ., but it did not.” Additionally, the Court denied the insurer summary judgment on the breach of contract claim, holding that the insured “demonstrated that there is a genuine issue of material fact concerning whether he was entitled to income loss benefits . . ..”