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)
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.