NOVEMBER 2016 BAD FAITH CASES: MISREPRESENTATION ALONE CANNOT VOID POLICY WITHOUT PROOF OF INTENT AND MATERIALITY; ISSUE OF INSURER BAD FAITH IN CLAIMS HANDLING WAS FOR JURY (Philadelphia Federal)
This case involved accusations of bad faith running in both directions. The insurer sought to void numerous life insurance policies on the deceased insured, based on claims that the insured made material misrepresentations in his insurance applications (he had multiple life insurance policies). The insured’s estate brought claims of bad faith based on the insurance investigation (alleging that the insurer at different times claimed the insured was not dead, had committed suicide and/or had been the victim of foul play, in addition to arguing that the policy should be voided on the basis of misrepresentations in the applications). Summary judgment was sought all around.
There was no issue that misrepresentations were made on the insurance application. However, there were genuine issues regarding both the insured’s intent in making those misrepresentations, and whether they were material, i.e., whether the policies still would have been issued if the truth were known to the carrier. Thus, summary judgment was denied to the insurer, since determination of the insured’s intent and how the insurer would have handled the true information were jury questions.
The court denied summary judgment to both parties on the insured’s bad faith claim. This being a federal action, plaintiff’s statutory bad faith claim was subject to a jury trial. The issue was the manner in which the insurer investigated the death of the insured, and a delay in paying benefits. The court found that the jury had to decide issues regarding whether the estate provided sufficient proof of death, and whether the insurer’s investigation “demonstrated a reasonable basis for questioning and refusing the claims.”