OCTOBER 2008 BAD FAITH CASES INSURANCE CARRIER PERFORMED REASONABLE INVESTIGATION INTO ALLEGED FORGERY IN DENYING CLAIM (Philadelphia Federal)
In Levin v. Transamerica Occidental Life Insurance Company, the insured made claims that the carrier wrongfully paid his sister the full proceeds of their parents life insurance policy, instead of paying him 50%. There was a fairly incredible history of purported changes to the beneficiaries of the policy. Two of the change forms, which would benefit plaintiff, were allegedly forged.
There were cross motions for summary judgment, and the court found that the evidence permitted a conclusion that the forms were not authentic. Thus, there was no breach of contract in failing to pay him. The court further found that even if there were somehow a contract, there was no fiduciary duty owed to him, and even if there were such a duty, there was no breach as the carrier undertook a proper investigation of the claims. He could not bring a consumer protection law claim because he had no standing as a non-party to the contract.
On the statutory bad faith claim, the plaintiff asserted that the carrier’s investigation into the proper owner and beneficiary of the insurance Policy was reckless and its decision to allocate the life insurance benefit to the sister lacked a reasonable basis. It is worth quoting the court on how to handle a claim of bad faith investigation:
“In order to determine whether an insurer acted in bad faith in conducting an investigation into whether an insured was entitled to benefits, courts have looked to the following: Judges of this court have held that an insurance company’s substantial and thorough investigation of an insurance claim, forming the basis of a company’s refusal to make or continue making benefit payments, establishes a reasonable basis that defeats a bad faith claim…To defeat a bad faith claim, the insurance company need not show that the process used to reach its conclusion was flawless or that its investigatory methods eliminated possibilities at odds with its conclusion. Rather, an insurance company simply must show that it conducted a review or investigation sufficiently thorough to yield a reasonable foundation for its action.” (citing Mann v. Unum Life Ins. Co.)
Here the carrier took reasonable steps to investigate the claim, including hiring a handwriting expert to determine whether there was a forgery or not. The court also recognized the significance of the fact that the insurer did not refuse to pay on that claim, or attempt to show any self-interest; rather it paid the sister the full $1,000,000. Thus, the carrier and the sister were granted summary judgment.