MARCH 2013 BAD FAITH CASES: COURT DENIES CLASS CERTIFICATION ON INSURER DECEPTION AND BAD FAITH CLAIMS, BUT PERMITS CLAIMS OF TWO PROPOSED PLAINTIFFS TO CONTINUE (New Jersey Federal)

In Clark v. The Prudential Ins. Co. of America, plaintiffs filed a putative class action complaint alleging fraudulent misrepresentation, fraudulent omissions, breach of the duty of good faith and fair dealing and violation of California’s Unfair Competition Law. The claims arose out of the carrier’s stoppage of the sale of Coordinated Health Insurance Program (“CHIP”) insurance plans.

In their complaint, plaintiffs argued that the carrier stopped selling CHIP policies to new customers in December 1981 (referred to as “closing the block”), despite its awareness that an exorbitant increase in premium rates would result. The insureds alleged the carrier intentionally concealed this information from its insureds and apprised policyholders that premiums would only increase as the result of an insured’s age and rising medical costs.

After examining the individual circumstances of each named plaintiff, the court denied the plaintiffs’ motion for class certification due to a lack of commonality and predominance. The court also partially granted the carrier’s motion for summary judgment based on a statute of limitations defense and dismissed four of the six plaintiffs. With respect to the remaining two named plaintiffs, the court denied the carrier’s motion, reasoning that a determination of the tolling of their claims involved genuine issues of material fact inappropriate for summary judgment.

Date of Decision: February 5, 2013

Clark v. Prudential Ins. Co. of Am., No. 08-6197, 2013 U.S. Dist. LEXIS 15571, U.S. District Court for the District of New Jersey (D.N.J. Feb. 5, 2013) (Debevoise, J.)