NOVEMBER 2012 BAD FAITH CASES: COURT AFFIRMS DENIAL OF BAD FAITH CLAIM WHERE INSURED FAILED TO MAKE MATERIAL DISCLOSURES (New Jersey Appellate Division)

In Heller v. First UNUM Life Ins. Co., the Appellate Division heard an insured’s appeal from the trial court’s denial of his cross-motion for summary judgment. The motion sought a ruling that the carrier acted in bad faith by denying the insured’s claim for disability benefits.

The injuries that lead to the insured’s claim occurred in early 1993. However, the insured did not file a proof of loss with the carrier until 1996 because he was serving a jail sentence for federal disability fraud. He later withdrew this claim and refiled it in 2000 after experiencing back pain. The carrier denied coverage because (1) it did not find the claim credible; (2) the insured provided false information on his applications for insurance coverage; and (3) the carrier was prejudiced by the lack of supporting evidence related to the insured’s claimed shoulder injury. The trial court agreed and found for the carrier.

The insured appealed this decision to the Appellate Division, arguing that he was entitled to coverage and that the carrier acted in bad faith by denying his insurance claim. The panel disagreed, writing a per curium decision in support of the trial court’s findings. Part of the court’s agreement with the carrier was based on a finding of disputed fact with respect to whether the insured had failed to disclose certain information, to the carrier’s prejudice, in order to hide his conviction for fraud.

Date of Decision: May 24, 2012

Heller v. First UNUM Life Ins. Co., NO. A-0688-10T3, 2012 N.J. Super. Unpub. LEXIS 1145, New Jersey Superior Court Appellate Division (App.Div. May 24, 2012) (Axelrad, Sapp-Peterson and Ostrer, JJ.)