BAD FAITH CLAIM CAN PROCEED TO TRIAL WHERE RECORD SHOWED A POTENTIAL BASIS FOR COVERAGE, EVEN THOUGH INSURER BELIEVED THAT BASIS WAS ONLY PUT FORWARD IN AN ATTEMPT TO EVADE A WAIVER (Middle District)

In this bad faith case, one type of injury was specifically not covered under a disability policy, pursuant to a waiver, but other forms of injury might be covered. The insurer denied the claim on the basis that the uncovered injury was the only injury that could have caused the disability at issue. The insured two types of injury were at issue, and brought breach of contract and bad faith claims.

The insured moved for summary judgment on the bad faith claim.

Middle District Judge James Munley found the record showed evidence of both uncovered and covered injuries. The insurer argued that the covered injury type was merely put forward as a make weight to avoid the true, uncovered, injury being the only basis for the disability claim.

As this was a summary judgment motion, the court could not disregard record evidence of either injury. Taking the evidence in the non-movant’s favor, the court found that (1) because the insurer reviewed the record before denying coverage and (2) the record included a covered claim as well as an uncovered claim, then (3) “these facts may show that [the insurer] knew it lacked a reasonable basis for denying the plaintiff’s disability insurance claim, or it recklessly disregarded its lack of a reasonable basis for doing so.”

“Therefore, plaintiff has sufficient evidence, which if credited by the jury, would support his bad faith claim making summary judgment for the defendant inappropriate here.”

Date of Decision: January 13, 2020

Dileo v. Federated Life Ins. Co., U. S. District Court Middle District of Pennsylvania No. 3:18cv628, 2020 U.S. Dist. LEXIS 5003 (M.D. Pa. Jan. 13, 2020) (Munley, J.)