APRIL 2011 BAD FAITH CASES
NO SEPARATE ACTION FOR COMMON BAD FAITH; MOTION IN LIMINE GRANTED PREVENTING EXTRA-CONTRACTUAL CAUSE OF ACTION AGAINST PLAINTIFF INSURER (Philadelphia Federal)

A man who was the beneficiary of an annuity from an insurer passed away before receiving the minimum guarantee of 360 months of payments. The annuity contract stated that if the man died before the end of those 360 months, “the remaining monthly payments in the guaranteed period shall continue to be paid monthly to [his] estate . . . as they fall due and not in a lump sum.”

Both the estate of the decedent and his sister made claims to the insurer for the remaining annuity payments. The insurer then sued both parties in a statutory interpleader action to determine the proper beneficiary of the annuity. The Estate and the decedent’s sister moved for summary judgment, and the court denied both motions in January 2010. It asked the parties to update the court on discovery concerning any extrinsic evidence and whether the parties had any factual disagreements about the evidence they uncovered.

The current opinion addressed an attempt by the decedent’s sister to potentially initiate an additional extra-contractual cause of action while the interpleader action was still pending. The insurer filed a motion in limine, seeking a ruling that there could be no extra-contractual cause of action remaining against it in the case.

The court discussed precedent from a prior Eastern District case where the court granted a defendant’s motion to dismiss a common-law bad faith claim separate from a breach of contract claim. The court there held that under Pennsylvania law, a common law bad faith claim, i..e. not a statutory bad faith claim, is subsumed in the breach of contract action. In this case, while the decedent’s sister never raised a separate bad faith claim, she did attempt to raise a separate breach of contract claim in addition to the interpleader action already before the court. Following the precedent, the court determined that “even a breach of contract claim is duplicative in an interpleader action,” and it granted the insurer’s motion in limine.

Date of Decision: March 23, 2011

Monarch Life Ins. Co. v. Estate of Tarone, Civil Action No. 09-734, United States District Court for the Eastern District of Pennsylvania, 2011 U.S. Dist. LEXIS 29740 and 2011 U.S. Dist. LEXIS 32931 (Mar. 23, 2011) (Hart, U.S.M.J.)