JANUARY 2006 BAD FAITH CASES
ISSUING RESERVATION OF RIGHTS LETTER DID NOT ESTABLISH BASIS FOR POST-LITIGATION BAD FAITH CLAIM (Philadelphia Federal)

Plaintiff sought leave to amend the complaint to add various averments of material fact, as well as claims for post-litigation bad faith conduct.

Specifically, plaintiff sought to add a post-litigation bad faith claim based upon the fact that defendants paid his benefits but continued to “maintain a reservation of rights until Saldi’s death, even after defendants knew and/or recklessly disregarded that they lacked any medically supported reasonable basis for reservation of rights.”

The U.S. District Court for the Eastern District of Pennsylvania would not allow the additional post-litigation bad faith claims, noting that the reservation of rights is itself a means of preventing a bad faith claim by the insured, as it allows an insurer to make payments to an insured while maintaining the right to seek reimbursement if it later becomes clear that the insured was not entitled to the payments.

The court also found defendants presented a reasonable basis for making such reservation of rights, on the grounds that defendants reviewed new documentation from plaintiff’s medical providers in making their decision.

Date of Decision: January 13, 2006

Saldi v. Paul Revere Life, United States District Court of the Eastern District of PA, Civil Action No. 99-CV-6563, 2006 U.S. Dist. LEXIS 1315 (D. Pa. 2006) (Surrick, J.)