JANUARY 2010 BAD FAITH CASES
COURT DISMISSES BAD FAITH CLAIM FINDING MATERIAL FALSE REPRESENTATIONS IN LIFE INSURANCE APPLICATION (Middle District)

In Neiman v. American International Group, Inc., the insurer refused to pay the proceeds of a term life insurance policy stating that the “facts pertaining to past medical history were misrepresented in the application.” The insured failed to disclose that he had cancer. The beneficiary of the policy sued the insurer for breach of contract and bad faith. The insurer alleges that the insured knowingly or in bad faith concealed information concerning his medical history, which was material to its decision to insure him.

The insurer had previously filed a motion for summary judgment. In the court’s memorandum and order denying the motion, the court found as a matter of law that the application contained false representations that were material to the risk undertaken by the insurer. The court denied the motion for summary judgment solely because there was a genuine issue of material fact concerning whether the insured made the statements knowing them to be false or in bad faith.

The insurer filed a motion in limine to dismiss the insured’s claim for bad faith. The court granted the motion to strike the bad faith claim finding that the insurer had a reasonable basis to deny the claim.

Date of Decision: December 7, 2009

Neiman v. Am. Int’l Group, Inc., Civil No. 1:CV-08-1535, United States District Court for the Middle District of Pennsylvania, 2009 U.S. Dist. LEXIS 113483 (M.D. Pa December 7, 2009) (Rambo, J.)