NO BAD FAITH WHERE POLICY PROPERLY TERMINATED (Philadelphia Federal)
This case centered on whether the insurer’s notices of lapse and termination were effective to terminate the policy. The policy required the carrier to “send” these notices. There was no dispute that the insurer caused the required notices to be mailed, but the insured denied ever receiving them.
The insurer argued mailing alone was sufficient to meet the “send” requirement, but the insured argued the policy further required that the notices actually be received. The term “send” was not defined in the policy. Judge Wolson looked to dictionary meaning of “send,” along with case law on mailing required documents. He concluded that “send” did not mean sent and received. Thus, the insurer’s mailings alone were sufficient to terminate the policy, whether or not the insured received the notices.
The insured also alleged bad faith in terminating the policy. Judge Wolson rejected this claim on the simple ground that there was a reasonable basis to terminate the policy, stating:
Pennsylvania’s law creates a cause of action against an insurance company “if the court finds that the insurer has acted in bad faith toward the insured.” 42 Pa.C.S. § 8371. Pennsylvania courts have defined “bad faith” as “any frivolous or unfounded refusal to pay proceeds of a policy.” Rancosky v. Washington National Ins. Co., 642 Pa. 153, 170 A.3d 364, 365 (Pa. 2017) (quotation omitted). A threshold question in a bad faith action is whether the employer had a reasonable basis for denying benefits under the policy. See Condio v. Erie Ins. Exch., 2006 PA Super 92, 899 A.2d 1136, 1143 (Pa. Super. Ct. 2006). As discussed above, [the insurer] had a reasonable basis for denying benefits. Thus, [the insured’s] bad faith claim fails.
Date of Decision: May 20, 2020
Wetty v. AXA Equitable Life Insurance Co., U.S. District Court Eastern District of Pennsylvania Case No. 2:18-cv-04756-JDW, 2020 U.S. Dist. LEXIS 88550 (E.D. Pa. May 20, 2020) (Wolson, J.)
