NOVEMBER 2007 BAD FAITH CASES: AWARD OF COSTS TO INSURER AFTER AWARD OF SUMMARY JUDGMENT; NO POST-CLAIMS UNDERWRITING BAD FAITH (Third Circuit)
The Third Circuit affirmed an award of costs against the insured under Federal Rule of Civil Procedure 54(d)(1). The district court had taken the insured’s indigence argument into account in lowering the costs awarded, and did not have to lower them to zero. Further, there was no legitimate unclean hands argument, but rather a restatement of a substantive claim on which the insured had already lost.
In its earlier decision, the district court had found that the policy was void ab initio because of misrepresentations in applying for the policy, that there could be no breach of contract where there was no contract, and that there could be no bad faith on the novel post-claims underwriting practices. This was affirmed by the Third Circuit in Northwestern Mut. Life Ins. Co. v. Babayan, 430 F.3d 121 (3d Cir. 2005), which also stated that the idea of post-claims underwriting could not really be distinguished from the permissible and necessary practice of claims investigation.
