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When Bad Faith Threatens Good Business: Third Circuit Developments in Insurer Bad-Faith Claims
Insurer bad-faith liability ' that is, any liability beyond the coverage or other benefits expressly provided for in the insurance contract ' has been litigated for about a century. For most of that time, judges and jurors applied it sparingly in egregious cases of blatant abuse by insurers. However, the tort of bad faith, by proscribing (among other things) 'unfounded' denials of coverage motivated by 'self-interest,' has always existed in tension with insurers' fundamental duty to maximize enterprise value by, for instance, paying claims only when contractually required. This tension, rarely explicit in the early cases, increasingly is laid bare as policyholders aggressively (if understandably) press doctrinal boundaries in the hope of recovering tort damages in suits on insurance contracts. Two recent cases involving disability benefits from courts within the Third Circuit ' Northwestern Mut. Life Ins. Co. v. Babayan, 430 F.3d 121 (3d Cir. 2005), and Saldi v. Paul Revere Life Ins., 224 F.R.D. 169 (E.D. Pa. 2004) ' illustrate this tension and suggest a need for judicial management to harmonize insurers' conflicting duties.
In Babayan, the Third Circuit upheld dismissal of the bad-faith claim of a policyholder who was denied disability benefits after discovery of admittedly inaccurate statements in her insurance application. The policyholder argued that the investigation of her medical background by an underwriter and others constituted impermissible 'post-claim underwriting,' but the court could not distinguish this 'nebulous' claim from ordinary post-claim investigation and observed that 'it is not bad faith to conduct a thorough investigation into a questionable claim.' Babayan, 430 F.3d at 139. In Saldi, the plaintiff alleged that disability benefits he received due to health-related temperature sensitivity were terminated following a claim investigation instituted 'as part of a bad-faith pattern and practice of terminating valid claims to improve [the defendant insurer's] profits.' 224 F.R.D. at 175. Based on documents produced in other disability cases against the same insurer, the Saldi court ordered extremely broad discovery of the profitability and claims handling practices of an entire national line of the defendant's disability insurance business.
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The DOJ's Criminal Division issued three declinations since the issuance of the revised CEP a year ago. Review of these cases gives insight into DOJ's implementation of the new policy in practice.
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Use of Deferred Prosecution Agreements In White Collar Investigations
This article discusses the practical and policy reasons for the use of DPAs and NPAs in white-collar criminal investigations, and considers the NDAA's new reporting provision and its relationship with other efforts to enhance transparency in DOJ decision-making.
Bankruptcy Sales: Finding a Diamond In the Rough
There is no efficient market for the sale of bankruptcy assets. Inefficient markets yield a transactional drag, potentially dampening the ability of debtors and trustees to maximize value for creditors. This article identifies ways in which investors may more easily discover bankruptcy asset sales.
A Lawyer's System for Active Reading
Active reading comprises many daily tasks lawyers engage in, including highlighting, annotating, note taking, comparing and searching texts. It demands more than flipping or turning pages.