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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.
Though these cases have relevant factual differences, they send very different signals regarding the claims investigation process. The Babayan court dismissed the claim that the insurer's searching post-claim investigation constituted bad faith. In contrast, the Saldi court credited (at least for purposes of the discovery phase of the litigation) the policyholder's allegation that he was the victim of an improper profit-driven claims investigation, based on evidence from other unrelated cases. Assuming for argument's sake that claims investigations are motivated, at least in part, by profit concerns, does this mean that every detail of the claims investigation, including how those concerns are translated into the denial of a claim, is open to discovery? The answer should be no ' and as discussed below, even in difficult cases there are means readily available to avoid burdensome and prejudicial discovery regarding alleged 'patterns and practices' of profit-motivated claims investigations.
Major Differences In UK, U.S. Copyright Laws
This article highlights how copyright law in the United Kingdom differs from U.S. copyright law, and points out differences that may be crucial to entertainment and media businesses familiar with U.S law that are interested in operating in the United Kingdom or under UK law. The article also briefly addresses contrasts in UK and U.S. trademark law.
The Article 8 Opt In
The Article 8 opt-in election adds an additional layer of complexity to the already labyrinthine rules governing perfection of security interests under the UCC. A lender that is unaware of the nuances created by the opt in (may find its security interest vulnerable to being primed by another party that has taken steps to perfect in a superior manner under the circumstances.
Strategy vs. Tactics: Two Sides of a Difficult Coin
With each successive large-scale cyber attack, it is slowly becoming clear that ransomware attacks are targeting the critical infrastructure of the most powerful country on the planet. Understanding the strategy, and tactics of our opponents, as well as the strategy and the tactics we implement as a response are vital to victory.
Legal Possession: What Does It Mean?
Possession of real property is a matter of physical fact. Having the right or legal entitlement to possession is not "possession," possession is "the fact of having or holding property in one's power." That power means having physical dominion and control over the property.
The Stranger to the Deed Rule
In 1987, a unanimous Court of Appeals reaffirmed the vitality of the "stranger to the deed" rule, which holds that if a grantor executes a deed to a grantee purporting to create an easement in a third party, the easement is invalid. Daniello v. Wagner, decided by the Second Department on November 29th, makes it clear that not all grantors (or their lawyers) have received the Court of Appeals' message, suggesting that the rule needs re-examination.