“Although Ohio courts have generally found independent tort liability only in cases of improper processing and handling of claims,” the U.S. District Court for the Northern District of Ohio held that a claim predicated on an insurer’s failure to refund unearmed premiums can support an independent claim for bad faith. Pate v. Guarantee Trust Life Ins. Co, No. 1:09-cv-2454 (N.D. Oh. Mar. 15, 2010).
In Pate, an insurer was sued in a class action lawsuit after it failed to refund unearned premiums when the insured class members satisfied their car loans prior to maturity. The credit insurance policies issued by the insurer to the class contained a provision requiring the insurer to refund a portion of the premium under such circumstances. As a result, the plaintiffs sued the insurer for breach of contract, unjust enrichment and violation of the duty of good faith and fair dealing.
The insurer moved to dismiss the bad faith count arguing that Ohio does not recognize a cause of action for bad faith outside of the claim handling context. Although the court recognized that bad faith claims in Ohio have typically been confined to the claims handling context, it declined to find that to preclude claims for bad faith in other contexts. Observing the broader rule that “an insurer has a duty to act in good faith towards its insured in carrying out its responsibilities under the policy of insurance,” the court held that the conduct complained of implicated the insurer’s responsibilities under the policy. Accordingly, the court held the plaintiffs’ complaint stated a claim for bad faith.
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