Extra-Contractual Liability

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Judge Ashley Royal of the United States District Court for the Middle District of Georgia recently held in a case by an insured against its disability insurer alleging bad faith refusal by the insurer to pay disability benefits, that the plaintiff was entitled to discovery of a wide range of documents potentially bearing on the insurer’s “intent” and the circumstances “surrounding” the insurer’s refusal to pay. 

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Earlier this summer, a federal district court in Washington certified questions to the Supreme Court of Washington concerning whether an insured can maintain a procedural bad faith claim despite the fact that coverage was properly denied.  The case, entitled St. Paul Fire and Marine Ins. Co. v. Onvia, Inc., Docket No. C06-1056RSL (W.D. Wash.)(see here), involved a claim based on a class action involving the insured’s practice of distributing advertisements via fax. 

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In a bad faith case involving wrongful denial of coverage of a wrongful death suit, a Pennsylvania Court awarded the policyholder’s assignee $8,490,666 in damages, despite the fact that the policyholder had pled guilty to voluntary manslaughter. 

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A Massachusetts court recently ruled that a “good health” requirement in a life insurance policy must be interpreted based upon what the contracting parties knew at the time the policy was issued (a subjective test), not based upon what in fact turned out to be true based on discoveries made at a later date (an objective test). 

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