April 2007 Bad Faith Cases — Claim For Bad Faith Properly Dismissed Where Insured Made Claim For Life Insurance Benefits For Deceased Ex-Wife (Third Circuit)

In Early v. United States Life Insurance Company in the City of New York, the insured asserted breach of contract, bad faith denial of benefits and state statutory claims after the insurer denied his claim for benefits under a life insurance policy that he had purchased through his employer for his deceased ex-wife.  The District Court dismissed the insured’s claim and the insured appealed.  In an unpublished opinion, the Third Circuit Court of Appeals affirmed the District Court’s dismissal because the insured’s policy specifically stated that only lawful spouses of employees are eligible for coverage.  Since the insured and his wife divorced prior to her death, there was no coverage.  In addition, the court also speculated that the insured’s claim would ordinarily fall within the scope of ERISA preemption.  However, neither party addressed whether the insured’s claims were preempted by ERISA.  The Court held that the insured’s claims would fail as a matter of law under Pennsylvania law as well as under ERISA’s civil enforcement provision, since the terms of the policy were clear and unambiguous.

Date of Decision:  March 22, 2007

Early v. The United States Life Insurance Company in the City of New York, United States Court of Appeals for the Third Circuit, CV-05-4696, 2007 U.S. App. LEXIS 6870 (3d. Cir. March 22, 2007)(Sloviter, Ambro and Brody, JJ.)