FEBRUARY 2008 BAD FAITH CASES3rd CIRCUIT UPHOLDS PARTIAL SUMMARY JUDGMENT ON BAD FAITH CLAIMS WHERE AMPLE EVIDENCE TO DENY BENEFITS (Third Circuit)

 

In Leach v. Northwestern Mutual Insurance Company, an insured filed an action against his insurer seeking payments under a disability insurance policy.  The insured had received benefits for total disability since suffering from a heart attack in 1991, and subsequently received benefits for a muscle condition and exhaustion.  After an investigation in 1998 uncovered that the insured had become the owner and operator of a marina, owned and operated a fishing boat, traveled to Russia to negotiate an oil contract, and performed consulting work for his former employer, the insurer denied benefits and sought restitution for over $200,000 in past benefits paid.  The insured sued, alleging breach of contract, bad faith and deceptive business practices, while the insurer filed a counterclaim for damages for breach of contract, unjust enrichment, misrepresentation and fraud.
The trial court entered partial summary in favor of the insurer on the basis that the insured could not meet his burden of proving by clear and convincing evidence that, (a) the insurer lacked a reasonable basis to deny benefits, and, (b) the insurer knew or recklessly disregarded its lack of a reasonable basis.  After a jury found in favor of the insurer on all remaining claims and counterclaims, the insured appealed to the United States Court of Appeals for the Third Circuit.  Upon appellate review, the Court affirmed the verdict of the trial court, finding that there was ample evidence supporting the denial of benefits.  For a summary of the lower court’s ruling awarding attorney’s fees to the insurer, see December 2006 summaries on this blog.
Decided: January 29, 2008
Leach v. Northwestern Mutual Insurance Company, United States Court of Appeals for the Third Circuit, No. 06-4786/5081, 2008 U.S. App. LEXIS 1990 (3rd Cir. 2008)(Jordan, J.)(unpublished).
J.H.