In Hatchigan v. State Farm Insurance Company, a bad faith claim arose after the insurer reversed its decision to provide the insured with payment for lost earnings. The insured suffered a lower back and neck injury when a vehicle lost control and struck his parked van. The carrier’s policy insured “the loss of wages or salary the insured would have earned in his or her regular work but not other income.” The insured filed an Application for Benefits which made a loss of earnings claim. The insurer’s claims representative called the insured and left a message indicating that a check covering his lost earnings would be issued. However , this was message was allegedly issued before the insured’s employer told the insurer that the insured was laid off. The insured was told by the insurer that lost wages would not be paid if he was laid off. However the insured continued to assert that he was not laid off but stopped working because of his injury. Both parties continued to send letter communications back and forth, however the insurer refused to pay the benefits and closed the file.
The insured filed a bad faith complaint. The insurer filed a motion for summary judgment, arguing that it reversed its decision to provide payment for lost earnings only after learning from the insured’s employer that he was laid off; and because applicable Delaware law did not permit the claims made. The insured was a Delaware resident at the time of the policy’s issuance. The insured responded that he did not seek recovery under Pennsylvania law, but only referred to Pennsylvania law as a basis for comparison since Delaware has no applicable statutory law. The Court found that Delaware law applied, and had no bad faith statute. Rather in Delaware, a bad faith insurance claim sounds in contract and arises from the implied covenant of good faith and fair dealing. The Court found that based on the facts there exists genuine issues of material fact warranting the denial of summary judgment. Factual disputes regarding the insured’s ability to work, whether he sought light duty work, as well as his obligation to mitigate lost income remain. Therefore given legitimate disputes regarding these factual matters exist, the Court denied the insurer’s motion for summary judgment and denied the insurer’s motion for summary judgment seeking that the insured be denied recovery of attorney’s fees and costs.
Date of Decision: November 25, 2008