FEBRUARY 2012 BAD FAITH CASES: COURT RULES THAT COMPLAINT ALLEGES PLAUSIBILE MISREPRESENTATION AND BREACH OF FIDUCIARY DUTY CLAIMS (Middle District)

In Jones v. South Williamsport School District, the court examined a carrier’s motion to dismiss. After a failed appeal for health insurance coverage under an employer-sponsored insurance policy, the insured party filed suit for misrepresentation and breach of fiduciary duty against the carrier, who moved to dismiss the action. The court ruled that dismissal was improper because it was premature to determine who exercised control over the insured’s employee health plan. Second, the court ruled that the insured pleaded facts sufficient to sustain a breach of fiduciary duty claim, which the Third Circuit has permitted in ERISA cases where fiduciaries “materially mislead those to whom the duties of loyalty and prudence are owed.” Although Pennsylvania common law does not permit such a claim in tort, pursuant to Cowden v. Aetna Cas. & Sur. Co., the court interpreted the insured’s allegations as a contractual breach of fiduciary duty claim. The court denied the motion to dismiss and permitted this portion of the complaint to proceed to discovery.
Date of Decision: January 25, 2012
Jones v. South Williamsport School District, No. 4:11-cv-1179, 2012 U.S. Dist. LEXIS 10099 (M.D. Pa. Jan 25, 2012) (Kane, J.).