JULY 2015 BAD FAITH CASES: COURT FINDS INSURER DID NOT ACT IN BAD FAITH BY TERMINATING COVERAGE AFTER INSURED FAILED TO PAY MONTHLY DEDUCTION AND PAY RESTITUTION (Middle District)

In Morris v. American National Insurance Group, the District Court adopted the Report and Recommendation of the Magistrate Judge, finding that the insurer did not act in bad faith when it terminated coverage after the insured failed to pay the monthly deduction and failed to make restitution within the allowable grace period.

After the insurer terminated the life insurance policy it had previously issued to its insured, the insured filed suit, alleging breach of contract, bad faith, and asking for a declaratory judgment. The insurer moved for summary judgment.

In granting summary judgment in favor of the insurer, the court found that the insurer did not act in bad faith because termination of coverage was proper and in accordance with the unambiguous terms of the policy agreement. Specifically, the insured failed to pay the monthly deduction due on June 22, 2012, and failed to make restitution within the 61-day grace period that began on June 22, 2012. Thus, the court found that the insurer had a reasonable basis for terminating coverage according to the plain language of the policy.

The Magistrate Judge’s Report and Recommendation had stated that in opposing summary judgment, the insured still had to meet the high burden for establishing bad faith “because the court must view the evidence presented in light of the substantive evidentiary burden at trial.”  The insured could not “overcome his burden of establishing that [the insurer] did not have a reasonable basis for terminating his Policy, as [the insured] failed to make proper premium payments in a timely manner.”

Date of Decision: May 28, 2015 (Report and Recommendation), July 7, 2015 (District Court opinion adopting Report and Recommendation)

Morris v. Am. Nat’l Ins. Corp., CIVIL ACTION NO. 4:13-CV-2236, 2015 U.S. Dist. LEXIS 88093 (M.D. Pa. July 7, 2015) (Brann, J.)

Morris v. Am. Nat’l Ins. Corp., CIVIL ACTION NO. 4:13-CV-2236, 2015 U.S. Dist. LEXIS 88447 (M.D. Pa. May 28, 2015) (Mehalchick, U.S.M.J.) (Report and Recommendation)