In Dean v. New England Mutual Life Insurance Company, the plaintiff’s claims concerned allegations of life insurance payments under her ex-husband’s policy directly to their daughters, rather than to her, individually, or to her as trustee for her daughters. A judgment of divorce had provided: “Husband shall maintain and pay the premium for insurance coverage to the amount of Seventy Five Thousand ($75,000) Dollars naming the children as equal beneficiaries and naming the Wife trustee until the children are emancipated.” At the time of death, the daughters were 19 and 20 years old. The former wife/plaintiff argued that the daughters were not emancipated under the terms of a Custody and Visitation Agreement.
The plaintiff alleged that the insurer “breached the implied duty of good faith and fair dealing owed to Plaintiff by the mishandling of the claim, failing to process the claim properly, fail[ing] to pay the proper party, and advising the Plaintiff that the parties[‘] children were legally entitled to the proceeds and moreover misstating to the Plaintiff . . . the insurance policy proceeds.” The court found that this failed to state a claim.
The plaintiff failed to allege that the insurers acted in bad faith or with an improper motive, and that: “Bad faith or ill motive is an essential element of a claim for breach of the implied covenant of good faith and fair dealing.” It noted that: “[A]n allegation of bad faith or unfair dealing should not be permitted to be advanced in the abstract and absent an improper motive.” Rather “to establish a claim for bad faith in the insurance context, the plaintiff must show two elements: (1) the insured lacked a ‘fairly debatable’ reason for its failure to pay a claim, and (2) the insurer knew or recklessly disregarded the lack of a reasonable basis for denying the claim….”
There was no bad faith or improper motive alleged in this case, “let alone that Defendants lacked a ‘fairly debatable’ reason for failing to pay out any of the Policy’s proceeds to Plaintiff, either on her own behalf or as Trustee.” Moreover, the plaintiff had acknowledged that the insurers did not deny a claim; rather, they paid out the policy’s proceeds to the claimants, i.e., the daughters, upon the daughters’ request for payment.
The court noted that the insurers had also asked for dismissal under the fairly debatable standard; but that such arguments were appropriate only for summary judgment motions, prior to trial, not motions to dismiss.
Date of Decision: January 29, 2015
Dean v. New Eng. Mut. Life Ins. Co., Civ. Action No. 14-2211 (FLW)(DEA), 2015 U.S. Dist. LEXIS 10244 (D.N.J. January 29, 2015) (Wolfson, J.)