In Kofsky v. Unum Life Insurance Company of America, the insured purchased a disability insurance policy. He alleged that the defendants, the insurer and the insured’s broker, unilaterally cancelled his insurance policy without prior notice. Thereafter, the insured claimed that he still forwarded payment under the policy, and that he fulfilled his duties under the policy, but the defendants refused to reinstate the policy. He brought claims for statutory bad faith, among others, against both the insurer and the broker, each of which sought to dismiss those claims.
The insurer’s motion to dismiss was denied. Although the complaint lacked details, it provided enough factual allegations to sufficiently state a bad faith claim. The insured alleged that the carrier unilaterally cancelled the policy even though the insured had fulfilled his obligations under the policy. This was enough to allege the carrier lacked a reasonable basis for cancellation, which can be the basis of a bad faith claim, and that there were issues of fact that remained.
The insurance broker was successful, however, because the bad faith statute only applies to insurers, not entities like brokers which do not issue policies, collect premiums, or assume risks or contractual obligations.
The court dismissed the breach of fiduciary duty claim against the insurer. There were no allegations that some action was taken or agreement made that would take the insurer beyond its contractual obligations as an insurer, which did not automatically create a fiduciary duty; rather, this appeared to be akin to a claim for breach of the contractual duty of good faith and fair dealing, which is subsumed in the breach of contract claim.
Date of Decision: September 2, 2014
Kofsky v. Unum Life Ins. Co. of Am., CIVIL ACTION NO. 13-5647, 2014 U.S. Dist. LEXIS 122220 (E.D. Pa. September 2, 2014) (Surrick, J.)