A pair of Federal Court rulings highlights First-Party Bad Faith Law. The rulings came in cases involving the law of neighboring States.
In one, a class action lawsuit against various GEICO Insurance Companies (GEICO Casualty, GEICO General, etc.) was certified as to certain Bad Faith Claims under Delaware substantive law. It can be a breach of the implied covenant of Good Faith and Fair Dealing, the Court noted, for an Insurance Company to fail to investigate or to process a Claim for Benefits including in this case Personal Injury Protection Benefits, or to delay payment in Bad Faith. The Federal Court certified a class action with respect to "Bad Faith Breach of Contract" Claims involving asserted reduction or denial of PIP Benefits under Delaware substantive law. Download Johnson v. GEICO Casualty Co. (D. Del. Case No. 06.408 Opinion Filed December 30, 2009), also published as Johnson v. GEICO Casualty Co., 2009 WL 5173486 (D. Del. December 30, 2009)(page numbers not yet assigned at time of publication; unnumbered paragraph beginning, "c. Count III: Bad Faith Breach of Contract"; Westlaw subscription required to access Westlaw).
In the other case, a Federal Court in a case involving Pennsylvania substantive law, adopted the Report and Recommendation of the Chief Magistrate Judge and dismissed Claims for alleged breach of Fiduciary Duty, Common Law Bad Faith, Breach of Duty of Good Faith and Fair Dealing, and Unfair Insurance Practices Act violations, among other Claims. Download Johnson v. GEICO Casualty Co. (D. Del. Case No. 06.408 Opinion Filed December 30, 2009) and Download Johnson v. State Farm Life Insurance Co. (W.D. Pa. Case No. 09.207 Report and Recommendation of U.S. Magistrate Judge, Filed February 8, 2010), also published as Johnson v. State Farm Life Insurance Co., 2010 WL 522333 (W.D. Pa. February 8, 2010)(Westlaw subscription required to access Westlaw). Simply put, two prongs of Pennsylvania Insurance Law caused the dismissal of the cited Claims: (1) As a general rule, there is no Fiduciary Duty owed by a Life Insurance Company to a beneficiary and their relationship is instead a relationship between two parties to a contract; and (2) There is no Fiduciary Duty of Good Faith and Fair Dealing ordinarily under a First-Party Insurance Contract, whereas there is a Fiduciary Duty of Good Faith and Fair Dealing when a Liability Insurer assumes the handling under the Insurance Contract, of claims asserted against the Insured. See id. at *6.
Two First-Party cases, both presenting First-Party Bad Faith Claims, and two different rulings.
Or are they really so different? There is a difference of course between contracts and torts. And that is one of the differences which distinguish these rulings in two cases involving the law of neighboring States.
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