High court: Primary beneficiaries can bring statutory bad faith claims
Jessica M. Karmasek Jun. 28, 2012, 2:50am
CHARLESTON - The West Virginia Supreme Court of Appeals ruled last week that a primary life insurance beneficiary may assert a statutory bad faith action after the death of the insured.
In its opinion filed Thursday, the Court sided with plaintiff Roger W. Goff.
Goff had appealed a May 25, 2010 order by the Harrison County Circuit Court, which dismissed his complaint against Penn Mutual Life Insurance Company for failure to state a claim upon which relief can be granted.
As the primary beneficiary under an insurance policy issued by Penn Mutual, Goff brought a cause of action under the state's Unfair Trade Practices Act, asserting that the insurer had violated the statutory duty of good faith and fair dealing.
After deciding that Goff did not meet the accepted definition of either a first- or a third-party bad faith claimant, the circuit court concluded that he could not assert a statutory bad faith claim against Penn Mutual.
Goff argued that a beneficiary stands in the shoes of a decedent insured for purposes of bringing a statutory bad faith claim.
The state's high court agreed, concluding that the circuit court erred in dismissing Goff's claim.
"The trial court correctly recognized that the claim Mr. Goff had filed did not fit into either of the definitions this Court has adopted for purposes of distinguishing first-party from third-party bad faith actions," Justice Thomas McHugh wrote for the Court.
"By ending the inquiry there, however, the trial court failed to fully consider the issue of whether Appellant may still pursue his claim."
The Court said the fact that the person who is asserting the claim is a third party with regard to the subject insurance policy does not alter the nature of the contract itself.
"The contract upon which Mr. Goff seeks to assert that Penn Mutual violated its statutory duty of good faith and fair dealing is clearly a first-party contract. In procuring the life insurance contract at issue, Betty Toler sought to provide financial security to Mr. Goff upon her demise as well as to gain the peace of mind that such a gift provides the donor," McHugh wrote in the Court's 14-page ruling.
"And while we take no position as to whether Appellant can succeed on his statutory bad faith claim, he deserves the right to pursue that claim."
The Court remanded the case to the Harrison Circuit Court.