Life Insurance – Duty Of Good Faith And Fair Dealing

Life insurance lawyers and other attorneys dealing with insurance companies will often speak of the insurance company “duty of good faith and fair dealing.”  This issue is discussed in a 2023 opinion from the Northern District of Texas, Dallas Division.  The opinion is styled, Avery D. Ensley v. Genworth Life and Annuity Insurance Company.
The facts of the case can be read in the opinion.  It is the discussion related to the issue of the “duty of good faith and fair dealing” that is discussed here.
The Court addressed Plaintiffs bad faith claim.  Plaintiff alleges that (1) Defendant breached its duty when it failed to adequately notify Plaintiff of premium changes, the Policy’s alleged depleted cash value, and the Policy’s pending lapse; (2) Defendant breached its duty by failing to proceed with automatic withdrawals until Plaintiff was notified of the deficit and given an opportunity to make the requisite payment; and (3) Defendant breached its duty when it failed to reinstate the Policy.
Defendant first argues that it owed no duty to Plaintiff because it never had to adjudicate a claim for benefits under the Policy.  This argument ignores the Texas Supreme Court’s holding that a cause of action for breach of the duty of good faith and fair dealing exists when the insurer wrongfully cancels an insurance policy without a reasonable basis.  As the court noted, a failure to extend the duty of good faith and fair dealing to the cancellation of an insurance policy would allow insurers to avoid bad faith liability by cancelling the entire policy rather than denying a single claim.  Viewing all evidence and drawing all reasonable inferences in the light most favorable to the non-moving party, the Court finds that genuine issues of material fact exist that preclude the Court from granting Defendants Motion For Summary Judgement as to Plaintiffs breach of the duty of good faith and fair dealing claim, to the extent it is predicated on cancellation of the Policy.
Plaintiff also alleges that Defendant breached its duty to deal fairly and in good faith with Plaintiff when Defendant refused to reinstate the Policy.  Even assuming the Texas Supreme Court would recognize a duty of good faith and fair dealing in the reinstatement context.  Plaintiff does not address the merits of his claims based on failure to reinstate anywhere in his briefing, and he did not submit any evidence supporting these claims.  As previously stated, once a party moves for summary judgment, the party resisting summary judgment “must present affirmative evidence setting forth specific facts, to show the existence of a genuine issue for trial.  Plaintiff has not done so, and he has abandoned claims based on Defendant’s refusal to reinstate the Policy.  By contrast. Defendant submitted evidence that it denied reinstatement because of “information obtained in the medical records …to include coronary artery disease؛ [m]emory loss and medication of Namenda,” and “[a]lcohol abuse history with medication of campral.”  Defendant also submitted evidence that Plaintiff was warned, by way of the application for reinstatement, that reinstatement would not take effect unless Defendant “received all premiums and any other amounts due.  The evidence shows that Plaintiff never paid the outstanding amounts due.  Thus, even if Plaintiff has not abandoned this claim.  Plaintiff has failed to show any bad faith on Defendant’s part in declining to reinstate the Policy.
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