A federal district court in Pennsylvania has rejected a bad faith claim against a life insurer brought by a married couple that alleged that it had continued to deduct premiums from their bank account after the policies had expired – although the court did permit the couple to proceed with their claim for conversion.
The Case
Edward and Charlotte Yandrisovitz both purchased a $25,000 convertible term life insurance policy from Ohio State Life Insurance Company in September and October 2001, with guaranteed premiums of $25.66 and $96.30, respectively. Both policies had a 15 year term and expired on August 31, 2016 and September 30, 2016, respectively.
According to the couple, after their policies expired in 2016, Ohio State Life Insurance (then known as Americo Financial Life and Annuity Insurance Company) renewed them for a year without notifying them or obtaining their consent. The Yandrisovitzes alleged that their insurance policies did not allow Ohio State to renew the policies and to continue deducting premiums from their bank account.
Ohio State increased the policy premiums from $25.66 to $268.79 and from $96.30 to $676.34 and continued deducting these amounts from the Yandrisovitzes bank account.
The Yandrisovitzes also asserted that, a year later, in September 2017, Ohio State once again renewed the policies after the initial one-year renewal had expired. Again, the couple asserted, Ohio State did not notify them of the extension or obtain their consent to it.
The Yandrisovitzes said that, on December 20, 2017, they contacted Ohio State and requested that they stop deducting funds from their bank account. However, according to the couple, Ohio State deducted premiums on January 9, 2018 and in February 2018.
The Yandrisovitzes asserted that Ohio State deducted a total of $11,753.54 in premiums from their bank account after their policies had expired in 2016 and refused to reimburse them this amount.
The Yandrisovitzes sued Ohio State. Among other claims, they asserted claims for conversion and statutory bad faith under 42 Pa. C.S. § 8371.
Ohio State moved to dismiss.
The District Court's Decision
The district court granted the insurer's motion to dismiss the statutory bad faith claim, but refused to dismiss the Yandrisovitzes conversion claim.
In its decision, the district court found that the Yandrisovitzes had stated a claim for conversion under Pennsylvania law. It reasoned that the Yandrisovitzes alleged that Ohio State had deprived them of funds by removing them from their bank account without their permission; that they did so after the policies had expired; and that the policies did not entitle Ohio State to do so.
By contrast, the district court found that the Yandrisovitzes had not stated a bad faith claim because they had not alleged that they made a claim for benefits under their policy. To state a claim of bad faith under 42 Pa. C.S. § 8371, the district court said, a plaintiff must allege that the insurer did not have a reasonable basis for denying benefits under the policy and knew or recklessly disregarded its lack of reasonable basis in denying the claim.
The district court observed that “bad faith” has been interpreted to include an insurer's conduct other than an unreasonable denial of benefits, but even in those situations an insured “must have made a claim under the policy to state a claim for bad faith.”
Because the Yandrisovitzes had not made any claim on their policies and did not allege that Ohio State failed to comply with its obligations under the policies, but only that Ohio State took more funds than the policies entitled them to take, the district court granted Ohio State's motion with respect to the Yandrisovitzes' bad faith claim.
The case is Yandrisovitz v. Ohio State Life Ins. Co., No. 5:18-cv-1036 (E.D. Pa. Aug. 31, 2018). Attorneys involved include: For EDWARD J. YANDRISOVITZ, CHARLOTTE F. YANDRISOVITZ, Plaintiffs: NEIL D. ETTINGER, LEAD ATTORNEY, ETTINGER & ASSOCIATES, LLC, WHITEHALL, PA. For OHIO STATE LIFE INSURANCE COMPANY, AMERICO FINANCIAL LIFE AND ANNUITY INSURANCE COMPANY, Defendants: ANDREW HANAN, LEAD ATTORNEY, The Hanan Law Firm LLC, Cherry Hill, NJ.
Steven A. Meyerowitz
Steven A. Meyerowitz, a Harvard Law School graduate, is the founder and president of Meyerowitz Communications Inc., a law firm marketing communications consulting company. He may be contacted at [email protected].