Rancosky v. Washington National Insurance
130 A.3d 79
| Pa. Super. Ct. | 2015Background
- LeAnn purchased a cancer insurance policy ("Cancer Policy") from Conseco (successor to Capital American) with payroll-deducted premiums; policy included a Waiver of Premium (WOP) if insured was disabled due to cancer for >90 consecutive days and required a physician's statement to prove disability.
- LeAnn was hospitalized and diagnosed with ovarian cancer in February 2003; she stopped working Feb. 4, 2003 but payroll deductions continued through June 14, 2003 due to accrued leave; Conseco received the last payroll premium on June 24, 2003 which—because premiums were paid in arrears—extended coverage only to May 24, 2003.
- LeAnn submitted multiple claim and WOP forms (some completed by physician office staff) and Conseco made several claim payments in 2003–2005 but later informed LeAnn her policy lapsed and denied further benefits in 2006, relying on a physician‑statement date (April 21, 2003) that made the 90‑day WOP period expire after coverage lapsed.
- Plaintiffs sued (Dec. 2008) alleging breach of contract, bad faith under 42 Pa.C.S. § 8371, fraud, UTPCPL violations, etc.; after trials the jury found breach of contract and awarded contractual damages, but the trial court found for Conseco on LeAnn’s bad faith claim; Martin’s claims were dismissed on summary judgment for failing to provide required written notice/proof of loss.
- On appeal the Superior Court affirmed summary judgment dismissing Martin’s claims, vacated the judgment on LeAnn’s bad faith claim, and remanded for a new bad-faith trial, concluding Conseco lacked a reasonable basis to deny WOP and failed to conduct a meaningful investigation when presented with conflicting dates.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether insurer acted in bad faith under 42 Pa.C.S. § 8371 | Rancosky: Conseco lacked a reasonable basis to deny WOP and recklessly disregarded that lack; bad faith shown by inadequate investigation and procedural conduct | Conseco: Denial was reasonable based on physician statement dates and policy terms; also argued statute of limitations | Court: Trial court erred by requiring proof of "dishonest purpose" for first prong; record shows Conseco lacked reasonable basis to deny and failed to meaningfully investigate; remand for new bad-faith determination (second prong left to trial court) |
| Whether LeAnn’s bad-faith claim is time‑barred | LeAnn: Bad-faith accrual occurred with Conseco’s inadequate 2006 investigation/refusal to reconsider; new injury occurred when insurer communicated inadequate investigation on Jan 5, 2007, so action (Dec 2008) timely | Conseco: Bad-faith claim accrued at earlier denial/termination letters (Mar 9, 2005 or Apr 12, 2006 or Sept 21, 2006), so two‑year statute bars suit | Court: Held claim based on inadequate investigation/reconsideration accrued in Jan 2007 (when insurer communicated results/refusal), so claim not time‑barred; dissenter would have barred claim |
| Whether trial court could consider insurer motive/self‑interest as element of bad faith | Rancosky: Motive/self‑interest is relevant to second prong (knowledge/recklessness), not a separate required element | Conseco: Trial court relied on lack of evidence of dishonest purpose to support denial | Court: Motive is probative of second prong only; trial court erred by treating motive as required to satisfy the first prong |
| Whether Martin’s claims survive summary judgment despite delayed notice | Rancosky: Martin’s late notice was reasonable given health crises and Conseco’s retroactive lapse; litigation provided Conseco all required info so no prejudice | Conseco: Martin failed to provide required written notice/proof per policy; no showing it was "reasonably possible" to give timely notice | Court: Affirmed summary judgment — Martin produced no evidence that timely notice was not reasonably possible prior to policy lapse; dismissal proper |
Key Cases Cited
- Terletsky v. Prudential Prop. & Cas. Ins. Co., 649 A.2d 680 (Pa. Super. 1994) (two‑part test for insurer bad faith: unreasonable basis + knowledge/recklessness)
- Hollock v. Erie Ins. Exchange, 842 A.2d 409 (Pa. Super. 2004) (standard of appellate review in non‑jury cases; insurer investigation obligations)
- Greene v. United Servs. Auto. Ass’n, 936 A.2d 1178 (Pa. Super. 2007) (motive/self‑interest probative of second prong, not a separate element)
- Condio v. Erie Ins. Exchange, 899 A.2d 1136 (Pa. Super. 2006) (insurer must reconsider denial when new evidence discredits basis for denial)
- Bonenberger v. Nationwide Mut. Ins. Co., 791 A.2d 378 (Pa. Super. 2002) (insurer must evaluate claims on merits; bad faith includes inadequate investigation)
- Mohney v. American General Life Ins. Co., 116 A.3d 1123 (Pa. Super. 2015) (investigation must be sufficiently thorough to reasonably support insurer’s action)
- Romano v. Nationwide Mut. Fire Ins. Co., 646 A.2d 1228 (Pa. Super. 1994) (insurer owes heightened duty of utmost good faith in first‑party claims)
- Ash v. Continental Ins. Co., 932 A.2d 877 (Pa. 2007) (§ 8371 bad‑faith actions subject to two‑year statute of limitations)
- Adamski v. Allstate Ins. Co., 738 A.2d 1033 (Pa. Super. 1999) (limitations accrual principles for bad‑faith claims)
- Jones v. Harleysville Mut. Ins. Co., 900 A.2d 855 (Pa. Super. 2006) (statute of limitations begins when insurer first denies claim; later re‑investigation does not necessarily toll limitations)