Bona Fide Reliance on Experts as a Bad Faith Defense
The Fifth Circuit Court of Appeals recently recognized that an insurer's reliance on the reports of objective experts is a defense to bad faith allegations when it affirmed a district court’s summary judgment in favor of a health insurer regarding an insured’s extra-contractual claims. In Henry v. Mutual of Omaha Insurance Company, 2007 WL 2897966 (5th Cir. October 05, 2007), the plaintiffs, on behalf of their deceased son, filed suit against Mutual of Omaha Insurance Company (“MOIC”), the issuer of their son’s health insurance coverage, alleging that MOIC’s denial of coverage for intravenous immunoglobulin (“IVIG”) replacement therapy caused their son to commit suicide. The federal district court granted MOIC’s motion for summary judgment and the Fifth Circuit affirmed.
The plaintiffs’ extra contractual claims were the sole subject of the appeal. The Fifth Circuit explained the plaintiffs’ claims under the DTPA, Insurance Code, and for common law bad faith all failed because MOIC had a reasonable basis for its decision to deny coverage. The court explained: “[p]lainly put, an insurer will not be faced with a tort suit for challenging a claim of coverage if there was any reasonable basis for denial of that coverage.” The Fifth Circuit found MOIC’s reliance upon the proffered opinions of several board-certified doctors who reviewed the insured’s claim demonstrated good faith. The court rejected the insured’s argument that the reports prepared by MOIC’s in-house and independent physicians were not objective, because these physicians were paid by MOIC. The court noted that the doctors were not “patently off-base in their analysis and conclusions” and their professional justifications were not “illegitimate or specious.” The court concluded by explaining: “[t]he question is not whether in the end MOIC’s doctors were right or wrong in their diagnosis of [the insured’s] condition and medical needs; the question is whether their methods and conclusions were reasonable, and whether MOIC was reasonable in relying on these conclusions.” The Fifth Circuit affirmed because it was satisfied that MOIC did not breach its duty of good faith and fair dealing, stating that MOIC clearly had a reasonable basis on which to deny coverage of its insured’s IVIG treatment for lack of medical necessity.
Editor’s Note: Although this case arises out of a health insurance context, the Fifth Circuit’s broad pronouncements about the standards applicable to determine whether an insurer’s reliance on experts in evaluating claims is proper will have applicability to any first party insurance claim where the insurer retains one or more expert consultants to evaluate some aspect of the submitted claim.
