Written by AMLO.

Mehr disability law wins important ruling in Bad faith case

Bailey v. Minnesota Life

Kentucky (2009)

Federal court holds Federal Law (ERISA) does not apply and $500,000 life insurance claim is remanded to state court to apply Kentucky Bad Faith law.

Franklin Bailey was killed in an automobile accident in 2005.  When his widow submitted a claim with Minnesota Life through a life insurance policy, the insurance company removed the case to Federal Court, claiming that it was governed by federal ERISA law.  This was significant because they had denied the claim under an intoxication coverage exclusion, even though the decedent’s blood alcohol content was below the legal limit.  Minnesota Life hired “in house” doctors to support its opinion.

Under Federal Law, the Court would uphold the decision unless it was “arbitrary and capricious”.  That can make it hard to win, even when you are right.  Under Federal ERISA law, the widow would never present her case to a jury and any bad faith or extra-contractual claims would be lost.

Because of Federal Judge Coffman’s ruling Rhoda Bailey can present her claim to a jury, which will decide the claim on the basis of a “more probable than not” standard.  In addition, she can present a claim for unreasonable delays under Kentucky’s bad faith claim and seek extra-contractual damages including 12% interest.  (12% interest is significant because of the long delays. This amounts to over $350,000).