Provident did not change its determination.
After the denial, plaintiff filed a two-count complaint. In
count one, plaintiff alleges that Provident failed to pay
benefits to plaintiff under terms of his disability insurance
policies. In count two, plaintiff alleges that Provident failed
and refused in bad faith, and without reasonable cause, to pay
plaintiff's claim under the terms of the policy." Provident now
moves for summary judgment as to count two.
I. Summary Judgment Standard
Summary judgment shall be granted if "the pleadings,
depositions, answers to interrogatories, and admissions on file,
together with the affidavits, if any, show that there is no
genuine issue as to any material fact and that the moving party
is entitled to a judgment as a matter of law." Fed.R.Civ.P.
56(c); see Hersh v. Allen Prods. Co., 789 F.2d 230, 232 (3d
Cir. 1986). In making this determination, a court must draw all
reasonable inferences in favor of the non-movant. See Meyer v.
Riegel Prods. Corp., 720 F.2d 303, 307 n. 2 (3d Cir. 1983),
cert. dismissed, 465 U.S. 1091, 104 S.Ct. 2144, 79 L.Ed.2d 910
(1984). Whether a fact is "material" is determined by the
substantive law defining the claims. See Anderson v. Liberty
Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202
(1986); United States v. 225 Cartons, 871 F.2d 409, 419 (3d
"[A]t the summary judgment stage the judge's function is not
himself to weigh the evidence and determine the truth of the
matter but to determine whether there is a genuine issue for
trial." Anderson, 477 U.S. at 249, 106 S.Ct. 2505. Summary
judgment must be granted if no reasonable trier of fact could
find for the non-moving party. See id. Conversely, if a
reasonable trier of fact could find for the non-moving party, the
Court must deny summary judgment. See id.
When the non-moving party bears the burden of proof at trial,
the moving party's burden can be "discharged by `showing' — that
is, pointing out to the District Court — that there is an absence
of evidence to support the non-moving party's case." Celotex
Corp. v. Catrett, 477 U.S. 317, 325, 106 S.Ct. 2548, 91 L.Ed.2d
265 (1986). If the moving party has carried its burden of
establishing the absence of a genuine issue of material fact, the
burden shifts to the non-moving party to "do more than simply
show that there is some metaphysical doubt as to the material
facts." Matsushita Elec. Indus. Co. v. Zenith Radio Corp.,
475 U.S. 574, 586, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986). When the
non-moving party's evidence in opposition to a properly-supported
motion for summary judgment is merely "colorable" or "not
significantly probative," the Court may grant summary judgment.
See Anderson, 477 U.S. at 249-50, 106 S.Ct. 2505.
Further, when a non-moving party who bears the burden of proof
at trial has failed, in opposition to a motion for summary
judgment, to raise a disputed fact issue as to any essential
element of his or her claim, summary judgment should be granted
because "a complete failure of proof concerning an essential
element of the nonmoving party's case necessarily renders all
other facts immaterial." Celotex, 477 U.S. at 322-23, 106 S.Ct.
II. Bad Faith
The New Jersey Supreme Court has recognized a cause of action
for an insurance company's "bad faith" failure to pay an
insured's claim. See Pickett v. Lloyd's, 131 N.J. 457, 470,
621 A.2d 445 (1993). The Pickett court established a test for
determining "bad faith." First, "a plaintiff must show the
absence of a reasonable basis for denying benefits of the
policy." Id. at 473, 621 A.2d 445 (quotations and citation
omitted). If a plaintiff demonstrates the absence of a reasonable
basis, he must then prove that the defendant knew or recklessly
lack of a reasonable basis for denying the claim. See id.
The Pickett court clarified this test, explaining that an
insurance company does not act in "bad faith" if the plaintiff's
insurance claim was "fairly debatable." The New Jersey Supreme
Court has prescribed a somewhat peculiar method to determine
whether a claim was "fairly debatable."
Under the "fairly debatable" standard, a claimant who
could not have established as a matter of law a right
to summary judgment on the substantive claim would
not be entitled to assert a claim for an insurer's
bad faith refusal to pay the claim.
Id. at 473, 621 A.2d 445; see also Hudson Universal, Ltd. v.
Aetna Ins. Co., 987 F. Supp. 337, 341 (D.N.J. 1997) (following
Pickett in holding that "an insurer's disclaimer of coverage
cannot be held to be in bad faith unless the insured is granted
summary judgment on the issue of coverage").
Thus, under the New Jersey Supreme Court's "fairly debatable"
standard, the Court must first ascertain whether plaintiff could
have established a right to summary judgment as to the underlying
claim — plaintiff's first cause of action. If factual issues
exist as to the underlying claim (i.e., questions of fact as to
whether plaintiff is entitled to insurance benefits — plaintiff's
first cause of action), the Court must dismiss plaintiff's second
cause of action — the "bad faith" claim.*fn5 See id.; see also
Hudson Universal, Ltd., 987 F. Supp. at 341 (following Pickett
in finding that a court must dismiss a plaintiff's "bad faith"
claim where a question of fact (or law) is present as to the
underlying claim); Polizzi Meats, Inc. v. Aetna Life & Cas.
Co., 931 F. Supp. 328, 334-35, 339-41 (D.N.J. 1996) (agreeing
with the defendant that "if there are genuine issues of material
fact regarding coverage which would preclude summary judgment in
favor of the insured, then the insurer cannot be held liable in
bad faith . . ."). The Court must do so because, according to the
New Jersey Supreme Court, a question of fact permits an insurer
to "fairly debate" an insured's claim. See Pickett, 131 N.J. at
473-74, 621 A.2d 445 In sum, the Court must rule, as a matter of
law, as to an insured's bad faith claim, if it finds genuine
issues of material fact precluding summary judgment as to the
The Court points out that it can envision other valid methods
of determining "bad faith" and considers the New Jersey Supreme
Court's rule somewhat anomalous. Indeed, such a rule is odd in
that it requires the Court to examine a cause of action
(plaintiff's first cause of action) which is not the subject of
the instant motion. Moreover, and more significantly, the jury
may ultimately reject the insurer's evidence and find that the
insurer possessed no basis to reject plaintiff's claim.
Certainly, after rejecting such evidence, other evidence may
suggest that the insurer acted in "bad faith." Yet, the jury is
precluded from deliberating "bad faith" simply because a court
finds issues of fact as to the underlying claim.
Although the Court doubts the wisdom of this standard, the New
Jersey Supreme Court has spoken. It has acknowledged and rejected
other methods for determining "bad faith" implemented in other
jurisdictions. Pickett, 131 N.J. at 472-73, 621 A.2d 445. Of
course, this Court, as a federal court sitting in diversity, must
apply the substantive law of New Jersey as determined by the
state's highest court. See Erie R.R. Co. v. Tompkins,
304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188 (1938). The Court must,
therefore, apply New Jersey's "fairly debatable" standard and
examine whether plaintiff could "have established
as a matter of law a right to summary judgment on [plaintiff's
first cause of action]." Pickett, 131 N.J. at 473,
621 A.2d 445.*fn6
In the instant case, Provident raises genuine issues of fact as
to plaintiff's underlying claim. Therefore, the Court must
dismiss plaintiff's "bad faith claim."
Indeed, Provident purportedly relied upon the reports of Dr.
David Gallina and Dr. Nancy Gallina in denying plaintiff's claim.
Those reports cast doubt upon plaintiff's veracity, suggesting
that plaintiff "exaggerated" his depression for the purpose of
obtaining insurance benefits. Provident also proffers evidence
that it relied on medical reports indicating that plaintiff
responded well to medication, his condition improved, and he
"could return to work." From this evidence, Provident argues that
it satisfies the "fairly debatable" standard.
The Court is compelled to agree. Such evidence would preclude
summary judgment as to the underlying claim. Indeed, if the jury
believes the reports concerning plaintiff's veracity, they may
reasonably conclude that plaintiff is, in fact, not disabled.
Moreover, Provident's evidence pertaining to mental improvement
and an imminent return to work suggest a condition inconsistent
with the alleged disability. While the Court acknowledges that
Dr. David Gallina found that plaintiff may be unable to return to
his prior job, the doctor noted that plaintiff's
"exaggeration"*fn7 may have skewed some test results. He also
found indications of "malingering." Viewing the evidence in its
totality, a reasonable juror could find that defendant reasonably
denied plaintiff benefits. Hence, because Provident has
demonstrated a question of fact as to the underlying claim,
Provident has satisfied the "fairly debatable" standard.
Pickett, 131 N.J. at 473-74, 621 A.2d 445. Accordingly, the
Court must grant Provident's motion for partial summary judgment
as to plaintiff's "bad faith" claim.*fn8
For the above stated reasons, the Court will grant defendant's
motion for partial summary judgment as to count two. Therefore,
the Court will dismiss count two with prejudice. An appropriate
Order is attached.
In accordance with the Court's Opinion filed herewith,
It is on this 7th day of August 2000,
ORDERED that defendant's motion for partial summary judgment as
to count two is granted and count two is dismissed with