Insurance Bad Faith in Disguise Fails
Post 4839
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Health Care Services Corp. (HCSC) moved to dismiss a suit by an insured because Montana law precludes King’s breach of the implied covenant of good faith and fair dealing claim. HCSC also argued that Montana statutory law prohibited King’s request for punitive damages and that the request should be stricken.
In Justin King v. Health Care Services Corp., No. CV-24-32-GF-BMM, United States District Court, D. Montana, Great Falls Division (July 15, 2024) the USDC resolved the various disputes.
FACTUAL BACKGROUND
King, a resident of Montana, sued HCSC, a business incorporated in Illinois, for HCSC’s alleged breach of contract with its insured King when HCSC denied King’s claim for coverage of a back surgery. HCSC insured King under an individual health insurance policy (“the Policy”). King requested pre-approval from HCSC for a two-level lumbar disc arthroplasty (“the surgery”). HCSC denied King’s pre-approval request on December 14, 2022, citing to a policy exclusion contained in the Policy. King nevertheless underwent the back surgery on October 12, 2023, at a clinic in Germany. King alleged that the Policy provided coverage for the surgery.
DISCUSSION
Count I: Breach of Contract
HCSC argued that King failed to allege facts sufficient to state a claim for breach of contract for Count I. HCSC contends that King failed to identify the contractual provision that would have required HCSC to cover his requested back surgery.
HCSC denied pre-approval for the surgery that King sought on the basis that the surgery was not appropriate, not medically necessary, and experimental.
The Food and Drug Administration (FDA) approved the use of a medical device known as the prodisc L for 2-level lumbar disc arthroplasties on April 10, 2020. The FDA concluded that the 2-level lumbar disc arthroplasty was safe and effective for King’s condition. Therefore, the complaint provides sufficient language for the Court to draw a reasonable inference that HCSC had breached the Policy.
Count II: Breach of Implied Covenant of Good Faith and Fair Dealing
HCSC argues that King’s claim of breach of the implied covenant of good faith and fair dealing should be dismissed because Montana law precludes the claim. King contended that HCSC misdescribes the cause of action of Count II.
The USDC concluded that King’s complaint presents an insurance bad faith claim in disguise. King failed to prove the distinction between the breach of the implied covenant claim and a common law bad faith claim..
Punitive Damages
HCSC argued that Montana law bars King from including a request for an award of punitive damages in the complaint. King concedes that Montana law bars the inclusion of punitive damages in an initial pleading. The USDC concluded it must dismiss the punitive damages claim in accordance with Mont. Code Ann. § 27-1-221(5).
However, King may file to amend the pleading for punitive damages after discovery begins.
Accordingly, IT WAS ORDERED that:
Defendant’s Rule 12(b)(6) Motion to Dismiss is GRANTED in part and DENIED in part.
Count II of Plaintiff’s complaint (Doc. 1) is DISMISSED.
Plaintiff’s punitive damages claim is DISMISSED.
ZALMA OPINION
The State of Montana does not like bad faith and claims seeking punitive damages. The plaintiff – to avoid the requirements of the state – composed its complaint to disguise its bad faith claim as a different type of tort. The attempt failed and the USDC limited the case to the simple breach of contract action and allowed that the plaintiff could amend his complaint to allege bad faith after discovery. When a plaintiff has a winnable breach of contract claim it should do so and give up the attempt to get rich with a bad faith suit.
(c) 2024 Barry Zalma & ClaimSchool, Inc.
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The Largest Residential Burglary of All Time
Post 5407
Fraud & the Fear of Bad Faith Suits
Posted on July 22, 2026 by Barry Zalma
See the full video at https://lnkd.in/gWQQEySW and at https://lnkd.in/gyhdK6wv
This is a Fictionalized True Crime Story of Insurance Fraud explaining why Insurance Fraud is a “Heads I Win, Tails You Lose” situation for Insurers. The story is one of a collection designed to help to Understand How Insurance Fraud in America is Costing Everyone who Buys Insurance Thousands of Dollars Every year and Why Insurance Fraud is Safer and More Profitable for the Perpetrators than any Other Crime.
This is a Fictionalized True Crime Story of Insurance Fraud explaining why Insurance Fraud is a “Heads I Win, Tails You Lose” situation for Insurers. The story is one of a collection designed to help to Understand How Insurance Fraud in America is Costing Everyone who Buys Insurance Thousands of Dollars Every year and Why Insurance Fraud is Safer and More Profitable for the Perpetrators than any Other Crime.
After ...
Chutzpah is not Enough
Post 5397
Posted on July 20, 2026 by Barry Zalma
See the video and at https://lnkd.in/gNUs2XzT and at https://lnkd.in/g2MawyzX
Magistrate Issues a Search Warrant if there is a Fair Probability that Contraband or Evidence of a Crime will be Found in a Particular Place.
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As part of the investigation, the FBI obtained an August 19, 2022 warrant to search Driscoll’s Sterling Pharmacy Yahoo email account for emails from January 1, 2018 through December 31, 2020. Driscoll moved to suppress the resulting evidence, arguing that the warrant lacked probable cause, was overbroad, and rested on material misstatements and omissions.
LAW:
The ...
Fraud Shouldn’t Pay
Post 5396
See the video and at https://rumble.com/v7ctgmq-the-great-jewel-theft.html at https://youtu.be/aRbQ2sJfGwA
This is a Fictionalized True Crime Story of Insurance Fraud explaining why Insurance Fraud is a “Heads I Win, Tails You Lose” situation for Insurers. The story is one of a collection designed to help to Understand How Insurance Fraud in America is Costing Everyone who Buys Insurance Thousands of Dollars Every year and Why Insurance Fraud is Safer and More Profitable for the ¬¬¬Perpetrators than any Other Crime.
The Insured purchased, for the first time in his life, a policy of Personal Articles Floater Insurance (PAF) scheduling $125,000 worth of ladies jewelry. He advised the insurer that the jewelry was always kept in a class E safe at his residence. He also told the insurer that he was employed full time as the owner of a gasoline service station and that he had never been canceled or suffered a previous loss.
One month after the policy was ...
Day Care Owner Loses Subsidies Because She Criticized State
Post 5421
Posted on August 11, 2026 by Barry Zalma
First Amendment Right Will be Allowed to Go to Trial
In Betsey J. Grant v. Maine State Department Of Heath And Human Services, No. 1:25-cv-00490-JAW, United States District Court, D. Maine (August 6, 2026), Betsey J. Grant, a licensed childcare provider and operator of Tiny Tikes Daycare in Trenton, Maine, sued Maine DHHS and several employees after she publicly criticized DHHS before Maine’s Government Oversight Committee and alleged that officials retaliated against her.
She claimed DHHS imposed and extended a conditional license, published stigmatizing information, interfered with subsidies and program funding, removed her from a food program, rescinded an expansion grant, and used biased or falsified evidence in licensing proceedings. Following the March 10, 2023, GOC testimony, Ms. Grant alleges that foster children's subsidies (approximately $30,000) were withheld; she was removed from the ...
Rescission for Material Misrepresentation
Post 5418
Posted on August 5, 2026 by Barry Zalma
An Insurer May Rescind An Insurance Policy Where The Applicant Made A Material Misrepresentation In The Application.
In Union Mutual Fire Insurance Company v. 844 Knickerbocker, LLC, et al. No. 2024-10359, Index No. 602824/22, 2026 NY Slip Op 04789, Supreme Court of New York, Second Department (July 29, 2026) Union Mutual Fire Insurance Company issued commercial insurance policies to 844 Knickerbocker, LLC, and Sanjaya Mallick based on applications stating that the insured property contained two apartment units. After an underlying personal injury action was filed, Union Mutual determined that the property actually contained three apartment units and rescinded the policies on the ground that the defendants had made a material misrepresentation in the applications.
LAW:
A misrepresentation is material if the insurer would not have issued the same policy, or would have issued it only on different terms, had the true ...
Rescission for Material Misrepresentation
Post 5418
Posted on August 5, 2026 by Barry Zalma
An Insurer May Rescind An Insurance Policy Where The Applicant Made A Material Misrepresentation In The Application.
In Union Mutual Fire Insurance Company v. 844 Knickerbocker, LLC, et al. No. 2024-10359, Index No. 602824/22, 2026 NY Slip Op 04789, Supreme Court of New York, Second Department (July 29, 2026) Union Mutual Fire Insurance Company issued commercial insurance policies to 844 Knickerbocker, LLC, and Sanjaya Mallick based on applications stating that the insured property contained two apartment units.
LAW:
A misrepresentation is material if the insurer would not have issued the same policy, or would have issued it only on different terms, had the true facts been disclosed. To establish materiality as a matter of law, the insurer must submit documentation of its underwriting practices, such as manuals, guidelines, bulletins, or rules addressing similar risks.
DISCUSSION/ANALYSIS:
As a result, the...
