Federal: Commercial Liability Insurer’s Investigation of Employment Status is Not “Bad Faith” Refusal to Pay

Where a worker sustained fatal injuries in a ditch cave-in and the worker’s widow filed a tort action against the owner of a masonry business alleging negligence, it was appropriate for the insurer under the business’ commercial general liability policy to investigate whether the deceased worker was an employee under Pennsylvania law—which would have meant it owed no duty to defend. There was conflicting evidence as to such employment status, and the commercial insurer’s decision to seek a declaratory judgment action was not the sort of “bad faith” or “frivolous” refusal to pay contemplated by the statute. The widow’s separate civil action for the insurer’s alleged bad faith could not withstand a summary judgment motion and it was, therefore, appropriate for the federal district court to grant the insurer relief from the suit.

Thomas A. Robinson, J.D., the Feature National Columnist for the LexisNexis Workers’ Compensation eNewsletter, is the co-author of Larson’s Workers’ Compensation Law (LexisNexis).

LexisNexis Online Subscribers: Citations below link to Lexis Advance.

See Bodnar v. Nationwide Mut. Ins. Co., 2016 U.S. App. LEXIS 17903 (3rd Cir., Oct. 4, 2016)

See generally Larson’s Workers’ Compensation Law, § 152.03.

Source: Larson’s Workers’ Compensation Law, the nation’s leading authority on workers’ compensation law