SW Legal studies in Business

Breach of Contract by Health Insurer Is Not Breach of Fiduciary Duty
Description Appeals court held that although an insured may have a suit for breach of contract, fraud, and false advertising against her health insurer for failure to properly review needed medical care, there is no suit for breach of fiduciary duty because there was no special relationship that created that duty.
Topic Insurance
Key Words Breach of Contract; Fraud; False Advertising; Breach of Fiduciary Duty
C A S E   S U M M A R Y
Facts Batas had health insurance from Prudential. While pregnant she suffered severe pain and was hospitalized. Prudential refused to allow her to be in the hospital for more than one day despite her physician's request based on serious intestinal swelling. Ten days later, Batas was taken to the emergency room with fever, swelling and severe pain. Her physician wanted to do surgery. Prudential took five days to approve the surgery. In the meantime, Batas' intestine ruptured and emergency surgery was required. Part of her colon was removed. She sued Prudential for breach of contract, fraud, false advertising, and breach of fiduciary duty relating to the provisions of health insurance benefits. The appeals court had to review the grounds for suit.
Decision The claim that the insurer did not conduct proper review procedures promised in the contract states a cause of action for breach of contract, fraud, and false advertising. Although Batas incurred no out-of-pocket losses, she suffered actual injury as a result of nonreceipt of promised health care. There is no claim for breach of fiduciary duty because there was no special relationship of trust or confidence that arises in an insurance contract. The relationship is a legal relationship, not one based on equity.
Citation Batas v. Prudential Insurance Co., 2001 WL 286902 (Sup. Ct., App. Div., N.Y., 2001)

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