Imagine you, as grandparents, had planned for months to purchase a life insurance policy on your soon-to-be-born-grandchild.  You intended it as a gift to your daughter and her husband.  But, your grandchild is born with a number of health problems and, in addition to your fears for her health, you are concerned that she is not eligible for the life insurance coverage.  So, you talk to the agent and he tells you that getting the coverage is not a problem.  After your initial surprise, you sign the application, pay the initial premium and obtain the $50,000 policy.

And then tragedy strikes.  Your infant grandchild's health problems prove too severe and she dies just a few months into her young life.  You and your family are devastated.  You spend weeks in mourning.  When the fog of grief starts to clear, you remember the life insurance policy and submit the claim to the company. Despite the agent's assurance that your grandchild was eligible for the coverage, the well-known life insurance company for infants denies your claim and accuses you of misrepresenting your grandchild's health on the application that you submitted!

Can the life insurance company deny this claim?

The final result remains to be seen, but the Western District of Pennsylvania federal court has ruled that the grandparents claims, including bad faith, against the insurance company can proceed towards trial.  This is an important hurdle in the grandparent's case against the insurance company.   See Fields v. Gerber Life Ins. Co., 2014 WL 4348171 (W.D. Pa. Sept. 2, 2014).