FEBRUARY 2010 BAD FAITH CASES
INSURER PROVES AMOUNT IN CONTROVERSY EXCEEDED STATUTORY MINIMUM FOR FEDERAL JURISDICTION BASED ON DAMAGES FOR BAD FAITH CLAIM (Western District)
INSURER PROVES AMOUNT IN CONTROVERSY EXCEEDED STATUTORY MINIMUM FOR FEDERAL JURISDICTION BASED ON DAMAGES FOR BAD FAITH CLAIM (Western District)
In Stehle-Rosellini v. Allstate Corp., the insured sued the insurer for breach of contract and statutory bad faith under 42 Pa. C.S. § 8371. In the complaint, the insured did not specify an amount for compensatory damages but included two ad damnum clauses seeking: (1) damages in an amount subject to the policy limits of the contract, plus interest and court costs totaling less than $75,000.00 for the breach of contract claim and (2) an amount equal to the prime rate of interest plus three percent, punitive damages, attorneys’ fees, court costs, and any other relief that the Court may deem proper in excess of $30,000.00 for the statutory bad faith claim.
The insured filed a notice of removal based on diversity of citizenship, and the case was removed to federal district court. The insured filed a motion to remand the action to state court, and the insurer filed a brief in opposition. The dispute was over whether the $75,000.00 amount in controversy requirement of 28 U.S.C. § 1332(a)(1) was satisfied.
The court stated that legal standard for meeting the $75,000.00 requirement depends on whether a plaintiff expressly limits the amount in controversy to an amount lower than the jurisdictional requirement. Where, in the complaint, the plaintiff expressly limits the amount in controversy to less than the jurisdictional minimum, the defendant has the burden of proving to a legal certainty that the claim is in excess of $75.000.00. Where the plaintiff has not expressly limited the amount to less than the jurisdictional minimum, the case must be remanded if it appears to a legal certainty that the plaintiff cannot recover the jurisdictional amount.
The court found that the insurer had the burden to prove to a legal certainty that the claim was in excess of $75.000.00 because the complaint expressly limited the amount in controversy to an amount below the jurisdictional minimum. The court stated that since the insured did not specify an amount for compensatory damages, the insured’s two ad damnum clauses must be considered in conjunction. The court found that while the first ad damnum clause sought less than the $75,0000.00, the second ad damnum clause contained an open-ended demand, which included attorneys’ fees and punitive damages. The court denied the insured’s motion to remand, holding that the insurer successfully proved to a legal certainty that the insured could recover the jurisdictional amount.
Date of Decision: January 25, 2010
Date of Decision: January 25, 2010
Stehle-Rosellini v. Allstate Corp., Civil Action No. 09 - 895,Doc. No. 8, United States District Court for the Western District of Pennsylvania, 2010 U.S. Dist. LEXIS 5709 (W.D. Pa. January 25, 2010) (Lenihan, U.S.M.J.).
Posted on February 2, 2010 By Fineman Krekstein & Harris, P.C. in Category:Procedural Issues
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JANUARY 2010 BAD FAITH CASES
POLICY HELD TO BE VOID AB INITIO DUE TO APPLICANT’S MISREPRESENTATIONS (Middle District)
POLICY HELD TO BE VOID AB INITIO DUE TO APPLICANT’S MISREPRESENTATIONS (Middle District)
In Bonsu v. Jackson National Life Insurance Company, the district court held that the plaintiff’s claims for bad faith and breach of contract failed because the life insurance policy was void ab initio due to the applicant’s misrepresentations in the life insurance application.
The facts underlying this case date back to 2002, when an individual purporting to be Kwaku Asamoah submitted an life insurance application naming his brother, Augustine Bonsu, as the sole beneficiary. According to the application, Asamoah was thirty-five years of age; had never been diagnosed with a serious medical condition; his driver’s license had never been suspended or revoked; and he had never been convicted of a misdemeanor or felony offense. Based on the answers he provided, Asamoah was given a “preference plus” policy rating and his semi-annual premium was fixed at $96.90. On December 27, 2002, the insurer approved the application and issued a $250,000 policy to Asamoah.
In May 2003, Asamoah allegedly traveled to his native country of Ghana. On May 13, 2003, however, Bonsu claims that Asamoah died in his sleep of unknown causes. After his allegedly death, Asamoah’s body was never examined by a physician and an autopsy was never performed prior to his burial. On May 30, 2003, the insurer received a $98 policy premium payment allegedly sent from Asamoah. Approximately two months later, on July 11, 2003, Bonsu contacted the insurer to report Asamoah’s death.
The insurer’s claims investigator noted several red flags in the case, including Asamoah’s recent application for life insurance, his relative youth and purported good health, and his assertion that he had no preexisting medical conditions. The insurer started a comprehensive investigation into Asamoah’s death. The investigator was unable to find any evidence that Asamoah had ever traveled to Ghana, and the alleged death certificate provided by Bonsu was missing important information. Additionally, the insurer was notified that “Kwaku Asamoah” was a fictitious name used by Bonsu as an alias to commit fraudulent acts, and that Bonsu had been arrested for business fraud, identity fraud, and insurance fraud.
During its investigation, the insurer obtained a copy of Asamoah's Virginia driving record, which indicated that Asamoah’s license was suspended from September 2001 until March 2002 because of a reckless driving conviction. In the state of Virginia, reckless driving is a misdemeanor. Asamoah was convicted of a misdemeanor offense and his driver’s license was suspended approximately one year before he filed the life insurance application, which stated that his driver’s license had never been suspended or revoked and that he had never been convicted of a misdemeanor offense.
On June 14, 2004, the insurer denied Bonsu’s claim for life insurance benefits because of its inability “to independently verify Mr. Asamoah’s death after an extensive investigation of the matter.” Bonsu, the beneficiary of the life insurance policy, sued the insurer seeking benefits and bad faith damages. The insurer filed a motion for summary judgment arguing that the life insurance contract was void ab initio due to false statements knowingly proffered by Asamoah during the application process, and asserting that its denial of benefits under the policy was reasonable given the information discovered during the investigation.
Under Pennsylvania law, a life insurance policy is void ab initio when (1) the insured made a false representation; (2) the insured knew the representation was false when it was made or made the representation in bad faith; and (3) the representation was material to the risk being insured. The court found that the first element was satisfied because an individual purporting to be Asamoah made a false representation on the insurance application when he stated that his driver’s license was never suspended and that he had never been convicted of a misdemeanor offense. In determining the second element, the court stated that it could presume that Asamoah knew the answers he provided were untruthful due to the short period of time between his license suspension and his false responses, as well as the unequivocal nature of the questions posed and response requested. The court found that the third element was satisfied because Asamoah’s misrepresentation resulted in a significantly lower premium, and that it was material to the risk assumed by the insurer. The policy underwriter testified that had Asamoah provided truthful responses to the questions concerning his prior conviction and license suspension, he would have been given a “Standard” policy rating with a higher premium, and not a “Preferred Plus' policy rating.”
In granting the insurer’s motion for summary judgment, the court concluded as follows: “In sum, a rational juror viewing the record evidence could reach only one conclusion: Asamoah knowingly provided false responses to [the insurer]’s policy questionnaire, and these responses caused [the insurer] to fix Asamoah’s premium at rate below that which he would have received by answering truthfully. Because his life insurance policy was procured by means of knowing falsehood, Asamoah’s policy was void ab initio. Without a valid policy, Bonsu’s claims for breach of contract and insurance bad faith necessarily fail, and [the insurer] is entitled to summary judgment.”
Date of Decision: January 4, 2010
Bonsu v. Jackson Nat'l Life Ins. Co., Civil Action No. 1:05-CV-2444, United States District Court for the Middle District of Pennsylvania, 2010 U.S. Dist. LEXIS 89 (M.D. Pa January 4, 2010) (Conner, J.)
Posted on January 26, 2010 By Fineman Krekstein & Harris, P.C. in Category:Reverse Bad Faith
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JANUARY 2010 BAD FAITH CASES
COURT SUSTAINS INSURER’S MOTION TO DISMISS INSURED’S BAD FAITH CLAIM FOR OBVIOUS POLICY EXCLUSION (C.C.P. Somerset County)
COURT SUSTAINS INSURER’S MOTION TO DISMISS INSURED’S BAD FAITH CLAIM FOR OBVIOUS POLICY EXCLUSION (C.C.P. Somerset County)
In Kister v. W.N. Tuscano Agency, Inc., the insured, a business that provides home heating fuel to residential customers, purchased an insurance policy from the insurer to cover its business operations. The policy included a standard exclusion for any pollution, however, the insured purchased an endorsement titled “Pollution Liability-Limited Coverage for Covered Autos Subject to Aggregate Limit,” which provided coverage in the event a covered vehicle was “upset or overturned in the course of transit or was involved in a collision with another object while in the course of transit.” The insured was sued by a customer, after the customer discovered fuel on the ground and around the tank where the fuel had been transferred. The insured filed a claim, and the insurer denied the claim on the basis that the incident was excluded under the policy’s pollution exclusion.
The insured sued for bad faith, among other causes of action. The insurer filed preliminary objections in the nature of a demurer (i.e. a motion to dismiss) to the insured’s bad faith claim. The court noted that the test for granting preliminary objections in the nature of a demurrer is “whether it is clear from all of the facts pleaded that the pleader will be unable to prove facts legally sufficient to establish his or her right to relief.” The court found that the policy did not provide coverage for the incident for which the insured sought coverage. The court noted that the insured failed to show or bring forth any evidence to prove that the insurer did not have a reasonable basis for denying the claim. Accordingly, the court sustained the insurer’s preliminary objections and dismissed the bad faith claim.
Date of Decision: August 26, 2009
Kister v. W.N. Tuscano Agency, Inc., No. 791 CIVIL 2008, Common Pleas Court of Somerset County, Pennsylvania, 2009 Pa. Dist. & Cnty. Dec. LEXIS 96, (C.C.P. Somerset August 26, 2009) (Klementik, J.).
Posted on January 21, 2010 By Fineman Krekstein & Harris, P.C. in Category:Coverage Issues
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JANUARY 2010 BAD FAITH CASES
TESTIMONY OF INSURED’S PUBLIC INSURANCE ADJUSTER EXCLUDED ON BAD FAITH CLAIM BUT ALLOWED ON INSURER’S ALLEGED VIOLATION OF THE UIPA (Middle District)
TESTIMONY OF INSURED’S PUBLIC INSURANCE ADJUSTER EXCLUDED ON BAD FAITH CLAIM BUT ALLOWED ON INSURER’S ALLEGED VIOLATION OF THE UIPA (Middle District)
In Hered, LLC v. Seneca Insurance Company, the insurer denied the insured’s claim for a fire loss and damage to its business premises on the basis that the insured fraudulently misrepresented the functioning of the sprinklers in the insured building. The insured sued the insurer for breach of contract and bad faith. The insurer filed a motion to exclude expert testimony of the public insurance adjuster who had been hired by the insured to adjust its fire loss. The insurer argued that a public adjuster should not be allowed to testify that the insurer acted in bad faith in handling the insured’s claim and failing to pay the claim.
At oral argument, the insured’s counsel conceded that the expert was not qualified and competent to testify that the insurer acted in bad faith. The court held that while expert testimony may be appropriate to establish that an insurer lacked a reasonable basis for denying an insured’s claim, in the present case, the insured could not present expert testimony regarding the bad faith claim. Accordingly, the court granted the insurer’s motion to exclude expert testimony with respect to the bad faith claim.
The court denied the insurer’s motion to exclude expert testimony with respect to the expert’s opinion that the insurer had violated the Unfair Insurance Practices Act (UIPA). The court found that the probative value of the expert testimony substantially outweighed any danger of unfair prejudice to the insurer and that any possible prejudice could be cured by an appropriate jury instruction.
Date of Decision: February 21, 2008
Hered, LLC v. Seneca Ins. Co., Civil Action No. 3:CV-06-0255, United States District Court for the Middle District of Pennsylvania, 2008 U.S. Dist. LEXIS 111943 (M.D. Pa February 21, 2008) (Blewitt, U.S.M.J.).
Posted on January 20, 2010 By Fineman Krekstein & Harris, P.C. in Category:Experts
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