(1) LARGE DISCREPANCY BETWEEN INSURED’S SETTLEMENT DEMAND AND INSURER’S OFFER OR (2) REFUSING POLICY LIMITS DEMAND, DO NOT BY THEMSELVES CONSTITUTE BAD FAITH (Philadelphia Federal)

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This UIM case involved breach of contract, common law bad faith, statutory bad faith, and Unfair Trade Practices and Consumer Protection Law (UTPCPL) claims. The seriously injured insured received the other driver’s $100,000 limits in settlement, and demanded the $300,000 UIM limits from his carrier. The insured’s expert placed lost income over $600,000, in addition to the serious personal injuries. The UIM insurer offered less than $12,500 to settle, and the insured brought suit.

The insurer successfully moved to dismiss the bad faith and UTPCPL claims, but the insured was given leave to amend on two of those claims.

STATUTORY BAD FAITH CLAIM NOT SUPPORTED BY FACTS

The statutory bad faith claim was not supported by any “factual content” in the complaint. Plaintiff only pleaded “conclusory statements that [the insurer] unreasonably withheld the payment of underinsured motorist benefits under the policy, failed to make a reasonable offer of settlement, presented a low offer of settlement, failed to engage in good faith negotiations, presented an offer of less than the amount due in an attempt to compel him to institute litigation, and failed to perform an adequate investigation of the value of his claim for underinsured motorist benefits.”

The court addressed the implied argument that a large discrepancy between demand and offer standing alone is sufficient to state a bad faith claim, even without pleading any other supporting facts as to why the insurer’s offer was unreasonable and made in reckless disregard of a benefit due. The court disagreed.  In rejecting this notion, the court made two key points: (1) “a disagreement over the settlement amount is not unusual[,]” and (2) “failure to immediately accede to a demand for the policy limit cannot, without more, amount to bad faith.”

Dismissal was without prejudice, with leave to file an amended complaint.

COMMON LAW BAD FAITH/BREACH OF DUTY OF GOOD FAITH AND FAIR DEALING CLAIMS ARE NOT A SEPARATE CAUSE OF ACTION IF BREACH OF CONTRACT IS PLEADED

The court found the common law bad faith claim subsumed in the breach of contract claim, and dismissed it with prejudice.

UNFAIR TRADE PRACTICES CLAIM NOT PLAUSIBLE

As to the UTPCPL claim, the court refused to dismiss on the basis of the economic loss doctrine. However, it did dismiss the UTPCPL count for failing to set out a plausible claim.

Plaintiff failed to allege sufficient facts to support (1) the existence of deceptive conduct, (2) justifiable reliance on any misleading conduct, or (3) damages flowing from reliance on such conduct. As with the statutory bad faith claim, however, plaintiff was given leave to re-plead this count.

[Note: This opinion does not address the line of case law holding that the UTPCPL does not apply to claims handling, as recently outlined in the Western District’s Neustein case.]

Date of Decision: February 7, 2019

McDonough v. State Farm Fire & Casualty Co., U. S. District Court Eastern District of Pennsylvania No. 5:18-cv-02247, 2019 U.S. Dist. LEXIS 19806 (E.D. Pa. Feb. 7, 2019) (Leeson, Jr., J.)

 

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