Monthly Archive for January, 2007

JANUARY 2007 BAD FAITH CASES
PUNITIVE DAMAGES INCLUDED TOWARD AMOUNT IN CONTROVERSY FOR PURPOSES OF REMOVAL, WHERE INSURED ALLOWED TO AMEND COMPLAINT ADDING BAD FAITH CLAIM (Western District)

The Court denied Plaintiff’s motion to remand and held that the amount in controversy had been met.  In addition, the court granted defendant insurer’s motion to dismiss plaintiff’s claim for punitive damages, but granted plaintiff’s request to file an amended complaint to include  a claim for bad faith.  Plaintiff owned trucks and equipment, which were insured by the defendant.

After sustaining fire damage to one of its trucks and vandalism damage to another, plaintiff submitted two claims to defendant, however, defendant made no payment, denial or adjustment and retained possession of the truck.  Plaintiff’s instituted an action in the Allegheny County Court of Common Pleas alleging two claims for breach of contract, a claim for violation of the Pennsylvania Unfair Trade Practices and Consumer Protection (“UTPCPL”) and a claim for punitive damages.

Defendant removed the complaint to federal court based on diversity jurisdiction.  Plaintiff filed a motion to remand arguing that the amount in controversy was not sufficient to sustain jurisdiction.  Defendant filed a motion to dismiss the UTPCL claim as well as the claim for punitive damages.

The court denied Plaintiff’s motion to remand and held that although the damages alleged in Plaintiff’s complaint only amounted to $74,545.00, $455 lower than the jurisdictional minimum, the punitive damages sought also may be included in the amount in controversy calculation unless they are “patently frivolous and without foundation.”

The court held that although punitive damages are not available for breach of contract or UTPCPL claims, the Plaintiff was clearly attempting to assert a bad faith claim rather than a claim under the UTPCPL.

The court, therefore, also granted defendant’s motion to dismiss the UTPCPL and punitive damage claims, but allowed plaintiff to amend its complaint to assert a claim for bad faith, which permits punitive damages.

Date of Decision: January 17, 2007

Dennis Bruce Landscape Management Services, Inc. v. Merchant’s Mutual Insurance Company, United States District Court for the Western District of Pennsylvania, Civil Action No. 06-1517, 2007 U.S. Dist. LEXIS 3328 (January 17, 2007)(Ambrose, J.)

 

January 2007 BAD FAITH CASES
COURT RULES THERE IS NO FEDERAL JURISDICTION WHENEVER IT IS POSSIBLE AN INSURED WILL RECOVER LESS THAN THE AMOUNT-IN-CONTROVERSY REQUIREMENT (Philadelphia Federal)

The insured filed two claims: one for breach of contract and one for bad faith.  Each claim was followed by a demand for judgment “not in excess of $50,000.”  The case was removed by the insurer to federal court, which has an amount-in-controversy minimum of $75,000 for this type of case.  The United States District Court remanded the case to state court.  It ruled that there was not a legal certainty that the insured, if successful on her claims, would recover in excess of $75,000.  The court reasoned that possible punitive damages and/or attorney’s fees awards in the tens-of-thousands of dollars were “speculative.”  In the court’s mind, the insured’s refusal to concede that her damages were less than $75,000 did not control.

Date of Decision: October 11, 2006.

Uccelletti v. State Farm Fire & Casualty Company, United States District Court for the Eastern District of Pennsylvania, No. 06-4065, 2006 U.S. Dist. LEXIS 94578 (E.D. Pa. 2006) (Davis, J.).

JANUARY 2007 BAD FAITH CASES
NO FEDERAL JURISDICTION WHERE PLAINTIFF UNEQUIVOCALLY ADMITS THAT HER CASE DOES NOT MEET THE AMOUNT-IN-CONTROVERSY REQUIREMENT (Philadelphia Federal)

In Brownstein v. Allstate Insurance Company, the insured alleged that her premises suffered $23,254.80 in damage, and that the insurer acted in bad faith by refusing to pay her claim for that amount.  The case was removed by the insurer to federal court, which has an amount-in-controversy minimum of $75,000 for this type of case.  The insured argued that the case should be remanded to state court because, “the amount in controversy in this case clearly does not exceed $ 75,000.”  Due to this unequivocal assertion, the court remanded the case to state court for lack of jurisdiction.  However, without the above statement by the insured, the case would likely not have been remanded.  The insured could conceivably recover in excess of $75,000 if she succeeded on her contract claim for $23,254.80 and her bad faith claim (which presumably sought punitive damages and attorneys fees).

Three relatively contemporaneous cases on the same topic have issued from the Eastern District Court, though by different judges.  In Uccelletti v. State Farm Fire & Casualty Company, summarized and posted contemporaneously with this summary, the case was remanded because of the lack of legal certainty the claims would be worth in excess of $75,000.  However, in another Pennsylvania Eastern District Court opinion, the insured’s effort to remand was denied, so long as it is conceivable that the insured could recover $75,000. See  Valley v. State Farm Fire and Casualty Company.  In Howard v. Allstate Insurance Company, the Court did remand a case that started as a Philadelphia Court of Common Pleas arbitration, i.e., the demand was less than $50,000, where the carrier seeking to remove the case could not establish by a preponderance of the evidence to a legal certainty that the “amount in controversy” exceeded $75,000.

Date of Decision: November 16, 2006.

Brownstein v. Allstate Insurance Company, United States District Court for the Eastern District of Pennsylvania, No. 06-4351, 2006 U.S. Dist. LEXIS 94577 (E.D. Pa. 2006) (Diamond, J.),

JANUARY 2007 BAD FAITH CASES
BAD FAITH SUIT TRANSFERRED FROM PENNSYLVANIA FEDERAL COURT TO VIRGINIA FEDERAL COURT AFTER BALANCING FACTS (Philadelphia Federal)

The carrier had issued a D & O policy to plaintiff.  Plaintiff was seeking coverage for class actions in Missouri and Indiana based on fax blasting claims.  There was a tentative settlement, but a denial of coverage resulting in a declaratory judgment and bad faith claim.  The carrier moved to transfer venue to Virginia, from the U. S. District Court for the Eastern District of Pennsylvania.

This was something of a twist as plaintiff was headquartered in Virginia, was suing under Virginia’s bad faith statute, neither party was from Pennsylvania, plaintiff had filed a similar suit against another carrier in Virginia, and the policy was issued in Virginia, among other things.

Although a plaintiff’s choice of forum carries considerable weight, this is less so where the plaintiff does not make that state its home and where the transaction or occurrence underlying the action did not occur in that state.  Taking into consideration these and other factors, the interests of justice and judicial economy favored transfer.

Date of Decision:  January 11, 2007

Resource Bank v. Progressive Casualty Insurance Company, United States for the Eastern District of Pennsylvania, No. 06-1699, 2007 U.S. Dist. LEXIS 2980 (E.D. Pa. Jan. 11, 2007) (Kauffman, J.)

JANUARY 2007 BAD FAITH CASES
COURT RULES DISCOVERY OF RESERVE INFORMATION IS PERMISSIBLE (Middle District)

The insured moved to compel the insurer to produce reserve information.  The insurer argued that the reserve information should only be discoverable where liability on the underlying policy is not contested.  The court ruled that reserve information is discoverable under the Federal Rules of Civil Procedure.

Date of Decision: November 30, 2006.

Javorski v. Nationwide Mutual Insurance Company, United States District Court for the Middle District of Pennsylvania, No. 3:06-CV-1071 (M.D. Pa. November 30, 2006) (Conaboy, J.).

 

JANUARY 2007 BAD FAITH CASES
COURT ORDERS IN CAMERA REVIEW OF ALLEGEDLY PRIVILEGED INFORMATION TO DETERMINE ISSUES ON MOTION TO COMPEL PRODUCTION (Middle District)

The insured moved to compel the insurer to produce documents which the insurer asserted were protected by attorney/client privilege and/or attorney work product.  Pennsylvania law provides that communications from an attorney to her client are only protected if they reveal confidences of the client.

The court ruled that such materials should be presented to the court, for in camera review, to determine if and when the privilege is properly asserted.

The court would likewise determine if and when the attorney work product doctrine applies (which protects an attorney’s mental impressions or conclusions respecting the value or merit of a claim or defense or respecting strategy or tactics).

Date of Decision: November 30, 2006.

Javorski v. Nationwide Mutual Insurance Company, United States District Court for the Middle District of Pennsylvania, No. 3:06-CV-1071 (M.D. Pa. November 30, 2006) (Conaboy, J.).

 

JANUARY 2007 BAD FAITH CASES
CASE ORIGINALLY STATE COURT ARBITRATION ALLOWED TO PROCEED IN FEDERAL COURT AFTER REMOVAL DESPITE INITIAL CLAIM BEING LIMITED TO $50,000 (Philadelphia Federal)

 

The insureds sued for breach of contract and bad faith for failure to pay on their claim for $31,445.65 in soot damage.  The case was brought in the Philadelphia Court of Common Pleas’ Compulsory Arbitration Program, which has a maximum jurisdiction limit of $50,000.  The case was removed by the insurer to federal court, which has an amount-in-controversy minimum of $75,000 for this type of case.

The insureds moved to remand the case to state court.  They argued that removal was improper because the case did not meet the minimum amount-in-controversy.  The Federal Court ruled that the removal was proper.  The Philadelphia civil court cover sheet, where the insureds listed their claims as less than $50,000, was not controlling.  Rather, the court reasoned that the insured could conceivably recover in excess of $75,000 if they succeeded on their contract claim for $31,445.65, their bad faith claim (which sough punitive damages), and attorneys fees.

The court noted that it would not be unforeseeable for the insureds to recover three or four times their claim (for $31,445.65) in punitive damages alone.  And the court further observed that the insureds were unwilling to stipulate that their claims were for less than $75,000.

Date of Decision: December 12, 2006

Valley, et al. v. State Farm Fire and Casualty Company, United States District Court for the Eastern District of Pennsylvania, No. 06-4351, 2006 U.S. Dist. LEXIS 90376 (E.D. Pa. 2006) (Shapiro, J.).

JANUARY 2007 BAD FAITH CASES
INSURED MAY PRESENT EVIDENCE OF “BAD FAITH CONDUCT DURING LITIGATION” UNDER ORIGINAL CLAIM FOR BAD FAITH (Middle District)

The insured sought to amend her complaint to include a count for the insurer’s bad faith conduct during the litigation.  The motion was based on the Pennsylvania Superior Court case Hollock v. Erie Insurance,  which held that a carrier could be liable for bad faith conduct during the bad faith litigation.  The U.S. District Court denied the Motion.

According to the court, there was no need to amend the Complaint to add the “bad faith during litigation” allegations.  They were already encompassed by the insured’s original Count for bad faith under the Pennsylvania bad faith statute.  It should be noted that the decision was based in large part on the liberal “notice” pleading standards of federal court.

A litigant in federal court does not need to provide a detailed factual basis for bad faith in his/her complaint.  A litigant in state court in Pennsylvania would likely need to amend his/her complaint under the fact-based pleading standard.  However, under this court’s reasoning, a state court would likely allow the amendment.

Date of Decision: November 30, 2006.

Javorski v. Nationwide Mutual Insurance Company, United States District Court for the Middle District of Pennsylvania, No. 3:06-CV-1071 (M.D. Pa. November 30, 2006) (Conaboy, J.).

JANUARY 2007 BAD FAITH CASES
CARRIER ALLOWED TO PLEAD “REVERSE BAD FAITH” UNDER A CONTRACT THEORY, AS AN AFFIRMATIVE DEFENSE TO STATUTORY BAD FAITH CLAIM (Middle District)

The insured moved to strike the carrier’s affirmative defense of “reverse bad faith.”  The insured argued that Pennsylvania does not recognize a claim for reverse bad faith, which is a claim that the insured acted in bad faith in the handling of his/her claim.  The Court disagreed.

The U.S. District Court reasoned that every contract, including those for insurance, imposes a duty of good faith on each party.

Further, Pennsylvania Courts have previously held that an insured’s bad faith conduct should be scrutinized to militate against a finding of bad faith against the carrier.

The motion to strike was therefore denied.

Date of Decision: November 30, 2006.

Javorski v. Nationwide Mutual Insurance Company, United States District Court for the Middle District of Pennsylvania, No. 3:06-CV-1071 (M.D. Pa. November 30, 2006) (Conaboy, J.).

 

JANUARY 2007 BAD FAITH CASES
CARRIER'S DOCUMENTS RELATING TO MATTERS ESSENTIAL TO BAD FAITH CLAIM DISCOVERABLE, & DOCUMENTS NOT PROTECTED AS WORK PRODUCT NOR PRIVILEGED (Philadelphia Commerce)

The insurer appealed a Court Order forcing the insurer to produce documents that the insurer claimed were protected under the work product and attorney client privilege.  The Philadelphia Commerce Court issued this Opinion in support of its original decision, and recommended that the appeal be quashed.

The insured served a request for production of documents to which the insurer objected on the grounds that the documents were protected by attorney-client privilege, work product privilege and because some of the documents were generated after the bad faith lawsuit was filed.  The documents sought included claims management logs in the underlying case as well as correspondence related to the bad faith case.

The Trial Court opined that the insurer’s appeal should be quashed because the requirements of the collateral order doctrine, which allows for an interlocutory appeal where the order at issue is separable from the main cause of action, involves a right too important to be denied review and would cause the right to be irreparably lost if no review of the issue were made, had not been met.

In addition, the court held that even if the collateral order doctrine were applicable, the order should be affirmed because the documents were not protected under the work product privilege or the attorney client privilege.  Although the documents were prepared in anticipation of litigation, none of the documents included legal conclusions of the insurer or its representatives or counsel.

Further, the documents did not contain statements made by the insurer to counsel for the purpose of representation, rather, they were referral documents handing over the matter to the legal department.

Finally, the court held that there is no “post-suit” doctrine in Pennsylvania.  Therefore, documents generated by the insurer or its counsel were not privileged merely because they were generated after the initiation of the bad faith case.

Date of Decision: November 30, 2006.

Copley Associates, Inc. v. Erie Insurance Exchange, Inc., December Term 2005, No. 1332, 2006 Phila Ct. Com. Pl. LEXIS 473 (C.C.P. Philadelphia Nov. 30, 2006) (Abramson, J.)