Monthly Archive for April, 2008

APRIL 2008 BAD FAITH CASES
DISTRICT COURT DISMISSES COMMON LAW BAD FAITH CLAIM (Western District)

Plaintiff filed a claim for water damage to its building stemming from an unknown cause.  After conducting an investigation, State Automobile Insurance Company (“State Auto”) denied the claim.  Plaintiff subsequently filed suit and asserted several claims including claims for common law bad faith and statutory bad faith.  As part of its common law bad faith claim, Plaintiff argued that State Auto minimally investigated its claim and failed to consider supplemental evidence submitted to the insurer.

State Auto filed a motion to strike plaintiff’s common law bad faith claim asserting that Pennsylvania law does not recognize a common law cause of action for bad faith.  The District Court agreed and held that should Plaintiff succeed in proving that State Auto failed to act in good faith, then 42 Pa. Cons. Stat. §8371 would provide the appropriate remedy.  Accordingly, the Court granted State Auto’s motion to strike and dismissed Plaintiff’s common law bad faith claim.

Date of Decision:  April 2, 2008

Signs v. State Automobile Mutual Ins. Co., United States District Court for the Western District of PA, No. 08-164, 2008 U.S. Dist. LEXIS 26770 (W.D. Pa. April 2, 2008) (Standish, J.)

J.T.L.

APRIL 2008 BAD FAITH CASES
COURT ALLOWS INSURED’S CLAIM TO ESTOP APPLICATION OF SETOFF PROVISION TO PROCEED, DESPITE CLEAR & UNAMBIGUOUS POLICY LANGUAGE TO THE CONTRARY (Philadelphia Federal)

In Romeo v. Unumprovident, the insured was unable to return to her job due to a motor vehicle accident.  Consequently, she began receiving benefits under a disability insurance policy.  The policy provided that her benefits would be reduced, or setoff, against any government retirement and disability fund benefits she may receive.

Sometime later, a representative for the insurer contacted her and inquired whether she received any such government benefits.  When she stated she did receive government benefits, the insurer’s representative promised her that no setoff would be taken.

The insured filed a claim for “equitable estoppel,” arguing that the insurer should be estopped from applying the setoff due to the promises of the insurer’s agent.  The insurer argued that, as a matter of law, the insurance policy unambiguously provided that the setoff will apply to her benefits.

The Court treated her claim as one for “promissory estoppel,” and found that she could conceivably prove that she had a reasonable expectation of coverage due to the promises and representations of the insurer’s agent.  Despite the clear and unambiguous language in the policy, therefore, the Court declined to enter judgment as a matter of law.

Date of Decision:  February 11, 2008

Romeo v. Unumprovident Corp., United States District Court for the Eastern District of Pennsylvania, No. 07-1211, 2008 U.S Dist. LEXIS 10199 (E.D. Pa. February 11, 2008) (Yohn, J.)

J.H.

 

APRIL 2008 BAD FAITH CASES
INSURED PLEADS ACTIONABLE BAD FAITH CLAIM BY ALLEGING THAT INSURER PROCEEDED WITH A DECLARATORY JUDGMENT ACTION KNOWING IT COULD NOT PREVAIL (Western District)

The Court was confronted with Nationwide’s Motion to Dismiss Plaintiff’s (the insured) Complaint alleging breach of contract and statutory bad faith.  Plaintiff’s Complaint asserted that Nationwide had acted in bad faith by failing to conduct a reasonable investigation regarding the lawsuit filed against Plaintiff, its continued pursuit of a declaratory judgment action and its failure to settle the underlying suit.

The Plaintiff shot Aaron Fitzsimmons with a handgun.  Mr. Fitzsimmons survived the incident and subsequently filed suit against the insured alleging claims for negligence, battery and punitive damages.  Plaintiff was insured under a homeowner’s policy which stated, “Coverage E – Personal Liability, and Coverage F – Medical Payments to Others do not apply to bodily injury or property damage: which is expected or intended by the inured (sic).”

Nationwide filed a declaratory judgment action which proceeded to trial limited to the issue of whether Plaintiff intended to shoot Mr. Fitzsimmons.  The jury found for the Plaintiff and the court directed Nationwide to provide coverage for Plaintiff in the underlying suit.  Following the trial Nationwide settled the underlying suit.

In its Motion to Dismiss, Nationwide argued that Plaintiff’s bad faith claim should be dismissed because it had provided a defense to Plaintiff in the underlying action under a reservation of rights and that it filed the declaratory judgment action to clarify its coverage obligations.  Plaintiff, however, argued that Nationwide persisted in pursuing the declaratory judgment proceedings even though during its investigation it knew it could not prevail.

The Court noted that the Pennsylvania Supreme Court had not yet addressed the question of whether an insurer actually denies benefits if it assumes the defense of its insured under a reservation of rights but files a declaratory judgment action seeking a declaration that it is not obligated to defend or indemnify its insured even when it is clear that it should be defending and indemnifying the insured rather than settling the underlying suit.

The Court held that under these facts, if accepted as true, the Pennsylvania Supreme Court would find that there had been a denial of benefits and that Plaintiff had alleged sufficient facts in support of a statutory bad faith claim.  Therefore, the Court denied Nationwide’s Motion to Dismiss.

Finally, Nationwide alleged that even if Plaintiff had stated a claim for statutory bad faith, it was precluded under the two-year statute of limitations.  Nationwide argued that Plaintiff failed to file the bad faith claim within two years of the date that Nationwide filed that declaratory judgment.  Conversely, Plaintiff argued that the limitations period did not begin to run until during the investigation period conducted after the declaratory judgment was filed in which Nationwide received various deposition transcripts clearly showing that Plaintiff did not intentionally shoot Mr. Fitzsimmons.

The Court held it was too early in the litigation to determine at what point Plaintiff knew or should have known that Nationwide was allegedly acting in bad faith.  As such, the Court denied Nationwide’s Motion without prejudice with regard to its statute of limitations argument.

Date of Decision:  March 20, 2008

Gideon v. Nationwide Mutual Fire Ins. Co., United States District Court for the Western District of Pennsylvania, No. 07-40E, 2008 U.S Dist. LEXIS 26729 (W.D. Pa. March 20, 2008) (Cohill, J.)

J.T.L.

APRIL 2008 BAD FAITH CASES
BAD FAITH CLAIM DISMISSED DUE TO ABSENCE OF DENIAL OF ANY BENEFITS UNDER INSURANCE POLICY (Lackawanna)

The Court addressed motions for summary judgment stemming from Plaintiff’s (the insured) Complaint alleging bad faith claims handling.  In an underlying lawsuit, Plaintiff was sued for injuries allegedly suffered by Randy Everetts while he was moving a refrigerator on the insured’s property.  Indian Harbor, through its third party administrator, American Claims Service, Inc., successfully defended the insured in the personal injury lawsuit.

From the very outset, a question arose as to whether the accident occurred during the effective dates of the policy.  Mr. Everetts in his complaint pleaded that the accident occurred one day before the policy became effective, while the insured insisted that the accident happened one day later, when the policy was in effect.

Approximately 18 months after Indian Harbor began defending the case, its third party administrator sent out a reservation of rights letter in which it stated that it would continue to defend the insured but if the facts established that the accident occurred before the inception of the policy, it would have no duty to indemnify the insured.  The insured, upon reading the reservation of rights letter, allegedly became so upset that he suffered a seizure and had to be hospitalized.

After the underlying action was successfully defended, the insured brought a bad faith action against Indian Harbor and its third party administrator alleging that the delay in issuing the reservation of rights letter was due to the failure of Indian Harbor to adequately investigate the coverage issues and that it also had an obligation to locate other insurance for the insured because it knew of the potential that the insured would not be insured under its policy.

Indian Harbor and American Claims filed motions for summary judgment, contesting each of the numerous theories of liability being advanced by the insured including Plaintiff’s bad faith claim.

In granting the motion, the trial court judge found that Indian Harbor and its third party administrator breached no duty to the insured, that it had no duty to find other insurance for the insured and that by successfully defending the insured in the underlying action, Indian Harbor had fulfilled its obligation to its insured.

In addition, the Court held that since no benefits were ever denied under Plaintiff’s insurance policy, section 8371 could not serve as a basis for a bad faith claim.

Date of Decision:  February 15, 2008

Smalanskas v. Indian Harbor, Pennsylvania Court of Common Pleas, Lackawanna County, Docket No. 04 CV 2394, 2008 Pa. Dist. & Cnty. Dec. LEXIS 233  (Feb. 15, 2008) (Nealon, J.)

J.T.L.

APRIL 2008 BAD FAITH CASES
REMAND DENIED WHERE NO DEFECT IN REMOVAL OF CASE TO FEDERAL COURT OR ANY RECOGNIZED INCONVENIENCE ARISING FROM THE PRESENT FEDERAL COURT FORUM (Western District)

The insured filed a complaint in a Pennsylvania Common Pleas Court against Defendant, his insurer, arising out of a car accident involving Plaintiff and a third party and setting forth only a bad faith claim against Defendant.  Defendant removed the case based on diversity to the U.S. District Court of the Western District of Pennsylvania.  Before the court for its consideration was Plaintiff’s Motion to Remand based on the theory of forum non conveniens due to Plaintiff’s medical condition and inability to travel.  The court also noted that a motion to remand is generally based only on defects in the removal.

The court noted that the argument of an inconvenient forum applies when considering transfers or dismissal, as opposed to remand.  Still, the court did not foreclose considering the inconvenience of the forum in addressing a motion to remand.  However, the court noted that Plaintiff failed to set forth any caselaw supporting his theory of inconvenience based on a medical condition.

Further, the court noted that forum non conveniens is generally limited to the context of when a more convenient forum is in a foreign country.  As a result, the court denied Plaintiff’s Motion to Remand.

Date of decision:  March 31, 2008

Hamed v. Horace Mann Insurance Company, United States District Court for the Western District of Pennsylvania, Civil Action No. 08-00133 (W.D. Pa. March 31, 2008).

(Barry Fischer, J.).
R.E.M.

 

APRIL 2008 BAD FAITH CASES
BAD FAITH CLAIM DISMISSED BECAUSE PLAINTIFF WAS CLASS MEMBER IN PRIOR CLASS ACTION SETTLEMENT AND INJURY WAS BASED ON RELEASED TRANSACTIONS (Western District)

Plaintiff was insured by Defendant on two separate life insurance policies.  The policies had been purchased by Plaintiff’s father, and they had been completely paid and no further premiums were due.  Plaintiff alleged that Defendant’s agent recommended that Plaintiff surrender these policies and apply the cash to a new policy.  Plaintiff alleges that the agent represented to him that Plaintiff would not be required to pay additional premiums on the policy, but that his benefit would increase over time.  Relying on the representations, Plaintiff made the exchange for the new life insurance policy.

Subsequently, Plaintiff received a notice of premium for the new life insurance policy.  As a result, Plaintiff filed an action alleging violations of the Pennsylvania Unfair Trade Practices and Consumer Protection Law (“UTPCPL”), common law breach of contract and bad faith pursuant to 42 Pa.C.S.A. § 8371.  Before the court for consideration was Defendant’s motion to dismiss.

Defendant’s motion was premised on the argument that Plaintiff’s claims were barred, based on a prior class action settlement in Willson v. New York Life Ins. Co., Index No. 94/127804 (Sup.Ct. NY Co. Feb. 1, 1996).  The Willson class action lawsuit arose from allegations that the defendant had engaged in a nationwide scheme to induce class members to purchase life insurance on the basis of alleged misleading sales presentations.

In support of its motion, Defendant argued that Plaintiff was a member of the Willson settlement class and was precluded from bringing his claims pursuant to the settlement agreement.  Plaintiff argued that he was not bound by the settlement agreement.  He argued that he was not part of the settlement class because his claim had not arisen at the time of the settlement agreement, nor did he receive adequate notice of the class action settlement, nor was he adequately represented by the settlement class.

In a thorough analysis, the court agreed with the Defendant and concluded that the Plaintiff was a member of the settlement class, and he alleged injury based entirely on transactions released by the settlement agreement.  As a result, Plaintiff’s action was dismissed on all counts.

Date of decision:  March 19, 2008

Pyle v. New York Life Insurance Company, United States District Court for the Western District of Pennsylvania, Civil Action No. 07-00360, 2008 U.S. Dist. LEXIS 21638, (W.D. Pa. Mar. 19, 2008) (Fischer, J.).

R.E.M.