Monthly Archive for December, 2009

DECEMBER 2009 BAD FAITH CASES
NO BAD FAITH WHERE INSURER FILES DECLARATORY JUDGMENT BEFORE CLAIM WAS MADE (Middle District)

In Principal Life Ins. Co. v. DeRose, the insurer filed a declaratory judgment seeking a declaration that its obligations under insurance policies issued on the life of JoAnn DeRose were not procured for legitimate purposes.  The trustees of DeRose’s estate filed a counterclaim for bad faith under 42 Pa. Cons. Stat. Ann. § 8371, among other counterclaims.  The court granted the insurer’s motion to dismiss the counterclaim for bad faith.  The court held that the filing of a declaratory judgment action is insufficient to give rise to a claim for relief under Pennsylvania’s bad faith statute, particularly where there has been no claim for benefits under the policy, and therefore, no denial of any claim.

Dates of Decision: October 28, 2009 and November 23, 2009

Principal Life Ins. Co. v. DeRose, Civil Action No. 1:08-CV-2294, United States District Court for the Middle District of Pennsylvania, 2009 U.S. Dist. LEXIS 109130 (M.D. Pa. October 28, 2009) (Carlson, U.S.M.J.)

Adopted by the District Court in Principal Life Ins. Co. v. DeRose, Civil Action No. 1:08-CV-2294, United States District Court for the Middle District of Pennsylvania, 2009 U.S. Dist. LEXIS 109126 (M.D. Pa. November 23, 2009) (Conner, J.)

DECEMBER 2009 BAD FAITH CASES
INSUREDS MAY BE ENTITLED TO COMPENSATORY DAMAGES BEYOND DAMAGES FOR STAUTORY BAD FAITH (Middle District)

The insurer argued that the insured’s claim for breach of the covenant of utmost fair dealing, should be dismissed for failure to state a claim upon which relief may be granted because the Pennsylvania bad faith statute, 42 Pa. Cons. Stat. Ann. § 8371, is the only remedy for extra-contractual damages.

The court addressed the issue of whether the duty of good faith and fair dealing is implied in insurance contracts in Pennsylvania, and if so, whether it is a separate cause of action from breach of contract.

The court stated that the covenant of good faith and fair dealing “acts as a term of the contract, and that covenant arises from the contract itself.”  The court held that in Pennsylvania, the breach of the covenant of good faith and fair dealing exists as a breach of contract and may allow for the award of compensatory damages beyond the damages provided for a bad faith claim under § 8371.

Date of Decision: November 24, 2009

Zaloga v. Provident Life & Accident Ins. Co. of Am., United States District Court for the Middle District of Pennsylvania, Case No. 3:09-CV-635, 671 F.Supp. 2d 623, 2009 U.S. Dist. LEXIS 109648 (M.D. Pa. November 24, 2009) (Kosik, J.)

DECEMBER 2009 BAD FAITH CASES
CLASS STATUS DENIED ON OTHER GROUNDS, BUT COURT WOULD HAVE FOUND PREDOMINANCE STANDARD MET RE BAD FAITH CLAIM OF A COMPANY WIDE PRACTICE (WESTERN DISTRICT)

This case involved a putative class action against an insurer for bad faith, among other things.  The court denied class action status as the typicality and adequacy elements were not met.  However, in observing that predominance would have gone in Plaintiff’s favor, the court stated: “Moreover, the bad faith alleged in this case relates to a coordinated, companywide decision to change the interpretation of ‘actual charges.'”

Date of Decision:  November 6, 2009

Smith v. Life Investors Ins. Co. of Am., No. 2:07-cv-681, 2009 U.S. Dist. LEXIS 103533 (W.D. Pa. Nov. 6, 2009) (McVerry, J.)