Monthly Archive for August, 2010

AUGUST 2010 BAD FAITH CASES
BAD FAITH CLAIM BASED ON ABUSE OF PEER REVIEW PROCESS NOT PRE-EMPTED AND INSURED PERMITTED TO PROCEED WITH CLAIM (Middle District)

In Cieplinski v. State Farm Mutual Insurance Company, the insured was involved in a motor vehicle accident, causing her to suffer bodily injury.  The policy she had with the insurer provided her with first party medical benefits.  After peer review, the insurer determined that medical expenses incurred by the insured for her treatment by a chiropractor would not be covered.  The insured filed a suit, and the insurer proceeded to cover the disputed expenses for the time being.

At a later date, the insurer again reviewed the insured’s situation, and it determined that chiropractic care had not been clinically necessary for the past two months, and it would not continue to cover the bills.  The insured then filed suit again, alleging that the insurer refused to pay her medical claims without conducting a reasonable investigation, failed to adopt and implement reasonable standards for prompt investigation of medical claims, did not attempt to effectuate prompt, fair and equitable settlement of her claims, and abused the peer review process.  The Complaint contained both breach of contract and bad faith claims.

In addressing the insurer’s Motion to Dismiss the bad faith claim, the court stated that the insurer argued that all bad faith claims for first party medical benefit denials were preempted by 75 Pa. Cons. St At. § 1797, which discusses the peer review plan for challenges to the reasonableness and necessity of treatment.  However, the court determined that while that statute preempted bad faith claims based on failure to conduct a reasonable investigation, evaluate coverage, or promptly notify her of a denial of first party benefits, a claim that an insurer has abused the peer review process in bad faith was not preempted.  Therefore, the court determined that the insured had properly pled a cause of action for bad faith, and it therefore denied the insurer’s motion to dismiss the bad faith claim.

Date of Decision:  July 26, 2010

Cieplinski v. State Farm Mut. Auto. Ins. Co., Civil Action No. 3:10-CV-1093, United States District Court for the Middle District of Pennsylvania, 2010 U.S. Dist. LEXIS 75257 (M.D. Pa. July 26, 2010) (Caputo, J.)

AUGUST 2010 BAD FAITH CASES
NO BAD FAITH WHERE CONTRACTUAL EXCLUSION APPLIES FOR INTENTIONAL TORT OF ONE INSURED (Middle District)

In Becker v. Farmington Casualty Company, the insured’s husband sexually molested her grandchild while the grandchild was being babysat by the insured at her house.  The only claim against the insured was a claim of negligence, with the allegation being that her negligent acts or omissions allowed her husband to commit the acts of molestation.

The insured contacted the insurer, asking it to defend and indemnify her under her homeowner’s policy, which generally covered personal liabilities sounding in negligence.  The insurer denied coverage, citing three reasons for denial under the contract:  (1) the heart of the suit was intentional harm committed by one of the insureds, (2) claims linked to sexual molestation were specifically excluded from coverage, and (3) the nature of the victim’s injury was emotional or psychological.  The insured then filed suit, alleging breach of contract and bad faith by the insurer in denying coverage.

The court only had to find in favor of the insurer for one of its three stated reasons for denial, and it focused on the exclusion of coverage for intentional injuries caused by an insured.  After discussing precedent, the court determined that insurance contract unambiguously excluded the insureds from coverage for intentional harm committed by any of the insureds under a policy, and therefore the female insured was not entitled to coverage as a matter of contract law.  Therefore, the court granted the insurer’s motion to dismiss the breach of contract and bad faith claims.

Date of Decision:  July 22, 2010

Becker v. Farmington Cas. Co., Civil Action No. 1:08-CV-2228, United States District Court for the Middle District of Pennsylvania, 2010 U.S. Dist. LEXIS 73902 (M.D. Pa. July 22, 2010) (Conner, J.)