Monthly Archive for March, 2012


The court issued an opinion of potentially broad impact. On what appears as an unfavorable factual scenario for the assignee of a statutory bad faith claim, the court held that as a general rule bad faith claims under 42 Pa.C.S. § 8371 are not assignable by the insured.

The court refused to follow a series of Superior Court cases allowing such an assignment on the basis that the Pennsylvania Supreme Court’s 2007 opinion in Ash v. Continental Ins. Co., established that section 8371 was in the nature of a tort, which then formed the predicate of the Court’s argument that an unliquidated tort claim generally could not be assigned.

The federal district court cited Pennsylvania Supreme Court authority, going back to the 19th century in some instances, standing for the principle that unliquidated tort claims are not assignable. This rule, the court reasoned, was created to stop “profiteering in litigation by individuals who otherwise have no interest in the subject matter of the underlying claim.”

The court recognized a Pennsylvania Supreme Court decision that allowed the assignment of a legal malpractice claim, but distinguished that case. The court stated that “causes of action in the nature of a penalty are not assignable” because a statutory penalty is “a personal privilege of the party aggrieved.”

Therefore, the district court in this case granted the carrier’s motion to dismiss because the assignment was invalid, and the putative assignee lacking standing.

Comment: This is obviously a decision of considerable significance in light of the practice of insured’s assigning breach of contract and bad faith claims to settle cases.

Date of Decision: February 28, 2012

Feingold v. Liberty Mutual Group, No. 11-5364, 2012 U.S. Dist. LEXIS 25273 (E.D. Pa. Feb. 28, 2012) (Bartle, J.).

This case was affirmed by the Third Circuit, which commended Judge Bartle’s reasoning on the issue.


The court heard an insured’s motion to remand her action to state court. The motion stemmed from a breach of contract and bad faith action brought after the carrier failed to pay life insurance benefits pursuant to the insured’s policy. After filing the suit in the Philadelphia Court of Common Pleas, the carrier removed to federal court.

The insured subsequently moved to remand. Although the parties were diverse in citizenship, the insured claimed that the amount in controversy did not exceed the requisite $75,000. The court flatly disagreed with this contention, denying the insured’s motion.

First, it reasoned that, under Third Circuit precedent a court must give a “reasonable reading of the value of rights being litigated,” making it impossible to say with certainty that the claim would not exceed $75,000. In making this determination, the court held that bad faith claims offer a potential award of punitive damages would easily surpass $75,000. The court also recognized that potential attorney’s fees would likely exceed the jurisdictional threshold.

Second, the court held it does not matter that the insured stipulated that damages would not exceed $75,000. It reasoned that a court must examine whether the “actual monetary demands in the aggregate exceed the threshold, irrespective of whether the plaintiff states that the demands do not.” As such, the court denied the insured’s motion.

Comment: It is not clear whether the removal in this case took place prior to the effective date (January 6, 2012) of the most recent amendments to28 U.S.C. §§ 1441, 1446. Under amended § 1446(c)(2), a good faith statement of damages in the initial pleading “shall be deemed to be the amount in controversy”; however, the removing defendant may assert the amount in controversy where the state’s law “permits recovery of damages in excess of the amount demanded” as in Pennsylvania. When that occurs, the district courts shall determine whether, by a preponderance of the evidence, the amount in controversy exceeds the statutory minimum. Some commentators note a court may even take discovery on this issue.

Date of Decision: February 23, 2012

Morris v. Banker’s Life & Casualty Company, NO. 11-7675, 2012 U.S. Dist. LEXIS 23952 (E.D. Pa. Feb. 23, 2012) (Stengel, J.)


The insureds brought a claim against their home insurance carrier under Pennsylvania’s Unfair Trade Practices and Consumer Protection Law (“UTPCPL”), to which the carrier responded with a motion to dismiss.

The claim stemmed from a fire that damaged the insureds’ residence in 2006. The damaged incurred was covered under its policy with the carrier, which investigated the damage. The carrier also recommended that the insureds select a contractor from their list of approved vendors, who were paid directly by the carrier. Unbeknownst to the insureds, the carrier had a financial stake in having its insureds utilize the services of participating contractors.

After selecting a contractor, who began working on the insureds’ home, the couple noticed that the quality of the work performed on their home was subpar. They also noticed that their property had been damaged and ordered the contractor to discontinue work. A Code Enforcement Officer later determined that the work was not in compliance with local building codes. Although the insureds paid for the work that had been done, they were forced to hire another contractor to complete the job, costing them $94,293.39.

The insureds commenced an action against the contractor in 2008, receiving a judgment against him. The insureds also commenced an action under the UTPCPL against their carrier, alleging that it engaged in deceptive practices. The carrier responded by filing a motion to dismiss.

Turning to the carrier’s motion, the court first held that the insureds had standing to sue the carrier because they had purchased “goods or services primarily for personal, family or household purposes” from the carrier as required under the UTPCPL statute.

As the insureds had relied upon representations about the carrier’s list of preferred contractors, there existed a causal connection between the carrier’s conduct and the detriment caused by the insureds’ reliance thereupon. The court denied the carrier’s motion on this issue.

Next, the court ruled that the insureds had properly alleged that the carrier engaged in fraudulent conduct, denying the carrier’s motion on this allegation. Specifically, the court ruled that the insureds had plausibly alleged misfeasance under the UTPCPL statute.

However, the carrier disagreed, arguing that, in the absence of breach of contract and bad faith claims, which were now past the statute of limitations, the insureds could not proceed. The carrier reasoned that the insureds were trying to “circumvent the applicable limitations periods by recasting…bad faith claims” as misfeasance under the UTPCPL. The court found this argument unavailing, finding that the carrier’s affirmative misrepresentations were not simple nonfeasance.

Lastly, the court ruled that the carrier’s conduct satisfied both the “fraudulent” and “deceptive” requirements of the UTPCPL statute, allowing them to proceed in their consumer protection action.

Therefore, the carrier’s motion to dismiss was denied and the court ruled that the insureds plausibly stated a claim, permitting the suit to proceed to discovery.

Date of Decision: February 24, 2012

Leary v. State Farm Fire & Casualty Co., No. 3:11-145, 2012 U.S. Dist. LEXIS 23898 (W.D. Pa. Feb. 24, 2012) (Gibson, J.).