AUGUST 2015 BAD FAITH CASES: COURT FINDS INSUREDS COULD NOT MAINTAIN A CLAIM FOR STATUTORY BAD FAITH WHERE INSURER’S BASIS OF DENIAL OF UNINSURED MOTORIST COVERAGE WAS CORRECT (Western District)

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In Cahall v. Ohio Casualty Insurance Company, the Court granted the insurer’s motion for summary judgment and denied the insured’s motion for summary judgment based on a waiver of underinsured motorist (UIM) benefits.

In the underlying action, one of the insureds was involved in a motor vehicle collision with another driver. After settling with the driver, the insured and her husband brought a UIM claim against their insurer, who denied the claim. The insurer had provided coverage to the insureds under an automobile policy, under which one of the insureds had executed a waiver form that rejected UIM coverage at the time of the policy’s issuance.

Later, during the time between the policy was issued and the motor vehicle accident, the insureds replaced both of the original vehicles insured under the policy.  They then added a third vehicle. After the new vehicle was added, the insureds did not execute a new waiver form rejecting UIM coverage.  The insurer took the position coverage was waived.

The complaint filed by the insureds included, among others, counts for breach of contract as to UIM coverage, and a statutory bad faith premised on the insurer’s “reasoning and rationale for denying UIM benefits.” The insureds filed for summary judgment, arguing they were entitled to coverage on grounds that the insurer was required to “provide them with another opportunity to reject UIM coverage and stacking.” The insurer filed a cross-motion for summary judgment, asserting that the insured’s original waiver of UIM benefits remained effective despite the subsequent addition of a third vehicle, and that the insureds could not maintain a claim for bad faith because the insurer had good cause to deny benefits.

In granting the insurer’s motion for summary judgment, the Court reasoned that “[t]he insured’s addition of a vehicle to an existing automobile insurance policy, as to which there is a prior properly noticed and executed waiver of UIM benefits, does not create an obligation/requirement that the insurer re-notice or re-obtain a subsequent waiver of such coverage.” Thus, because the insurer was correct in the basis of the denial of underinsured motorist coverage, the insureds could not maintain a claim for statutory bad faith.

Date of Decision: July 20, 2015

Cahall v. Ohio Cas. Ins. Co., No. 14-1246, 2015 U.S. Dist. LEXIS 93943 (W.D.Pa. July 20, 2015) (Lenihan, J.)

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