Monthly Archive for March, 2018

MARCH 2018 BAD FAITH CASES: NO BAD FAITH ON UIM CLAIM DENIAL WHERE RECORD SHOWED THE INSURED WAS AT FAULT IN CAUSING THE ACCIDENT (Middle District)

In this UIM action, the insured brought suit for bad faith and breach of contract after the insurer denied the claim on the basis that the insured caused the accident at issue. The insurer moved for partial summary judgment on the bad faith claim.

The record showed the insured failed to stop at a blinking red light before striking another driver who had a blinking yellow light. The Court found that the insurer reviewed: the facts of the accident as provided by several witnesses, the police report, the insured’s traffic citation for failing to stop, photos showing damage to the vehicles, and the fact that the insured paid for the damages she caused to the other driver.

Citing Third Circuit precedent, the Court stated that “summary judgment is essentially ‘put up or shut up’ time for the non-moving party.’” While the insured testified that she did stop at the blinking light, such testimony was insufficient given the overwhelming evidence that she was at fault. Thus, the Court held that the insurer’s claim denial was supported by sufficient evidence to find that it had no duty to pay a UIM claim. There could be no bad faith on this record, and summary judgment went to the insurer.

Date of Decision: March 7, 2018

Long v. State Farm Mutual Automobile Insurance. Co., U. S. District Court for the Middle District of Pennsylvania, CIVIL ACTION NO. 4:15-cv-02404, 2018 U.S. Dist. LEXIS 36779 (M.D. Pa. Mar. 7, 2018) (Brann, J.)

 

MARCH 2018 BAD FAITH CASES: NEGLIGENCE IS NOT BAD FAITH; SUMMARY JUDGMENT CANNOT BE DEFEATED WHERE RECORD CONTRADICTS BALD ALLEGATIONS OF BAD FAITH (Philadelphia Federal)

In this UIM case, the actual record warranted summary judgment for the insurer, despite allegations of bad faith to the contrary.

The insured submitted a UIM claim for injuries sustained to his elbow. The insured recovered $100,000 from the tortfeasor’s insurer, and then requested maximum UIM benefits of $200,000. Three weeks before the accident, the insured had injured the elbow when he fell at his home.

The insured’s counsel initially attempted to contact a claims specialist who no longer worked for insurer. Nearly four months later, the insurer responded that that this adjuster no longer worked there, but the UIM claim was being transferred to another claims specialist immediately. The insurer did immediately begin processing the claim, and continually requested additional medical records from the insured, to no avail.

The insured filed suit for bad faith and breach of contract, and the insurer moved for summary judgment on the bad faith claim, which was granted for the following reasons:

Negligence is not bad faith.

  1. The insured argued bad faith in delaying the UIM investigation for four months. The Court ruled that in light of the fact that the initial demand letter was sent to the wrong person, the delay in opening the claim amounted to mere negligence, not bad faith.

The record contradicts the insured’s alleged bases for bad faith.

  1. The insured argued a failure to tender reasonable UIM benefits. The Court rejected this argument, stating that a partial valuation of the claim had neither been made nor requested by the insured.

  2. The insured argued the insurer used dilatory tactics and failed to investigate the claim. The Court found this “patently false,” because the record showed the insurer continually communicated with the insured and retained three separate physicians who all concluded the insured suffered no additional elbow injury due to the auto accident.

  3. The insured argued the claim was frivolously denied. The Court rejected this argument, citing the thorough investigation conducted by the insurer.

Date of Decision: March 6, 2018

Smith v. LM General Insurance Co., CIVIL ACTION NO. 17-02310, 2018 U.S. Dist. LEXIS 35773 (E.D. Pa. Mar. 6, 2018) (Pappert, J.)

MARCH 2018 BAD FAITH CASES: THIRD CIRCUIT DID NOT HAVE TO REACH ISSUE OF WHAT LITIGATION CONDUCT COULD CONSTITUTE BAD FAITH, BECAUSE CONDUCT AT ISSUE WAS NOT BAD FAITH CONDUCT IN THE FIRST INSTANCE (Third Circuit, Pennsylvania law)

The insured alleged bad faith based on the insurer’s introduction and reliance on allegedly biased expert testimony in this underinsured motorist case. The District Court had dismissed the claim, after an extensive analysis on when litigation conduct might constitute bad faith. The Third Circuit affirmed, but without addressing that issue.

The parties entered a high/low settlement agreement during the course of a jury trial, i.e., if the insured won he could get up to $300,000, but no less than $100,000 if he lost. The jury awarded $1.6 Million, but that sum was molded to $300,000. The agreement released all bad faith claims existing up to the date of the agreement, but did not release post-agreement bad faith claims.

The insurer relied upon two experts’ reports and testimony before the jury. The insured later brought a bad faith action based upon the insurer’s use of its expert reports and testimony during the trial process and after the date of the high/low agreement. He alleged that the insurer acted in bad faith by introducing and relying upon the biased testimony of its experts; by “failing to make an honest, intelligent settlement offer”; and by “seeking to have the bad faith claim dismissed with prejudice.”

The Third Circuit observed that bad faith is based upon the frivolous or unfounded refusal to pay proceeds under a policy, under a two criteria test: (1) that it was unreasonable to deny benefits; and (2) that the insurer knew or recklessly disregarded the absence of a reasonable basis to deny benefits. The big issue addressed at the District Court level was how to evaluate litigation conduct under the Bad Faith Statute. The Third Circuit found it did not have to reach that issue because the complaint’s allegations (including expert reports and depositions as exhibits) did “not identify any misconduct, much less bad faith” conduct.

It was alleged contradictions in the experts’ testimony that formed the basis of the bad faith claim. The Court found no inconsistencies in the first expert’s report and testimony, and found that the report was more limited in scope than the insured asserted. Similarly, the Court found no contradictions in the second expert’s report. Thus, “[b]ecause the statements made by [the medical experts] are not contradictory, [the insurer’s] introduction of and reliance on their testimony cannot rise to the level of bad faith, even under [insured’s] suggested legal standard.”

And again, after noting the absence of Pennsylvania Supreme Court precedent on when litigation conduct could be subject to the Bad Faith Statute — though it had been addressed to some degree in the Superior Court and the Third Circuit — the Court stated that it “need not reach this question because the facts alleged clearly do not amount to knowing presentation of biased expert testimony.”

Date of Decision: February 27, 2018

Homer v. Nationwide Mutual Insurance Co., U. S. Court of Appeals Third Circuit No. 16-3686, 2018 U.S. App. LEXIS 4859 (3d Cir. Feb. 27, 2018) (Fishman, Hardiman, Roth, JJ.)

MARCH 2018 BAD FAITH CASES: COURT REMANDS CASE WHERE BAD FAITH CLAIM DROPPED AFTER REMOVAL, AND SUM AT ISSUE FALLS BELOW $75,000 (Western District)

The carrier removed the case based on diversity jurisdiction. At the time of removal, there was diversity and “there was a good faith belief that the amount in controversy exceeded $75,000 because [the insured] could recover punitive damages under the Pennsylvania Bad Faith statute.” However, the insured later “agreed to voluntarily dismiss the insurance bad faith claim leaving only an $18,000 breach of contract claim.

The court looked to 28 U.S.C. § 1447(c): “If at any time before final judgment it appears that the district court lacks subject matter jurisdiction, the case shall be remanded.” Applying section 1447(c), the court found the case no longer involved a dispute in excess of $75,000, and the insurer agreed that remand was proper.

Date of Decision: February 26, 2018

Sciulli v. GEICO General Insurance Co., CIVIL ACTION NO. 16-1907, 2018 U.S. Dist. LEXIS 30158 (W.D. Pa. Feb. 26, 2018) (Flowers Conti, C.J.)