Monthly Archive for July, 2018

JULY 2018 BAD FAITH CASES: NO BAD FAITH WHERE (1) DENIAL WAS REASONABLE AND (2) THERE WAS NO DELAY IN MAKING DECISION TO DENY; COURT ALSO EXPLAINS DUTY TO REIMBURSE VS. DUTY TO DEFEND (New Jersey Appellate Division)

The central discussion in this case focused on the duty to defend as distinguished from the duty to reimburse. Where there is coverage on the face of the complaint a defense must be provided, with two exceptions. If there are covered and uncovered claims, or the coverage issue is of a kind that cannot be determined through the underlying action against the insured, then the obligation to defend becomes an obligation to reimburse defense costs if it is later determined coverage was due. Thus, an insurer can reserve its rights and dispute coverage, which can turn the duty to defend into a duty to reimburse.

In this case, there was a policy exclusion with anti-concurrent and anti-sequential language, when compared to the allegations in the complaint, made it premature “to order [the insurer] to assume responsibility for the defense since it was unclear, based on the anti-concurrent and anti-sequential language in the exclusion, whether any claims would be covered.” Thus, the duty to defend became a duty to reimburse.

The insured settled the claim, and sought recovery under the Griggs rule. Under Griggs: “Where an insurer wrongfully refused coverage and a defense to its insured, so that the insured is obliged to defend himself in an action later held to be covered by the policy, the insurer is liable for the amount of the judgment obtained against the insured or of the settlement made by him. The only qualifications to this rule are that the amount paid in settlement be reasonable and that the payment be made in good faith.” The Court refused to apply Griggs to this case where a duty to deny a defense and coverage was made in good faith.

Further, the insurer did not breach its duty of good faith in the steps taken to deny the claim. There was no unreasonable delay in denying the claim, and no purported to prejudice the insured.

This opinion provides a good overview of New Jersey law on policy interpretation and coverage disputes, coverage disputes involving exclusions, and anti-concurrent/anti-sequential clauses.

Date of Decision: July 20, 2018

Wear v. Selective Insurance Co., New Jersey Superior Court Appellate Division, DOCKET NO. A-5526-15T1 A-0033-16T1, 2018 N.J. Super. LEXIS 108 (App. Div. July 20, 2018) (Koblitz, Manahan, Suter, JJ.)

JULY 2018 BAD FAITH CASES: WHEN INSURER FOLLOWS RELEVANT CASE LAW ON EXCLUSIONS, BAD FAITH CLAIM IS MERITLESS (Philadelphia Federal)

To complete a cable installation, Comcast contracted with FTS, and FTS contracted with CVRS, “which hired Jeremy Hays”—who brought a workers’ compensation complaint against CVRS and Comcast, in Tennessee. Subsequently, “Comcast filed a Third-party Complaint [] against FTS seeking express indemnity for Hays’s claim for workers’ compensation against Comcast.” FTS (insured) had a Commercial General Liability Policy (the “CGL Policy”) with Zurich American Insurance Company (Zurich-insurer), and a Workers’ Compensation Policy with American Zurich Insurance Company (AZIC-insurer). FTS sought coverage from Zurich and filed a Third-Party Complaint against AZIC to cover the workers’ compensation.

“The CGL Policy contained a contractual liability exclusion, excluding certain damages FTS assumes in a contract or agreement, but the exclusion does not apply to an ‘insured contract.’” Moreover, “the indemnity agreement between Comcast and FTS is an “insured contract” if the underlying workers’ compensation claim constitutes tort liability.

Zurich-insurer sought a declaratory judgment alleging “it owes no coverage to FTS under the CGL Policy,” and AZIC filed an Answer and Counterclaim against FTS arguing, “its first party workers’ compensation coverage was not implicated by Comcast’s claim for express contractual indemnity from FTS.” Finally, the insured counterclaimed with a bad faith claim against insurers.

THE CGL POLICY:

The CGL Policy does not apply to contractual liability, “unless the insured would have such liability on the absence of a contract or agreement or the insured assumes such contractual liability in an ‘insured contract.’” In reviewing Tennessee law, where Hays raised the workers’ compensation claim, this court concluded workers’ compensation law does not fall within “tort liability” because Tennessee law “immunizes entities that are liable for Tennessee workers’ compensation benefits from tort liability.”

THE WORKERS’ COMPENSATION POLICY:

The Workers’ Compensation Policy excludes coverage of “liability assumed under a contract.” In Pennsylvania, the obligation of an insurer’s duty to defend is based solely on the allegations in the complaint. The third party complaint in this matter alleged “FTS has an express contractual duty to indemnify.” This contractual obligation addressed in the complaint “triggers the exclusion for liability assumed in a contract.” Thus, the workers’ compensation does not protect FTS.

The BAD FAITH CLAIM IS MERITLESS:

The insurer argued that the statutory bad faith claim was “meritless because [the insurer’s] coverage positon was reasonable and consistent with the decisions that have decided the issue.” The insured “argues that the [insurer’s] decision to deny benefits under the CGL Policy was in bad faith because it was not reasonable for Zurich to ignore the definition of ‘tort liability’ in the CGL Policy.” Additionally, the insured argued that the insurer made contradictory arguments when the insurer identified the insured as an employer of Hays, and denied coverage under the Workers’ Compensation Policy.

The court determined, “[the insurer] had a reasonable basis to deny coverage under the CGL Policy, evidenced by the fact that its position was consistent with case law on the issue.” Additionally, the court concluded the insurer did not make contradictory coverage conclusions because “Zurich did not deny coverage under the CGL Policy because it believed FTS was Hays’s employer, but rather because it believed Hays’s claim for workers’ compensation benefits did not implicate a tort liability.” Thus, the bad faith claim was meritless.

Date of Decision: July 17, 2018

Zurich American Insurance Company v. FTS USA, LLC, U. S. District Court, Eastern District of PA, CIVIL ACTION NO. 17-1156, 2018 U.S. Dist. LEXIS 119431 (E.D. Pa. July 17, 2018) (Slomsky, J.)

JULY 2018 BAD FAITH CASES: (1) RELIANCE ON INADEQUATE EXPERT REPORT CAN BE BAD FAITH; (2) COURT REFUSES TO STRIKE REFERENCE TO CARRIER’S PRIOR ATTEMPT TO TERMINATE POLICY AFTER A DIFFERENT LOSS (Philadelphia Federal)

In this case, the insured argued that the carrier’s reliance on its expert (an unidentified plumber) was unreasonable. The insurer took the position that reliance on an expert makes a decision reasonable as a matter of course. The court found that bad faith could be found if the plaintiff could prove unreasonable reliance on an inadequate expert report.

In this case, the plaintiff alleged the report did not name the expert, was unsigned, and provided no factual basis to support its conclusions. While the court did find there was some factual support in the report, the report was still inadequate because the expert did not go beyond the surface in inspecting the damage at issue, and “offered quite a thin analysis of the potential evidence available for determining the cause of the damage.”

Thus, a plausible claim was stated that the carrier’s reliance on this expert report was unreasonable. By contrast, the court reviewed other cases where there was “a much more comprehensive investigation process and more detail relied upon than is alleged here.”

The carrier also sought to strike references to its prior efforts to terminate the insured’s policy which arose out of a different loss. The carrier’s termination effort was overturned by the insurance department. The insured argued this was “relevant to the question of whether [the carrier] had knowledge of, or recklessly disregarded its lack of any reasonable basis for denying Plaintiffs’ coverage claim for the [claim now at issue].”

The court refused to strike this language from the complaint.

More generally, the Court provided an overview of the law on analyzing what constitutes a reasonable basis to deny coverage: “An insurer need not demonstrate that their evaluation of an insured’s claim was correct in order to show that they had a reasonable basis for a coverage decision, and thereby prevail against a statutory bad faith claim. … ‘Bad faith cannot be found where the insurer’s conduct is in accordance with a reasonable but incorrect interpretation of the insurance policy and the law.’ … Rather, an insurer simply must show that it had a reasonable basis for a coverage decision based on the information available at the time the decision was made. … ‘In deciding whether an insurer had a reasonable basis for denying benefits, a court should examine what factors the insurer considered in evaluating a claim.’ The reasonable basis standard imposes a requirement ‘that the insurer properly investigate claims prior to refusing to pay the proceeds of the policy to its insured.’ … Ultimately, ‘[b]ad faith claims are fact-specific and depend on the conduct of the insurer vis-à-vis its insured.’ … Courts must analyze the facts at hand to determine whether an insurer’s decision process on a particular insurance claim was sufficient such that it cannot be said to constitute bad faith as a matter of law.”

Date of Decision: July 18, 2018

Overbrook Properties, LLC v. Allstate Indem. Co., U. S. District Court Eastern District of Pennsylvania, CIVIL ACTION NO. 18-630, 2018 U.S. Dist. LEXIS 118766 (E.D. Pa. July 17, 2018) (Baylson, J.)

JULY 2018 BAD FAITH CASES: (1) DENIAL FOR LATE NOTICE, WITHOUT A SHOWING OF PREJUDICE, CAN BE THE BASIS FOR BAD FAITH; (2) NO BAD FAITH WHERE NO COVERAGE DUE (Western District)

Today we discuss two opinions issued by Western District Judge Hornak on July 17th and 18th.

The key issue in the FAPD bad faith case was the carrier’s coverage denial based on late notice. The insured argued that the insurer had to show prejudice before denial, but the insurer argued that prejudice was only relevant to coverage, not bad faith. Judge Hornak of the Western District disagreed, and found that a coverage denial based on late notice that did not create prejudice could be a basis to assert that the denial was unreasonable, meeting the first element of a statutory bad faith claim.

The complaint further stated a plausible claim that this denial was knowing or reckless. A key factor was the alleged failure to adequately investigate the loss before denying the claim. Thus, the court refused to dismiss the bad faith claim.

As background before wrestling with the late notice/prejudice issue, the court included the statement that “the insured must ultimately show that the insurer breached its duty of good faith through some motive of self-interest or ill will.” The Supreme Court has made clear that while showing self-interest or ill-will may provide evidence to support a bad faith claim, these are not required elements of a bad faith claim.

The court also gave a list of some conduct that could constitute bad faith: “an unreasonable delay in handling claims; a frivolous or unfounded refusal to pay; a failure to communicate with the insured; acting in a dilatory manner . . . . A bad faith claim may also arise when an insurance company conducts an inadequate investigation.” As noted many times on this blog, there is a real question whether conduct that does not deny or delay a benefit can be bad faith standing alone.

This is consistent with Judge Hornak’s opinion issued the following day in Campbell, stating: In light of the dismissal of the Breach of Contract claim, the Bad Faith claim cannot survive. Frog, Switch & Mfg. Co. v. Travelers Ins. Co., 193 F.3d 742, 751 n.9 (3d Cir. 1999) (“[W]here there was no duty to defend, there was good cause to refuse to defend against a suit.”).
Dates of Decision: July 17, 2018 and July 18, 2018

FAPD, LLC v. Auto-Owners Insurance Co., No. 2:18-cv-00428, 2018 U.S. Dist. LEXIS 118776 (W.D. Pa. July 17, 2018) (Hornak, J.)

Campbell v. State Farm Fire & Cas. Co., 2:18-cv-00292, 2018 U.S. Dist. LEXIS 119973 (W.D. Pa. July 18, 2018) (Hornak, J.)

JUNE 2018 BAD FAITH CASES: IN AN OPINION THAT BRINGS OUT THE VALUE OF KEEPING A THOROUGH AND DETAILED CLAIMS FILE, THE INSURED FAILED TO PRESENT CLEAR AND CONVINCING EVIDENCE THAT (1) THE INSURER LACKED A REASONABLE BASIS FOR ITS ESTIMATES, AND (2) THAT DELAY AMOUNTED TO BAD FAITH (Philadelphia Federal)

After a fire damaged insured’s property, six inspections of the property occurred due to the adjusters’ differing opinions on demolition and construction costs. Time also passed to address the tenant insurance carrier’s payment responsibilities. The insured sued for breach of contract and bad faith, alleging that the insurer improperly delayed in claims handling and payment, and refused to pay “sufficient insurance benefits” under the policy.

Under Pennsylvania law, a bad faith claim can be asserted if the insurer lacks a reasonable basis for denying coverage or in causing improper delay of payment. The insured alleged “that [the insurer] acted without a reasonable basis by (1) only releasing funds far below the amount due and owed under the policy, and (2) purposely delaying payment.” At the core of a delay bad faith claim, “[t]he plaintiff bears the burden of establishing delay by clear and convincing evidence.”

BAD FAITH DENIAL OF FUNDS

The insured argued that the insurer lacked a reasonable basis for the sum it chose to pay because the insurer waivered from its initial damage estimate, questioned the insured’s damage estimates, inspected the property six times, and relied on the tenant’s insurance carrier to determine final damage estimates.

The court ruled the insured’s evidence “fails, as a matter of Pennsylvania law, to reach the clear and convincing standard required for bad faith claims.” The evidence was not clear and convincing because it did not reflect a “frivolous or unfounded refusal to pay proceeds of the policy,” and because the evidence was “likely immaterial to whether [the insurer] lacked a reasonable basis for the eventual insurance payment.”

BAD FAITH DELAY OF PAYMENT

The court further ruled that the insurer did not exhibit bad faith in delaying payment, because the insured failed “as a matter of law to reach the clear and convincing standard.” The insured relied on the evidence referenced above, and “the undisputed fact that the time between the initial claim and the filing of the lawsuit was more than eleven months.”

First, the court concluded that the insurer provided the final payment four months after the initial claim. Next, the court determined that “continuous questioning” concerning the claim was not clear and convincing evidence of delay because the insured’s “submissions to [the insurer] always received a timely response, and the ‘questioning’ was consistent throughout.”

The court then concluded that when “delay is attributable to the need to investigate further . . . no bad faith has occurred.” The court found that “[e]ach of the six inspections had a reasonable basis,” as represented in “[e]xtensive, contemporaneous documentation, attached to [insurer’s] undisputed statement of facts.” The court ruled that the statement of facts reflected the necessity of the six inspections. Finally, the court concluded the insured did not provide sufficient evidence to prove “that [insurer’s] ‘obligations [to pay insured] are not contingent on the policy of insurance between [the tenant] and [tenant’s insurer] or payments made thereunder.’”

Summary judgment was granted for the insurer.

Date of Decision: June 29, 2018

LMT Associates, LLC v. Ohio Casualty Insurance Co., U. S. District Court, Eastern District of Pennsylvania NO. 17-3565, 2018 U.S. Dist. LEXIS 109643 (E.D. Pa. June 29, 2018) (Baylson, J.)

JULY 2018 BAD FAITH CASES: (1) BREACH OF IMPLIED COVENANT OF GOOD FAITH AND BREACH OF CONTRACT CLAIM NOT SEPARATE CAUSES OF ACTION; (2) STATUTORY BAD FAITH CLAIM FAILS WHERE INSURED MERELY ARGUES INSURER’S POLICY INTERPRETATION FAVORS INSURER (Middle District)

The insured had a life insurance policy with a $25,000 coverage amount. The original policy included a two-year suicide exclusion. Two other insurers acquired the original policy. The insured later increased her coverage under that policy to $100,000. Twelve years later, she obtained a replacement policy, also with a coverage amount of $100,000.

In connection with the replacement policy, the insured received a “Notice” which informed her, in pertinent part, that in switching to the replacement policy: “You should recognize that a policy that has been in existence for a period of time may have certain advantages to you over a new policy….Under your existing policy, the period of time during which the issuing company … deny coverage for death caused by suicide, may have expired or may expire earlier than it will under the proposed policy.”

After the insured’s death by suicide, her husband, on behalf of his children, filed a death benefit claim for the full $100,000, but the insurers refused under the suicide exclusion, and instead offered to pay a refund of $285.12 plus interest, representing the premiums paid on the policy.

AMBIGUITIES AND REASONABLE EXPECTATIONS FAVOR INSURED

The insured sued for the $100,000 policy coverage, and also brought a statutory bad faith claim, and claim for breach of implied covenant of good faith and fair dealing. The court ultimately granted the Plaintiffs summary judgment on the breach of contract claim.

Working under contra proferentem principles, the court did an extensive latent and patent ambiguity analysis of the policy language, and whether the insured’s long history of making payments for the same $100,000 was the applicable time period, rather than the replacement policy’s inception date.

The court also separately ruled summary judgment should be entered for the Plaintiffs under a reasonable expectations theory.

The replacement policy’s suicide exclusion language presented a “latent ambiguity,” and the above-quoted Notice did not alleviate that ambiguity because it did not “conclusively compel the reading that the suicide exclusion period started anew… [with the replacement policy’s inception].”

The court also determined the insured “could have reasonably believed that the suicide exclusion expired two years after she first began paying premiums on a life insurance policy . . . worth $100,000,” which started 12 years before the replacement policy, thus providing her with a reasonable expectation of coverage.

The replacement policy’s suicide exclusion was only two sentences long: “If the insured dies by suicide … we will not pay any death proceed[s] payable on amounts of insurance which have been in effect for less than 2 years. If the suicide … is within the first 2 contract years, we will pay as death proceeds the premiums you paid.”

The court’s analysis was lengthy, but the outcome basically hinged on the idea that the insured had been paying on the same “amounts of insurance” for over ten years, and that even what constituted “the first 2 contract years” was unclear when reading the policy as a whole.

With respect to the bad faith claims, the court made a distinction concerning insurance contract interpretation and bad faith claims. Thus, while the “[discovery] ambiguity should be resolved in favor of the Plaintiffs because of Pennsylvania’s judicially constructed principles favoring the insured in the specific context of insurance contracts,” “no such principle applies to the breach of implied covenant of good faith or the statutory bad faith claim.”

IMPLIED COVENANT CLAIM NOT DISTINCT FROM CONTRACT CLAIM

The court also recognized that “a claim for breach of the implied covenant of good faith and fair dealing is a breach of contract action, not an independent action for breach of a duty of good faith and fair dealing.”

“Pennsylvania law does not recognize a separate breach of contractual duty of good faith and fair dealing.” Thus, “a plaintiff would be barred from proceeding on both claims if they are based on the same conduct.” While Plaintiffs earlier alleged that the insurers made a “promise” to the insured regarding her benefit amount, “after the benefit of full discovery” they “failed to adduce any additional evidence” that the insurer’s conduct is separate “from Defendants’ denial of coverage based on their interpretation of the contract.”

Additionally, Plaintiffs only evidence on this issue is the insurer’s denial letter based on its “interpretation of the suicide exclusion—i.e. the same conduct that forms the basis of Plaintiff’s breach of contract claim.”

POLICY INTERPRETATION FAVORING INSURER, BY ITSELF, IS NOT BAD FAITH

Lastly, the court granted summary judgment on the statutory bad faith claim. The court stated that “’bad faith’ means ‘any frivolous or unfounded refusal to pay proceeds of a policy.’” Moreover, “knowledge or reckless disregard of a lack of a reasonable basis for denial of coverage is necessary.” Thus, “[a] reasonable basis is all that is required to defeat a claim of bad faith.”

In granting summary judgment, the court explained: “Plaintiffs openly acknowledge that their cause of action is founded upon [the insurer’s] refusal to pay the insurance claim in light of the language of the [suicide] exclusion … instead of presenting any evidence of bad faith obtained in discovery.” Further, “Plaintiffs do not challenge or even mention Defendants’ investigative process before denying the claim.”

Plaintiffs only argued, that the insurers “acted in bad faith because they relied on an interpretation more favorable to themselves when interpreting an ambiguous exclusion,” without the requisite proof by clear and convincing evidence that this interpretation was unreasonable and made in knowing or reckless disregard of that fact. The court could not conclude on the record “that [the insurers’] denial of the benefits based on their interpretation of the exclusion was so unreasonable that it amounts to bad faith.”

Date of Decision: June 28, 2018

Lomma v. Ohio National Life Assurance Corp., U. S. District Court, Middle District of Pennsylvania No. 3:16-CV-2396, 2018 U.S. Dist. LEXIS 108705 (M.D. Pa. June 28, 2018) (Mariani, J.)

 

 

JULY 2018 BAD FAITH CASES: AN INSURED CANNOT SUSTAIN A BAD FAITH CLAIM WITH MERELY IPSE DIXIT (Middle District)

In this first party medical benefits claim, accidental injury was covered but not loss resulting from disease. Prior to the insurer’s summary judgment motion, the record appeared to show the loss resulted from diabetes, which would not be covered. However, an affidavit submitted in opposition to summary judgment created a dispute of fact as to whether the loss arose from an accidental injury which may have been exacerbated by the diabetes, but was not caused by the diabetes. Thus, summary judgment was denied on the breach of contract claim.

Summary judgment was granted on the insured’s bad faith claim. The court observed that an insured “must show, by clear and convincing evidence, that [the insurer] ‘did not have a reasonable basis for denying benefits under the policy,] and that [it] ‘knew of or recklessly disregarded its lack of a reasonable basis in denying the claim.’”

In this case, none of the medical records mentioned injury, and most referred to diabetes as causing the loss. The only evidence the insurer had in evaluating the claim that supported an injury separate from the disease was the insured’s own language in his statement of claim. “But an insured cannot sustain a bad faith claim with merely ipse dixit.” Thus, the insured won summary judgment on the bad faith claim.

Date of Decision: June 28, 2018

Long v. Hartford Life & Accident Insurance Co., U. S. District Court, Middle District of Pennsylvania No. 4:16-CV-00138, 2018 U.S. Dist. LEXIS 108014 (M.D. Pa. June 28, 2018) (Brann, J.)

 

JUNE 2018 BAD FAITH CASES: (1) UIPA VIOLATIONS IRRELEVANT TO PROVING BAD FAITH AND MUST BE STRICKEN; BUT (2) FACTS DETAILING INSURER’S CONDUCT DENYING CLAIM, INCLUDING FAILURE TO ABIDE BY INDUSTRY STANDARDS, MAKE OUT PLAUSIBLE BAD FAITH CASE (Philadelphia Federal )

In this case, the court permitted the bad faith claim to proceed, however it struck all references to the Unfair Insurance Practices Act (UIPA) as “irrelevant” in determining violations of Pennsylvania’s Bad Faith Statute.

BAD FAITH PLAUSIBLY PLEADED

The insured alleged she “suffered ‘sudden and accidental direct physical loss’ to her insured premises.” She alleged the insurer “determined [the insured] suffered loss to property covered under the policy but did not completely indemnify [the insured] for the loss.”

She allegedly suffered water damage containing human waste. The complaint asserted that the public adjuster told the carrier it was not handling the claim according to the Institute of Inspection Clearing and Restoration Certification (IICRC) protocols, which required removing all porous material.

The insurer’s repair estimate did not include payment for removal and replacement of all porous material in contact with the contaminated water.

The insured alleged the insurer “knew that its estimate of repairs and ultimate payment did not comply with the insurance and construction industries for damage caused by contaminated water,” and that the insurer grossly underestimated the damage and grossly underpaid the claim. Additionally, she claimed the insurer “engaged in a pattern of behavior intended to delay and frustrate the adjustment process.”

To establish statutory bad faith, an insured must prove “(1) that the insurer lacked a reasonable basis for denying benefits; and (2) that the insurer knew or recklessly disregarded its lack of reasonable basis.” The insurer sought dismissal, citing earlier federal case law on inadequately pleading Pennsylvania bad faith claims. The court found, however, that the insured’s allegations were not purely conclusory legal statements made without factual support, lacking any description of the insurer’s behavior. Moreover, the court observed that an insured need not “prove her case at the pleading stage.”

The court concluded “the facts alleged by [the insured] . . . are sufficient to make out a claim for bad faith as the facts address the reasonableness of [insurer’s] actions.” The “Complaint contained numerous explanations and descriptions of the alleged bad faith conduct,” including, “notice of contaminated waste; violation of IICRC protocols; and knowledge that estimated repairs and ultimate payment was not in compliance with IICRC.” The insured set out sufficient facts to make out a plausible right to relief.

UIPA VIOLATIONS IRRELEVANT TO PROVING BAD FAITH CLAIMS

The court next considered the insured’s attempt to plead UIPA violations as evidence of bad faith. The court summarized the history of such efforts. It concluded that prior to Terletsky’s establishing the two-part bad faith test —recently adopted by the Pennsylvania Supreme Court — courts did look to the UIPA and Unfair Claim Settlement Practices (UCSP) regulations as bases to prove bad faith. However, once the two part bad faith test (quoted above), became the law, “[T]his two-pronged test effectively replaced the court’s analysis of UIPA or UCSP to determine bad faith.” Thus, all UIPA references in the complaint were stricken.

[Note: There are courts that will consider UIPA violations in evaluating statutory bad faith claims, as well as those recognizing UIPA violations do not themselves constitute bad faith.]

Date of Decision: June 21, 2018

Kunsman v. Metro. Direct Property & Casualty Insurance Co., U. S. District Court, Eastern District of Pennsylvania, NO. 17-4619, 2018 U.S. Dist. LEXIS 104621 (E.D. Pa. June 21, 2018) (Schmehl, J.)

 

 

JULY 2018 BAD FAITH CASES: NO BAD FAITH POSSIBLE FOR FAILING TO PAY INJURED THIRD PARTY WHERE INSURED NOT LIABLE TO INJURED PARTY (New Jersey Appellate Division) (Unpublished)

In this case, the insured sued her mother for injuries suffered from a slip and fall at the mother’s house. She also brought a bad faith claim against the mother’s insurer for refusing to assess the claim and give the daughter a payment. The trial court found no negligence and granted the mother summary judgment. The Appellate Division agreed.

There is no reference in the opinion that the claim against the insurer was assigned to the daughter, and there was clearly no judgment against the mother giving the daughter a direct action against the insurer. Thus, it is unclear how the daughter even had a right to assert a bad faith claim against her mother’s insurer in the first instance.

That being said, the court found no basis for the bad faith claim once it was ruled the insured was not negligent. The Appellate Division held “that plaintiff’s claim for bad faith … lacked any legal basis once the judge found that [the] insured … was not negligent.”

Date of Decision: June 27, 2018

Spellman v. Theresa Kosenski & Plymouth Rock Assurance, New Jersey Superior Court Appellate Division NO. A-3381-16T3, 2018 N.J. Super. Unpub. LEXIS 1539 (N.J. App. Div. June 27, 2018) (Reisner and Mayer, JJ.)