Monthly Archive for February, 2019

BAD FAITH PLAINTIFFS MUST PLEAD SPECIFIC FACTS OR SEE THEIR CLAIM DISMISSED (Philadelphia Federal)

In this UIM bad faith case, the court sets out a clear mandate to plead specific facts if a plaintiff intends to survive a motion to dismiss:

“Because bad faith claims are fact-specific, to survive a motion to dismiss ‘a plaintiff must plead specific facts as evidence of bad faith and cannot rely on conclusory statements.’ …. To that end, ‘[a] plaintiff cannot merely say that an insurer acted unfairly, but instead must describe with specificity what was unfair.’”

In their complaint, the insureds did not specify the disputed sum at issue “or any facts surrounding the dispute itself….” Their bad faith assertions only state that the carrier failed to negotiate, conducted an improper investigation and evaluation, and failed to request a defense medical examination.  However, the court found the complaint “devoid of facts” as to the actual investigation, offers, or responses.

Further, instead of setting out sufficient specific facts, the insureds simply allege there is no dispute over fault or that UIM benefits are due.  They imply any actions other than meeting the insureds’ demands must necessarily be bad faith in light of these two predicates. The court disagreed.  There is no necessary or inescapable inference from these two assertions that could fill the gaps needed to reach plausibility for purposes of a bad faith complaint. The case was instead dismissed, with leave to file an amended complaint.

In analyzing the complaint, the court cites a number of cases with similarly inadequate allegations. These cases are summarized on this Blog: Jones, McDonough, and Kosmalski. These Eastern District cases are consistent with decisions in other Pennsylvania federal districts, as most recently discussed in connection with Middle District Judge Richard Caputo’s method of stripping away conclusory allegations in deciding motions to dismiss bad faith claims. The Rosenberg case provides an example from the Western District.

[Note: The court also cites pre-Rancosky law for the proposition that an “insured must ultimately show that the insurer breached its duty of good faith through some motive of self-interest or ill will.” To the extent this is stated as a necessary element of proof, however, it is no longer the law after Rancosky, summarized here. In Rancosky, the Supreme Court held the motive of self-interest or ill will is not a requisite element of proving statutory bad faith, though it may be evidence of a knowing or reckless disregard of the insurer’s unreasonable denial of benefits.]

Date of Decision: February 14, 2019

Kiessling v. State Farm Mututal Auto. Ins. Co., U. S. District Court Eastern District of Pennsylvania CIVIL ACTION NO. 18-4281, 2019 U.S. Dist. LEXIS 24085 (E.D. Pa. Feb. 14, 2019) (Slomsky, J.)

JUDGE CAPUTO'S METHODOLOGY FOR ANALYZING BAD FAITH PLEADINGS FOR THOSE WHO MISSED WEDNESDAY'S POST BECAUSE OF THE WEATHER

Here is a link to Wednesday’s post, which goes over three opinions Middle District Judge Richard Caputo issued last week dismissing bad faith claims.  The method used is not unique to Judge Caputo, but his recent series of opinions crystallizes the practice of stripping away conclusory pleadings in search of genuine factual allegations that could support plausible claims an insurer’s denial of a benefit was (1) unreasonable and (2) that the insurer knew or recklessly disregarded the unreasonableness of its decision.

NO BAD FAITH WHERE REFUSAL TO MEET INSURED’S PAYMENT DEMAND IS JUSTIFIED BY EXPRESS POLICY LANGUAGE (Philadelphia Federal)

The insurer successfully obtained summary judgment despite its continued refusal to reimburse its insured the sum actually paid to repair property damage.

The policy covered fire damage to the insured’s motel. However, coverage was limited to the least expensive of the following three options: “(1) the applicable insurance limit; (2) the cost to replace with property ‘[o]f comparable material and quality’ and ‘used for the same purpose;’ or, (3) ‘[t]he amount actually spent that is necessary to repair or replace the lost or damaged property.’” The building’s coverage limit was $2.25 Million.

Fire damaged the hotel, and the insurer paid approximately $1.6 Million. The insured claimed the loss exceeded $2.25 million, and that the insurer acted in bad faith by not reimbursing sums actually paid to repair the motel. The insured’s argument boiled down to: (a) the loss was covered; (b) the insured actually paid more than $2.25 Million to contractors, which could be proven through invoices, etc.; (c) and the insurer only paid $1.6 Million to the insured even though the insured demonstrably paid more than $2.25 Million.

The insurer offered evidence from third party contractors that the repair work could have been done at less expense, and used that as its basis to pay less than what the insured actually paid. The court found that the insurer’s payment theory comported with one of the three permissible options in the policy, i.e., the cost to replace with property of comparable material and quality. The insured’s unqualified demand for full reimbursement misread the policy.

Thus, “the Policy allows room for disagreement between the parties as to whether the invoices Plaintiff submitted were more than the ‘cost to replace’ with property of ‘comparable material and quality’—and as a result [the insurer’s] failure to fully compensate the claimed loss is not evidence of bad faith.”

Further, the insured failed to present any evidence beyond the payment invoices. Those invoices did not create any issues of material fact as to the insurer’s bad faith. Simply failing to pay what an insured demands is not bad faith where express policy language allows for a different standard of payment.

Date of Decision: February 12, 2019

Purvi, LLC v. National Fire & Marine Insurance Co., U. S. District Court Eastern District of Pennsylvania CIVIL ACTION NO. 18-822, 2019 U.S. Dist. LEXIS 22774, 2019 WL 558195 (E.D. Pa. Feb. 12, 2019) (Beetlestone, J.)

JUDGE CAPUTO DISMISSES THREE BAD FAITH CASES AFTER STRIPPING AWAY CONCLUSORY ALLEGATIONS (Middle District)

We have summarized well over 40 opinions issued by the Honorable Richard Caputo since this Blog’s inception in June of 2006. There is no question Judge Caputo is thoroughly familiar with Pennsylvania bad faith law.

He issued three new opinions last week, all addressing proper pleading in bad faith cases. In all three cases, Judge Caputo uses the phrases “stripped of these conclusory allegations” or “stripped of its conclusory allegations” within the context of carrying out his analysis of whether a complaint pleads plausible bad faith. Similarly, in two December 2018 opinions, Judge Caputo used the phrase “stripped of its conclusory statements” when analyzing dismissal of bad faith complaints under the federal rules. The blog summary of those two cases can be found here.

This stripping of conclusory allegations methodology is intended to reveal whether a pleading alleges actual facts that can plausibly support the bad faith elements of (1) unreasonableness and (2) knowing or reckless disregard of unreasonableness. It is clearly a best practice for plaintiffs to apply this methodology before filing a complaint, and for defendants to use in moving to dismiss bad faith claims.

In Judge Caputo’s three most recent opinions, two are dismissed with prejudice, and one is dismissed without prejudice and leave to amend. The two cases dismissed with prejudice, Clarke v. Liberty Mutual Insurance Co., and Moran v. USAA, were previously dismissed without prejudice and leave to amend. In fact, these are Judge Caputo’s two cases summarized in the December 2018 blog post. The Clarke and Moran plaintiffs’ failures to cure their pleadings are set out below, along with the third opinion where the plaintiff still retains an opportunity to plead a plausible complaint.

Clarke v. Liberty Mutual (discrepancy between alleged damages and insurer’s valuation alone is not bad faith)

In Clarke’s amended complaint, the original complaint’s conclusory allegations and most of the factual allegations remain unchanged. The only new factual allegations include further detail on the insured’s treatment for injuries and the cost of treatment. The insured pleads that “because these medical bills total over $39,000.00 and she may require additional injections in the future, Defendants are alleged to have engaged in bad faith in concluding that the claim fell within the $15,000.00 third-party settlement.”

These facts remain inadequate to support a bad faith claim. Judge Caputo relies upon Judge Darnell Jones’ opinion in West v. State Farm. Judge Jones had observed that so-called “low-ball” offers alone cannot state a claim for bad faith. Rather, the plaintiff must aver factual allegations as to why that the “low-ball” offer was actually unreasonable, and how the insurer knew or recklessly disregarded the fact that it was unreasonable.

Absent such allegations, the controlling principle is that low but reasonable estimates made in the ordinary course of negotiations do no constitute bad faith. As Judge Jones reasoned in West, at most “the argument that the valuation of $15,000.00 is facially insufficient in light of medical expenses of approximately $40,000.00 and the limits of Plaintiffs’ insurance policy does not alone show Defendants ‘acted in bad faith rather, it might have negligently failed to investigate and evaluate, leading to an unreasonable settlement offer.’” [Compare this to the similar result reached in Judge Leeson’s recent McDonough opinion, summarized here.]

Moran v. USAA (again, a discrepancy in valuation alone does not get around the conclusory pleading problem)

In Moran, the only additions in the amended complaint included facts supporting the value of the insured’s claim: “(1) [the insured] never had neck problems prior to the accident; (2) she makes $550.00 per week as a caregiver; (3) she may require surgery that would cause her to miss several months of work, which she believes will result in lost wages in excess of $10,000.00; and (4) if she has surgery, she will exhaust her remaining balance of $2,000.00 of medical benefits.” While these facts may have supported the insured’s valuation, there were no new facts pleaded as to why the insurer’s offer (a) was unreasonable and (b) how the insurer knew or recklessly disregarded that fact and/or how anything more than negligent valuation could be inferred. Again, following West, Judge Caputo found that bad faith cannot arise solely from discrepancies in valuation.

Wyoming Valley FOP v. Selective Insurance Co. (this is what the stripping method looks like)

In the third case, the insured sought first party benefits for theft under a CGL policy. The insurer refused to pay, and the insured brought bad faith claims. Judge Caputo found the following allegations conclusory:

The actions and inactions of Selective in adjusting, evaluating, and investigating Plaintiff’s claim constitutes bad faith as defined under 42 Pa. C.S.A. § 8371 and the Pennsylvania Unfair Insurance Practices Act, 40 P.S. § 1171, et seq. as follows:

  1. Misrepresenting important facts or policy or contract provisions, namely, the prompt payment of losses;

  2. Failing to acknowledge and act properly upon written communication with respect to Plaintiff’s claims arising under the policy;

  3. Failing to adopt or implement reasonable standards for the prompt investigation of Plaintiff’s claims;

  4. Refusing to pay Plaintiff’s claims without conducting a reasonable investigation based upon all available information;

  5. Failing to affirm coverage of Plaintiff’s claims within a reasonable time after all information requested of Plaintiffs were provided to the Defendant or its representatives;

  6. Not attempting in good faith to effectuate a prompt, fair and equitable settlement of Plaintiff’s claims in which the Defendant’s liability under the policy has become reasonably clear;

  7. Compelling Plaintiff to institute litigation to recover [*7]  amounts due under the insurance policy by denying or failing to act upon Plaintiff’s claims;

  8. Continuing to investigate Plaintiff’s claims after receipt of all information necessary to the adjustment of the claims;

  9. Failing to communicate with Plaintiff;

  10. Subordinating the interest of its insured to their own financial monetary interest;

  11. Failing promptly to offer payment to Plaintiff; and

  12. Failing [to] objectively and fairly evaluate Plaintiff’s claim.

Stripping away these 12 conclusory allegations left only a few actual allegations of fact: (1) there was an insurance policy; (2) the policy covered theft; (3) a theft was reported; (4) the insured provided all information required under the policy; (5) the insured made repeated payment demands; and (6) the insurer denied the claim.

Such cursory allegations fail to state a plausible bad faith claim, which requires clear and convincing evidence that an insurer was (a) unreasonable in denying a benefit and (b) knew or recklessly disregarded the fact that its position was unreasonable. Even assuming these allegations amounted to a claim that there was no reasonable basis to deny a benefit, there were still no factual allegations from which to plausibly infer that the insurer knew or recklessly disregarded this lack of a reasonable basis.

Such threadbare assertions may suggest bad faith is possible, but only speculative inferences can take the claim to plausible, and speculation is impermissible to set out a plausible cause of action.

Judge Caputo did sua sponte give leave to amend, as it was not clear that amendment would be futile.

Clarke v. Liberty Mutual Insurance Co., U. S. District Court Middle District of Pennsylvania NO. 3:18-CV-1925, 2019 U.S. Dist. LEXIS 21507, 2019 WL 522473 (M.D. Pa. Feb. 11, 2019) (Caputo, J.)

Moran v. USAA, U. S. District Court Middle District of Pennsylvania NO. 3:18-CV-2085, 2019 U.S. Dist. LEXIS 24080 (M.D. Pa. Feb. 14, 2019) (Caputo, J.)

Wyoming Valley FOP v. Selective Insurance Co., U. S. District Court Middle District of Pennsylvania NO. 3:18-CV-2270, 2019 U.S. Dist. LEXIS 24400 (M.D. Pa. Feb. 14, 2019) (Caputo, J.)

 

 

 

(1) LARGE DISCREPANCY BETWEEN INSURED’S SETTLEMENT DEMAND AND INSURER’S OFFER OR (2) REFUSING POLICY LIMITS DEMAND, DO NOT BY THEMSELVES CONSTITUTE BAD FAITH (Philadelphia Federal)

This UIM case involved breach of contract, common law bad faith, statutory bad faith, and Unfair Trade Practices and Consumer Protection Law (UTPCPL) claims. The seriously injured insured received the other driver’s $100,000 limits in settlement, and demanded the $300,000 UIM limits from his carrier. The insured’s expert placed lost income over $600,000, in addition to the serious personal injuries. The UIM insurer offered less than $12,500 to settle, and the insured brought suit.

The insurer successfully moved to dismiss the bad faith and UTPCPL claims, but the insured was given leave to amend on two of those claims.

STATUTORY BAD FAITH CLAIM NOT SUPPORTED BY FACTS

The statutory bad faith claim was not supported by any “factual content” in the complaint. Plaintiff only pleaded “conclusory statements that [the insurer] unreasonably withheld the payment of underinsured motorist benefits under the policy, failed to make a reasonable offer of settlement, presented a low offer of settlement, failed to engage in good faith negotiations, presented an offer of less than the amount due in an attempt to compel him to institute litigation, and failed to perform an adequate investigation of the value of his claim for underinsured motorist benefits.”

The court addressed the implied argument that a large discrepancy between demand and offer standing alone is sufficient to state a bad faith claim, even without pleading any other supporting facts as to why the insurer’s offer was unreasonable and made in reckless disregard of a benefit due. The court disagreed.  In rejecting this notion, the court made two key points: (1) “a disagreement over the settlement amount is not unusual[,]” and (2) “failure to immediately accede to a demand for the policy limit cannot, without more, amount to bad faith.”

Dismissal was without prejudice, with leave to file an amended complaint.

COMMON LAW BAD FAITH/BREACH OF DUTY OF GOOD FAITH AND FAIR DEALING CLAIMS ARE NOT A SEPARATE CAUSE OF ACTION IF BREACH OF CONTRACT IS PLEADED

The court found the common law bad faith claim subsumed in the breach of contract claim, and dismissed it with prejudice.

UNFAIR TRADE PRACTICES CLAIM NOT PLAUSIBLE

As to the UTPCPL claim, the court refused to dismiss on the basis of the economic loss doctrine. However, it did dismiss the UTPCPL count for failing to set out a plausible claim.

Plaintiff failed to allege sufficient facts to support (1) the existence of deceptive conduct, (2) justifiable reliance on any misleading conduct, or (3) damages flowing from reliance on such conduct. As with the statutory bad faith claim, however, plaintiff was given leave to re-plead this count.

[Note: This opinion does not address the line of case law holding that the UTPCPL does not apply to claims handling, as recently outlined in the Western District’s Neustein case.]

Date of Decision: February 7, 2019

McDonough v. State Farm Fire & Casualty Co., U. S. District Court Eastern District of Pennsylvania No. 5:18-cv-02247, 2019 U.S. Dist. LEXIS 19806 (E.D. Pa. Feb. 7, 2019) (Leeson, Jr., J.)

 

COURT ADDRESSES DISCOVERY RE: (1) RESERVES (2) OTHER CLAIMS/DISPUTES; (3) CLAIM LOGS; (4) CLAIM STATUS REPORTS; (5) POLICY AND PROCEDURE MANUALS; (6) EMPLOYEE INCENTIVES; (7) ANTICIPATION OF LITIGATION/WORK PRODUCT; AND (8) OVERBROAD DISCOVERY LANGUAGE (Middle District)

This case addresses a number of discovery issues in this first party benefit denial breach of contract and bad faith case.

RESERVES (BAD FAITH ON COVERAGE VS. REFUSAL TO SETTLE/VALUE DISPUTES)

Magistrate Judge Carlson observed courts in the Third Circuit are split on whether reserves are discoverable in bad faith cases. He first states that when the bad faith case is about a failure to settle or dispute over a claim’s value, the prevailing view is that reserves are discoverable. “However, when the bad faith claim is based on a denial of coverage and ‘does not involve the value of the claim or [the plaintiff’s] estimation of liability… the reserve information requested is neither relevant nor reasonably calculated to lead to the discovery of admissible evidence.”

The alleged bad faith in this case is based on denying coverage through a biased and unfair review process, and not a dispute over value. Thus, reserves are irrelevant to the bad faith claim, and production is not required.

OTHER MATTERS NOT RELEVANT OR DISCOVERABLE

The alleged basis of the bad faith claim was that the insurer intentionally used a biased peer review organization and doctor to terminate plaintiff’s medical benefits unfairly. Plaintiff served interrogatories concerning virtually all matters in which the same PRO and doctor were selected by the insurer. Magistrate Judge Carlson did not permit this discovery.

The court first looked at prior case law denying discovery on the issue of the size of an adjuster’s case load, finding it both irrelevant and of marginal utility compared to the burden imposed on the insurer to make production. In the present case, Magistrate Judge Carlson found that “the number of times that this PRO and/or doctor decided in favor of the insurer, whether on initial review or on reconsideration, will not necessarily speak to any such bias.” If, e.g., a PRO found for the insurer 98 out of a 100 times, “those 98 claims may very well have been legitimately decided on their merits, which could not be known without an extensive post hoc evaluation of the merits of each claim.”

The court was not going to carry out that kind of evaluation, and observed that “courts in this circuit have held that ‘discovery of other insureds’ claims in bad faith cases is generally improper, as such information is irrelevant.”

ADDITIONAL RULINGS ON CLAIMS LOGS, CLAIMS STATUS REPORTS, ANTICIPATION OF LITIGATION, OVERBROAD DISCOVERY LANGUAGE, EMPLOYEE INCENTIVES, AND POLICY/PROCEDURE MANUALS

Magistrate Judge Carlson made the following additional points and rulings:

  1. Magistrate Judges have broad discretion in resolving discovery disputes.

  2. Plaintiff alleged there was a biased peer review process used to deny medical benefits. The court found the portions of the insurer’s policy manuals on the peer review process, and employee procedures or policies for handling inquiries about insurance policies, must be produced.

  3. A request for “all communications of any nature whatsoever” concerning the complaint are vague and overbroad, as are requests for communications regarding “any matters raised by Plaintiff’s and Defendants’ initial disclosures”.

  4. The work product doctrine kicked in when plaintiff’s counsel wrote to the insurer expressing dissatisfaction with the outcome of the PRO process. Actual suit or even the threat of suit are not required to trigger the insurer’s anticipation of litigation. Thus, claim notes created after the date of that letter received work product protection, but claim notes before that date had to be produced.

  5. Claim log entries indicating an employee simply looked at the file or generically uploaded a document are not protected work product.

  6. The insurer was required to respond to an interrogatory asking for “the nature and amount of any employee incentive to close out insureds’ claims”.

Date of Decision: February 6, 2019

Barnard v. Liberty Mutual Insurance Corp., U. S. District Court Middle District of Pennsylvania Civil No. 3:18-CV-01218, 2019 U.S. Dist. LEXIS 18660 (M.D. Pa. Feb. 6, 2019) (Carlson, M.J.)

NO NEW BAD FAITH ACTS ALLEGED THAT COULD RE-START THE STATUTE OF LIMITATIONS PERIOD (Philadelphia Federal)

This case addresses when a bad faith cause of action accrues, or can be re-started, for statute of limitations purposes.

The bad faith statute of limitations is two years. The claim accrues with the initial coverage denial. Repeated denials of the same claim are merely continuations of an existing harm, and do not constitute new actionable events triggering a new statute of limitations period. Only if the subsequent bad faith act is separate, distinct, and unrelated to the original bad faith denial, can a new limitations period begin to run.

In this case, the alleged bad faith conduct occurred in 2011. The present suit was filed in 2019. The court would not accept bald allegations that events “have taken place and continued over a period of years up to the present day” to re-start the statute of limitations, as no facts were alleged “suggesting a basis for claims within the limitations period.” The complaint was dismissed without leave to amend.

Date of Decision: February 1, 2019

Feingold v. Brooks, U. S. District Court Eastern District of Pennsylvania CIVIL ACTION NO. 19-CV-0291, 2019 U.S. Dist. LEXIS 16606, 2019 WL 415575 (E.D. Pa. Feb. 1, 2019) (Tucker, J.)

COURT OUTLINES PRINCIPLES FOR REMOVING BAD FAITH CLAIMS TO FEDERAL COURT (Philadelphia Federal)

Federal Judge Mitchell S. Goldberg sets out useful examples and principles concerning removal of statutory bad faith claims to federal court. The issue in these cases is the degree of certainty needed to measure claims made against the $75,000 jurisdictional threshold.

  1. The sum at issue is determined at the time the petition to remove is filed.

  2. Courts do not look at the low end of an open-ended claim; rather, the measure is “a reasonable reading of the value of the rights being litigated.”

  3. Punitive damages and attorneys’ fees are considered in statutory bad faith cases.

  4. There is no recovery cap on the punitive damages and attorneys’ fees available under the bad faith statute.

[Note: Attorney’s fees must still be reasonable, and the U.S. Supreme Court has placed limits on punitive damages to conform to due process requirements.]

  1. In a bad faith case, the “amount in controversy exceeds the $75,000 threshold where a plaintiff is able to recover a specified amount of damages, plus punitive damages and attorney’s fees….”

  2. The court gave two case examples of pleading specified damages along with punitives: (1) a claim for $53,315 in contract damages accompanied by a bad faith claim “in excess of $50,000 together with interests and costs” was sufficient; and (2) a claim for $28,682.41 in unpaid benefits plus punitive damages was sufficient.

  3. Under this line of cases, the instant plaintiff’s claim for $24,711.11 plus punitive damages meets the $75,000 pleading threshold.

  4. By contrast, failure to plead a specific unpaid benefit amount works against removal.

  5. In two cases where the action was remanded, the plaintiffs pleaded lost benefits in “an amount not in excess of $50,000” and punitive damages “not in excess of $50,000”.

In this case, even though the $75,000 threshold was met, the court still remanded the action because removal was untimely. The insurer argued that any damage sum was uncertain as pleaded in the complaint. Therefore, any effort at removal lacked “legal certainty” and the insurer had to serve requests for admissions to get sufficient clarity before it could properly remove the action. This process took many months.

The court disagreed, finding the complaint itself was adequate to make the monetary threshold determination. Thus, the thirty-day removal period from service of the complaint had long passed, without the insurer taking action to remove the case, and the case was remanded.

Date of Decision: January 28, 2019

Hutchinson v. State Farm Fire & Casualty Co., U.S. District Court Eastern District of Pennsylvania CIVIL ACTION No. 18-cv-2588, 2019 U.S. Dist. LEXIS 13820 (E.D. Pa. Jan. 28, 2019) (Goldberg, J.)

UIPA ALLEGATIONS PERMITTED IN PLEADING STATUTORY BAD FAITH (Philadelphia Federal)

Plaintiff pleaded violations of six sections of the Unfair Insurance Practices Act (UIPA) in support of its statutory bad faith claims. The plaintiff specifically prefaced its recitation of these UIPA violations as being “evidence of bad faith”, and did not plead them as separately stated causes of action. The insurer moved to strike the UIPA averments as prejudicial, “confusing and immaterial”, and because proving a UIPA violation is irrelevant to proving a statutory bad faith claim.

The court denied the motion.

The court found that the alleged UIPA violations amounted to allegations that the insurer “made deceptive, misleading or untrue statements through advertising, misrepresented facts relating to contract provisions, refused to pay claims without conducting reasonable investigation, did not good faith attempts to effectuate equitable settlements, compelled persons to institute litigation to recover amounts due, and attempted to settle claims for less than the amount due.” It held these allegations were relevant to the bad faith claim. The court cited three Eastern District cases, from 1991, 1992, and 1993, in support of its conclusion that UIPA violations are permitted to support statutory bad faith claims.

Note: The case law is not uniform in accepting UIPA violations to support statutory bad faith cases.

(1) Some opinions rule that UIPA allegations are never relevant and must be stricken or dismissed. Under this theory, once the Superior Court’s Terletsky bad faith standards were adopted in 1994, it became unnecessary to reference the UIPA or the Unfair Claim Settlement Practices Regulations to provide standards for determining statutory bad faith. See the June 2018 Kunsman case, summarized here. (In its 2017 Rancosky decision, Pennsylvania’s Supreme Court adopted the Terletsky standards for determining statutory bad faith.)

(2) Other courts find UIPA violations can support statutory bad faith claims, but with some nuances as to what is permitted.

Some simply find UIPA violations relevant, as in today’s case described above. See the June 2014 Militello case, summarized here.

Some cases add that UIPA violations cannot constitute bad faith per se, however, such violations can be considered in evaluating bad faith. See the April 2017 Ridolfi case, summarized here.

This goes to the idea that a UIPA violation might be evidence of bad faith, while not itself constituting bad faith. See the 2017 Jack case, summarized here. As pointed out above, the plaintiff in the present case specifically prefaced its UIPA allegations with the qualification that the recited UIPA violations were “evidence of bad faith”.

Some courts, however, will dismiss UIPA allegations that simply recite the UIPA’s statutory language in tandem with conclusory language that violating these UIPA provisions constitutes bad faith. These cases require the plaintiff to additionally plead independent facts constituting the conduct that violates the UIPA and support a finding of statutory bad faith. See the October 2018 Higman case, summarized here.

A link to UIPA and Unfair Claim Settlement Practices Regulations related case summaries on this Blog can be found here.

Date of Decision: January 31, 2019

Penn-Dion Corp. v. Great American Insurance Co., U.S. District Court Eastern District of Pennsylvania CIVIL ACTION NO. 17-4634, 2019 U.S. Dist. LEXIS 15334 (E.D. Pa. Jan. 31, 2019) (Slomsky, J.)

 

NO BAD FAITH WHERE (1) NO EVIDENCE OF BAD FAITH OFFERED AND (2) NO COVERAGE DUE UNDER A POLICY EXCLUSION (Philadelphia Federal)

An “entrustment” exclusion precluded coverage in this property damage case. After the court’s lengthy analysis reaching this conclusion, it addressed the insured’s bad faith claims. Notably, neither party briefed the bad faith issue, even though the insurer moved for summary judgment on that claim as well as the breach of contract claim.

The court readily granted judgment on the bad faith claim, stating: “The record is devoid of any evidence that Defendant denied coverage to Plaintiff in bad faith and, what is more, the Court has already determined that Defendant’s denial of coverage was proper based on the entrustment exclusion of the Policy. Accordingly, there is no basis for finding that Defendant acted in bad faith, and summary judgment is appropriate.”

Date of Decision: January 25, 2019

KA Together, Inc. v. Aspen Specialty Insurance Co., U.S. District Court Eastern District of Pennsylvania CIVIL ACTION NO. 18-142, 2019 U.S. Dist. LEXIS 12184, 2019 WL 325319 (E.D. Pa. Jan. 25, 2019) (Slomsky, J.)