Monthly Archive for June, 2019

PUNITIVE DAMAGES NOT PERMITTED ABSENT A SPECIAL RELATIONSHIP OR AGGRAVATED CIRCUMSTANCES; FIRST PARTY INSURANCE CLAIMS DO NO CREATE A FIDUCIARY RELATIONSHIP (New Jersey Federal)

The insured disputed the sum the insurer was willing to pay for property damage. She brought claims for breach of contract and breach of the implied covenant of good faith and fair dealing, seeking punitive damages on both counts. The original complaint was dismissed and she filed an amended complaint. The insurer moved to dismiss the punitive damages claims.

In New Jersey, punitive damages are governed by statute, N.J.S.A. §2A:15-5.12(a): “Punitive damages may be awarded to the plaintiff only if the plaintiff proves, by clear and convincing evidence, that the harm suffered was the result of the defendant’s acts or omissions, and such acts or omissions were actuated by actual malice or accompanied by a wanton and willful disregard of persons who foreseeably might be harmed by those acts or omissions.”

Under New Jersey law, punitive damages require more than showing a breach of good faith obligations. Egregious circumstances are required, described by the court as malicious, evil-minded, or wanton acts of reckless disregard. In this case, the insured failed to plead actual malice or a wanton and willful disregard for her rights, and the punitive damages claims were dismissed.

Specifically, as to the breach of contract claim, the insured claimed that “aggravated circumstances” were present, providing an exception to the usual rule that punitive damages cannot be recovered for contract claims. The court thought otherwise: “Plaintiff’s Amended Complaint does not provide adequate factual allegations to support this assertion, nor does she suggest the existence of any fiduciary relationship.”

As to the implied covenant of good faith and fair dealing claim, the court again focused on whether there was any special relationship between the insured and insurer, or aggravated circumstances. In a first party coverage case, New Jersey law holds there is no fiduciary relationship. Thus, punitive damages cannot be asserted under a special relationship theory. Further, as stated above, no aggravated circumstances were pleaded.

In addition, the court looked at the leading case of Pickett v. Lloyd’s on tort theories and punitive damages, stating:

Plaintiff relies on Pickett, … as to an insurance company’s bad faith liability when denying benefits or processing a claim. …. The court in Pickett held that a claimant must show that either there was no debatable reason to deny benefits or, as to a processing delay, no valid reason existed for the delay and the insurance company knew or recklessly disregarded that fact. …. The court also asserted that while there is no right to punitive damages for an insurer’s wrongful refusal to pay a first-party claim, “[d]eliberate, overt and dishonest dealings” were torts distinct from a bad-faith claim. …. As pled, Defendant’s behavior does not rise to the level of egregiousness required for an award of punitive damages. Plaintiff has not sufficiently alleged that there were any deliberate, overt, or dishonest dealings on Defendant’s part.

As the insured had already been given an opportunity to re-plead punitive damages in an amended complaint, the punitive damages claims were dismissed outright.

Date of Decision: June 20, 2019

Johnson v. Encompass Insurance Co., U. S. District Court District of New Jersey Civil Action No. 17-3527 (JMV) (MF), 2019 U.S. Dist. LEXIS 103290, 2019 WL 2537809 (D.N.J. June 20, 2019) (Vazquez, J.)

BAD FAITH CLAIM SURVIVES SUMMARY JUDGMENT WHERE INSURER ALLEGEDLY DID NOT KNOW BASIS OF ITS EXPERT'S ESTIMATES (Middle District)

In this property loss case arising from a home fire, the insurer’s public adjuster estimated personal property damages at over $220,000. The insurer’s various experts estimated the personal property losses at approximately $51,000.

The insurer’s claim handler relied upon two vendors, one to inventory the lost property and the other to value the items inventoried. The claim handler concluded that the public adjuster’s inventory and photographs did not justify the $220,000 claim, so he adhered to the results of the insurer’s expert vendors.

The insured brought claims for breach of contract and bad faith, and the insurer moved for summary judgment on the bad faith claim.

The court denied summary judgment. It found the following facts in the record supported a potential bad faith claim:

  1. The insureds offered evidence the insurer’s claim handler did not know how his valuation expert obtained the price and depreciation schedules in the lower estimate.

  2. The insurer’s proof of loss requirements for the burned items was “significantly burdensome.”

  3. The insurer’s adjuster failed to send a proof of loss.

Taking these facts in the light most favorable to the insureds, the court concluded they may show the insurer knew there was no reasonable basis for failing to increase its value estimate, or recklessly disregarded the absence of a reasonable basis to do so.

Date of Decision: June 20, 2019

Obelkevich v. Safeco Insurance Co., U. S. District Court Middle District of Pennsylvania No. 3:18cv1111, 2019 U.S. Dist. LEXIS 103177 (M.D. Pa. June 20, 2019) (Munley, J.)

BAD FAITH NOT POSSIBLE WHERE THERE IS A REASONABLE BASIS TO DENY THE CLAIM (Philadelphia Federal)

In this complicated coverage case, involving damages to a condominium unit through the actions of the insured’s own tenant, the court found no coverage due under the policy language in light of the circumstances. Further, the court ruled that the insured’s purchase of additional coverage for renters, even if otherwise applicable, was invalid because of concealment and mischaracterization in applying for that additional coverage.

Having determined no coverage was due, the court granted summary judgment on the bad faith claim. The court emphasized that a reasonable basis for denying coverage is all that is needed to overcome a bad faith claim. In this case, the carrier had a reasonable basis to deny the insured’s claims, and the “pertinent claims [were] not covered by the Policy.”

Date of Decision: June 11, 2019

Beautyman v. General Insurance Company of America, U. S. District Court Eastern District of Pennsylvania CIVIL ACTION No. 17-5804, 2019 U.S. Dist. LEXIS 97526 (E.D. Pa. June 11, 2019) (Kelly, J.)

 

COURT WILL NOT SIMPLY INFER BAD FAITH CONDUCT, WITHOUT FACTUAL DETAIL THAT CAN UNDERPIN A PLAUSIBLE BAD FAITH CLAIM (Philadelphia Federal)

This is another example of a failure to meet federal plausibility pleading standards when asserting statutory bad faith. The opinion was issued by Judge Michael Baylson. We have summarized nearly 40 of Judge Baylson’s bad faith opinions over the years.

Judge Baylson sets out the basic propositions guiding the outcome of this motion to dismiss the bad faith count.

  1. “Alleging an insurer failed to pay plaintiff for claims covered by an insurance policy, even if the loss-causing incident is uncontested and plaintiff allegedly fulfilled all prior conditions, does not itself state a plausible claim for unreasonableness.” Judge Baylson cites his 2011 Eley opinion, among other cases, in support.

  2. “[M]ere averment that an insurer had no reasonable basis for refusing to reimburse a plaintiff is a conclusory legal statement, not a factual allegation.”

  3. “'[T]he mere fact that [the insurer] denied [the insured’s] request for coverage,’ without factual specifics as to ‘who, what, where, when, and how’ such denial was unreasonable, does not plausibly show reckless indifference.” He cites Judge O’Neill’s 2012 Blasetti decision in support.

  4. “A failure to immediately accede to a demand [under an insurance policy] cannot, without more, amount to bad faith.” Judge Baylson cites to Judge Buckwatler’s Pasqualino decision in support of this proposition.

The case involved a property damage claim for breach of contract and bad faith. Applying the foregoing principles to the complaint’s averments, Judge Baylson reaches the following conclusions:

First, the complaint alleges the insurer possessed no evidence that the losses did not occur and were not substantiated.  However, there are no supporting facts alleged as to the unreasonableness of the insurer’s position. The only allegations are the property damage was covered under the policy, and that the insured complied with the policy by sending some written documentation of the damages and demanding coverage.

Judge Baylson refused to infer unreasonableness from simply pleading a failure to reimburse the alleged damages, “without [the complaint] clarifying what expenses were submitted, when they were rejected, and whether or how [the insurer] responded.”

Second, the complaint wholly failed to address the knowing or reckless disregard element needed to prove statutory bad faith. Simply arguing a carrier’s general knowledge, i.e., the conclusory notion that the carrier must have known its position was unreasonable,  with no supporting facts, is inadequate to meet the second prong of the Terletsky/Rancosky bad faith test.

The complaint was dismissed without prejudice, however, with leave to amend.

Date of Decision: June 10, 2019

Kelley v. State Farm Fire & Casualty Co., U. S. District Court Eastern District of Pennsylvania CIVIL ACTION NO. 19-0626, 2019 U.S. Dist. LEXIS 96904 (E.D. Pa. June 10, 2019) (Baylson, J.)

CASE REMANDED WHERE INSURED’S COUNSEL ADMITTED CASE WAS WORTH LESS THAN $75,000, EVEN THOUGH COUNSEL WOULD NOT SIGN A STIPULATION TO THAT EFFECT PREPARED BY OPPOSING COUNSEL (Philadelphia Federal)

The insurer removed this bad faith action, and the insured sought to remand on the basis that the claims did not exceed $75,000. The court agreed, based chiefly on the fact there was no dispute that plaintiff’s counsel admitted “the damages clearly do not exceed $75,000.”

In addition, although the complaint alleged “substantial” losses and other boilerplate language concerning damages, there were “no allegations of specific events and losses, [and] any determination of same by this Court would constitute pure speculation.” Speculation about damages based on boilerplate allegations can not meet the insurer’s burden to establish a proper basis for removal.

Further, the insured’s refusal to stipulate its claim was worth less than $75,000 was not dispositive. Case law indicates such a stipulation may be considered as evidence, or as a factor, in weighing whether the jurisdictional amount is met.  The focus, however, must remain on a reasonable reading of the complaint. This is especially true when the stipulation is entered after the complaint was filed, which the court said “is of no legal significance.”

There was also some issue as to whether choosing not to sign a stipulation prepared by opposing counsel, is the equivalent of refusing to stipulate. The court observes that: “A party’s failure to sign a stipulation limiting damages—though worthy of some consideration—is not dispositive of the amount-in-controversy issue, given that both defendants and plaintiffs typically seek to use it as a tactical advantage in removing cases.”

Quoting an earlier opinion, the court states:

Defendants read too much into this unsigned stipulation. First, as best as this Court can tell, Plaintiffs’ lawyer has not signed the stipulation prepared by opposing counsel, which is different from Plaintiffs refusing to agree to cap their damages. Lawyers tend to be cautious. It is therefore unsurprising that Plaintiffs’ lawyer’s first reaction to a stipulation limiting his clients’ recovery was not to take out his pen and say, “where do I sign?” . . . But just as a complaint that limits damages to a figure below the jurisdictional threshold does not guarantee the case stays out of federal court, a lawyer’s refusal to limit his clients’ recovery by signing a stipulation should not end the inquiry[.]

Thus, the matter was remanded.

Date of Decision: June 5, 2019

Murphy Murphy & Murphy v. Nationwide Insurance Co., U. S. District Court Eastern District of Pennsylvania, CIVIL ACTION NO. 19-0712, 2019 U.S. Dist. LEXIS 94673 (E.D. Pa. June 5, 2019) (Jones, J.)

INSURED CANNOT RELY ON (1) FACTS OUTSIDE THE COMPLAINT OR (2) CONCLUSORY ALLEGATIONS TO DEFEAT MOTION TO DISMISS; AND INSURER OWES NO FIDUCIARY DUTY IN UIM CONTEXT (Philadelphia Federal)

This UIM case involved a dispute over the available amount of coverage under an auto policy.  The complaint included breach of contract, statutory bad faith, and breach of the duty of good faith and fair dealing claims. The insurer also believed a breach of fiduciary duty claim may have been alleged.  The insurer moved to dismiss all claims.

The insured argued facts outside the complaint in responding to the insurer’s motion to dismiss. These facts may have stated a cause of action for breach of contract had they been properly pleaded, but the court could not consider them in ruling on the motion to dismiss. Thus, the motion to dismiss the contract claim was granted, but without prejudice.

The court also found the insured failed to plead a UIM bad faith claim. As stated, in opposing the motion to dismiss the insured relied on facts not pleaded to argue the carrier improperly refused stacking. Unpleaded facts could not support a bad faith claim, though again, the insured was allowed to amend and presumably assert these factual allegations in a future pleading.

As to the bad faith allegations actually pleaded, these were conclusory and could not make out a plausible bad faith claim.

The conclusory averments included: “[the insurer] committed bad faith by acting with a dishonest purpose and knowingly breaching a duty because of its self-interest …; denying coverage …; collecting premiums and then denying coverage…; and [c]onspiring to create a defense for its own self-interest which its [sic] knows has no factual basis….”

The court further observed there is no fiduciary duty in the UIM context, and dismissed any such claims.

The court finally found the common law bad faith claim to be subsumed in the breach of contract claim, as there is no common law bad faith claim in Pennsylvania outside the contractual duty to act in good faith.

Date of Decision: June 3, 2019

Pommells v. State Farm Insurance, U. S. District Court Eastern District of Pennsylvania CIVIL ACTION No. 18-5143, 2019 U.S. Dist. LEXIS 92435, 2019 WL 2339992 (E.D. Pa. June 3, 2019) (Kelly, J.)

BAD FAITH CLAIM BROUGHT MORE THAN TWO YEARS AFTER NOTICE OF DENIAL DISMISSED ON STATUTE OF LIMITATIONS GROUNDS (Philadelphia Federal)

A property loss coverage claim was dismissed under the policy’s two-year suit limitation provision, requiring that any suit be brought within two years of the date of loss. In dismissing this breach of contract claim, the court reiterated the Third Circuit’s holding that an insurer does not have to show prejudice in enforcing a suit limitation provision.

The insured also brought a statutory bad faith claim, and a breach of the covenant of good faith and fair dealing count. The insurer moved to dismiss the bad faith claim on statute of limitations grounds, arguing that the policy benefit was denied more than two years prior to suit. (It is well established that the bad faith limitations period is two years).

The insurer relied on a notice of denial, attached to its answer, in moving to dismiss. The insured asserted because this document was not attached to the complaint, it could not be considered on a motion to dismiss. Under the circumstances of this case, the court disagreed.

The court observed that courts handling motions to dismiss “may consider an undisputedly authentic document that a defendant attaches as an exhibit to a motion to dismiss if the plaintiff’s claims are based on the document.” Absent this exception, plaintiffs with legally deficient claims could simply omit attaching a document to avoid dismissal of claims that should be dismissed.

The court found the denial referenced in the complaint to be based on this notice of denial  document, and so considered it on the motion to dismiss.  The notice of denial was issued over two years before suit. Thus, the bad faith claim was independently time barred, and was dismissed on that basis.

[Note: This court ruled two weeks earlier that a bad faith claim could proceed even when the underlying breach of contract was dismissed because of a suit limitations provision, i.e., the bad faith claim could proceed even though no coverage was due. A link summarizing that opinion, and the viability of bad faith claims when no coverage is due, can be found here.]

Finally, the court dismissed the breach of the covenant of good faith and fair dealing as being subsumed within the breach of contract claim.

Date of Decision: May 23, 2019

Mail Quip, Inc. v. Allstate Insurance Co., U. S. District Court Eastern District of Pennsylvania CIVIL ACTION No. 19-223, 2019 U.S. Dist. LEXIS 87923 (E.D. Pa. May 23, 2019) (Kenney, J.)

TWO MIDDLE DISTRICT CASES ON PLEADING BAD FAITH, AT BOTH ENDS OF THE ADEQUACY SPECTRUM: (1) BAD FAITH CLAIM DISMISSED WITHOUT PREJUDICE FOR FAILURE TO ALLEGE KNOWING OR RECKLESS DISREGARD OF UNREASONABLE CLAIM DENIAL; (2) INSURED SUCCESSFULLY AMENDS COMPLAINT TO SURVIVE SECOND MOTION TO DISMISS

These two recent Middle District of Pennsylvania cases provide guidance at either end of the spectrum on pleading statutory bad faith.

CASE 1: BOTH ELEMENTS OF BAD FAITH MUST BE PLEADED

This case involved a coverage dispute and bad faith claims. The insured municipality sought repayment for a $1,000,000 settlement over a death arising out of an automobile accident involving one of the city’s police officers. The underlying suit included federal constitutional claims.

There were two $1,000,000 policies at issue: an auto policy and a law enforcement policy. The insurer paid $500,000 under the auto policy, but refused payment under the law enforcement policy per an auto exclusion.

The court agreed the law enforcement policy did not provide coverage. However, it rejected an argument that the auto policy payment was limited under a state statute capping tort liability at $500,000. The court found that the cap did not apply to federal civil rights claims. Thus, coverage for the remaining $500,000 was potentially due.

The court, however, dismissed the bad faith claim without prejudice, stating:

Defendants argue that the City’s insurance bad faith claim must fail because, although the City alleged that [the insurers] lacked a reasonable basis for denying benefits under the policies, the City did not allege that [the insurers] “knew or recklessly disregarded [the] lack of reasonable basis [when] denying the … claim[s],” as required by law. This Court agrees with [the insurers], and will dismiss the City’s insurance bad faith claim. That dismissal, however, will be without prejudice, and the City may amend its complaint to satisfy the identified deficiency.

Date of Decision: May 16, 2019

City of Williamsport v. CNA Insurance. Cos., U. S. District Court Middle of Pennsylvania No. 4:19-CV-00170, 2019 U.S. Dist. LEXIS 82667 (M.D. Pa. May 16, 2019) (Brann, J.)

CASE 2: HOW TO DO IT THE SECOND TIME AROUND (PLEADING THE WHO, WHAT, WHERE, WHEN, AND HOW)

This case provides an example of an insured sufficiently amending a defectively pleaded first complaint, to survive a motion to dismiss the amended complaint.

The original complaint was dismissed without prejudice for conclusory pleading, even though it included 29 bad faith averments. The summary of the court’s first dismissal can be found here.

In addressing a motion to dismiss the amended complaint, the court restated principles from its prior decision. Unlike the first complaint, however, the court found the following allegations went beyond conclusory pleading:

In the complaint presently before the Court, [the insured’s] bad faith count, Count II, lists 20 allegations of bad faith. … The Court finds that each of these subparagraphs describe who, what, where, when, and how the bad faith alleged in each subpart of ¶73 occurred. … Further, the Court finds that the amended complaint adequately alleges that [the insurer] acted in bad faith, and sufficiently articulates the factual basis of the bad faith claim. Each subparagraph details the factual basis for the bad faith claim. These averments are sufficient to allow this claim to go forward, and the complaint satisfactorily pleads both elements of a bad faith claim, that the insurer did not have a reasonable basis for denying benefits under the policy, and that the insurer knew or recklessly disregarded its lack of reasonable basis in denying the insured’s claim.

Date of Decision: May 23, 2019

Sowinski v. New Jersey Manufacturers Insurance Co., U. S. District Court Middle District of Pennsylvania CIVIL ACTION NO. 3:17-CV-02352, 2019 U.S. Dist. LEXIS 87140 (M.D. Pa. May 23, 2019) (Mehalchick, M.J.)

TWO NON-PRECEDENTIAL BAD FAITH OPINIONS FROM PENNSYLVANIA’S SUPERIOR COURT: (1) INSUREDS’ CONDUCT AND STATE OF MIND ARE NOT WHAT DETERMINES AN INSURER’S BAD FAITH, RATHER IT IS THE INSURER’S OWN CONDUCT; (2) BAD FAITH PLEADING INADEQUATE

In Wilson v. Erie Insurance Group, the Superior Court reversed the entry of a judgment for non pros on a bad faith claim which had been in suit for 16 years.

Among other points, the appellate court observed that the focus in bad faith cases is the insurer’s conduct and state of mind, not the insured’s. Thus, the Court observed:

[B]ad faith applies to “those actions an insurer took when called upon to perform its contractual obligations of defense and indemnification or payment of a loss that failed to satisfy the duty of good faith and fair dealing implied in the parties’ insurance contract.” In order to prove bad faith, a plaintiff must show by clear and convincing evidence that the insurer did not have a reasonable basis for denying benefits under the policy, and knew or recklessly disregarded its lack of reasonable basis in denying the claim. … Thus, the insured’s argue, a bad faith action turns on the reasonableness of the conduct of the insurer, not the insured. …

Similarly, although the [insureds] could not remember the timing of … settlement offers, and the amount of those offers, it did not impair [the insurer’s] ability to defend the case. All of that information is documented in [the insurer’s] files or, in some cases, admitted in the pleadings. The fact that the [the insureds] could not remember if they had any expectations in terms of settlement was of no consequence as their expectations are irrelevant in this bad faith case. See Rhodes v. USAA Casualty Ins. Co., 2011 PA Super 105, 21 A.3d 1253 (Pa.Super. 2011) (holding expectations of the insureds are not material to bad faith liability). It is difficult to imagine how [the insurer] was substantially impaired in its ability to present a defense by the [the insureds’] inability to recall these details. Moreover, if [the insurer] genuinely required that information, it would not have waited until 2018 to take the depositions.

Date of Decision: May 13, 2019

Wilson v. Erie Insurance Group & Erie Insurance Exchange, Superior Court of Pennsylvania No. 717 WDA 2018, 2019 Pa. Super. Unpub. LEXIS 1867 (Pa. Super. Ct. May 13, 2019) (Bowes, Shogan, Strassburger, JJ.)

In Feingold v. State Farm, the Superior Court dealt with an unusual set of procedural circumstances, but we only focus on its discussion of bad faith pleading standards. The court states:

An insured has a cause of action “if the court finds that the insurer has acted in bad faith toward the insured[.]” 42 Pa.C.S. § 8371. To prove a bad faith claim, the insured must present clear and convincing evidence that (1) the insurer did not have a reasonable basis for denying benefits under the policy, and (2) the insurer knew or recklessly disregarded its lack of reasonable basis in denying the claim. …

Based on our review of his complaint, [plaintiff-assignee] failed to allege either requisite element. First, [plaintiff-assignee] averred that after the UIM arbitration award, [the insurer] informed him that it did not believe the [the insureds] were entitled to UIM damages under their policy. [The] complaint did not allege that [the insurer] was without a reasonable basis for denying benefits. Second, [plaintiff-assignee] averred only that [the insurer] did not advise him of a specific reason for denying the … UIM claims. This is not sufficient to demonstrate that [the insurer] knew or recklessly disregarded its lack of a reasonable basis for denying the claim. Accordingly, we find no abuse of discretion or error in the trial court’s determination that the bad faith claim was frivolous.

Date of Decision: May 17, 2018

Feingold v. State Farm Insurance Co., Superior Court of Pennsylvania No. 2340 EDA 2018, No. 2833 EDA 2018, 2019 Pa. Super. Unpub. LEXIS 1931 (Pa. Super. Ct. May 17, 2019) (Kunselman, Murray, Pelligrinia, JJ.)

TWO NEW JERSEY CASES FINDING NO BAD FAITH: (1) NO BAD FAITH WHERE NO COVERAGE IS DUE (New Jersey Superior Court Appellate Division); (2) NO PLAUSIBLE BAD FAITH CLAIM PLEADED UNDER NEW JERSEY LAW (New Jersey Federal)

Bad faith claims failed in two recent New Jersey cases, one in the Superior Court’s Appellate Division, and the other after removal to federal court.

Case 1:  There Can be no Bad Faith if Coverage is Not Due 

The New Jersey Superior Court Appellate Division affirmed the trial court’s ruling that there was no “property damage” as defined under the policy, because lost money is not “tangible property.” The trial court thus granted summary judgment on the coverage claim. It had also dismissed the insured’s bad faith claim.

The Appellate Division affirmed the judgment that no coverage was due. In light of the absence of any coverage duty, it found no need to address any other arguments, presumably including the bad faith claim.

Date of Decision: May 9, 2019

Estate of Louis F. Keppel v. Angela’s Angels Home Healthcare, Superior Court of New Jersey Appellate Division DOCKET NO. A-3868-17T1, 2019 N.J. Super. Unpub. LEXIS 1068 (N.J. App. Div. May 9, 2019) (Currier, Koblitz, Mayer, JJ.)

Case 2:  The Insured’s Conclusory Allegations Fail to Set Out a Plausible Bad Faith Claim

The insured brought a breach of contract and bad faith complaint against the carrier in the Superior Court, which was removed to federal court on diversity grounds. She alleged the carrier did not pay the full amount due on her water loss. No motion to dismiss the contract claim was asserted, but the insurer did move to dismiss the insured’s bad faith claim and request for punitive damages.

The bad faith count included allegations that the insurer “(1) failed to properly and promptly investigate Plaintiff’s claims; (2) denied and delayed her coverage with no debatable reason to do so; (3) violated the Unfair Claims Settlement Practices Act; and (4) unreasonably denied adjusting and paying Plaintiff’s claim.”

These allegations did not support a plausible bad faith claim under federal pleading standards. The court stated:

To allege bad faith in the insurance context under New Jersey law, a plaintiff must allege facts to plausibly suggest that the insurer (1) did not have a “fairly debatable” reason for its failure to pay the claim, and (2) that the insurer knew or recklessly disregarded the lack of a reasonable basis for denying the claim. … Here, Plaintiff alleges no facts to plausibly suggest that Defendant lacked a fairly debatable reason for denying the claim or that it knew or recklessly disregarded the lack of a reasonable basis for doing so. Plaintiff simply provides bald legal conclusions in claiming that Defendant’s failure to pay amounted to bad faith. Because conclusory allegations are not sufficient, [the bad faith count] is dismissed.

Once the court dismissed the bad faith claim, there was no basis to pursue punitive damages. The only remaining claim was for breach of contract, and the rare circumstances allowing punitives damages for breaches of contract did not exist on this complaint.

Date of Decision: May 29, 2019

Johnson v. State Farm Fire & Casualty Co., U.S. District Court District of New Jersey Civil No. 18-15209 (RBK/KMW), 2019 U.S. Dist. LEXIS 89613 (D.N.J. May 29, 2019) (Kugler, J.)