Monthly Archive for July, 2019

EMAILS BETWEEN CLAIMS ADJUSTER AND PLAINTIFF’S COUNSEL AFTER INSURER’S DEFENSE COUNSEL’S INVOLVEMENT IS MADE KNOWN: IT’S BEST NOT TO DO THAT, EVEN IF ADJUSTER INITIATES THE CONTACT (Middle District)

This UIM breach of contract and bad faith case involved an alleged ex parte contact with the carrier’s claims adjuster, after defense counsel had communicated a letter of representation to the insured’s counsel. Three months later after that representation letter, there were direct communications, via email exchanges, between plaintiff’s counsel and the claims adjuster. They discussed the plaintiff’s demands and claims handling events. The carrier brought a motion for a protective order to preclude use of these emails in the case, because of the allegedly impermissible ex parte contacts with a represented person.

The email initiating the communications came from the adjuster to plaintiff’s counsel. The carrier took the position this was inadvertent, asserting the adjuster actually intended the email for her own defense counsel. The court observed it was unclear whether the communication was inadvertent. In any event, the court found whether intended or inadvertent, the result is the same.

The court generally observed that the prudent course would have been for plaintiff’s counsel to communicate with defense counsel regarding the adjuster’s very first email, rather than responding to the adjuster. This clearly would have avoided the ensuing issues.

The court analyzed the contact under Rule of Professional Conduct 4.2, governing direct contacts with represented persons. It concluded the rule was not violated. There was no intent to create an unfair advantage or indicia of dishonest intent. Further, the court observed defense counsel did not make an issue of the email exchange for a year, in demanding that it not be disseminated by plaintiff’s counsel, e.g., to plaintiff’s expert.

However, though there was no rule violation, some remedial measures were warranted. Thus, the court precluded any information obtained from the adjuster via these emails, that could bind the carrier.

The court did deny a request for attorney’s fees on the motion. The communications were limited, and the conduct did not rise to the level of egregiousness that would call for an attorney’s fee award.

Date of Decision: July 17, 2019

Golden v. Brethren Mutual Insurance Co., U. S. District Court Middle District of Pennsylvania Civil No. 3:18-CV-02425, 2019 U.S. Dist. LEXIS 118519, 2019 WL 3216629 (M.D. Pa. July 17, 2019) (Saporito, M.J.)

 

DISCOVERY IN BAD FAITH CASE: (1) RESERVES DISCOVERABLE; (2) MENTAL IMPRESSIONS NOT DISCOVERABLE; (3) TRADE SECRET OBJECTIONS CANNOT STAND ABSENT APPROPRIATE MOTION FOR PROTECTIVE ORDER (Philadelphia Federal)

In this bad faith action, Eastern District Judge Slomsky addressed three disputed discovery issues: (1) reserves; (2) claim adjuster work product; and (3) trade secrets.

Reserves are Discoverable

District courts within the Third Circuit are split on whether reserves are discoverable in bad faith cases. In this action, Judge Slomsky stood with those judges who find reserves relevant and discoverable.

Work Product Privilege not Eviscerated Simply by Bringing a Bad Faith Action

On the other hand, he refused to require production of a claim adjuster’s mental impressions simply because it was a bad faith case. As the court states: “In essence, Plaintiff’s sole argument to compel production of [the adjuster’s] mental impressions is that [the mental impressions] are relevant merely because this case contains a bad faith claim. It is well-settled that this argument is insufficient to disregard the work-product privilege set forth in Rule 26.”

Trade Secret Objections Fail When (1) Insurer Does not Move for Protective Order, and (2) Does not Lay Out Nature of Trade Secrets in Opposing Motion to Compel

The insurer made redactions to document production based on trade secret objections. The court first observed that Pennsylvania Civil Rule 4012 governed this trade secrets issue, rather than the Federal Rules. The interpreted Pa.R.C.P. 4012 to require a party objecting on this basis to bring a motion for a protective order in the first instance, which the insurer did not do in this case. The court then observed that the insurer failed to address the insured’s arguments against the presence of trade secret protections, which could have been done without revealing any trade secrets. Still, after granting the motion to compel on this issue, the court gave leave for the insurer to file an “appropriate” motion for a protective order.

Date of Decision: July 16, 2019

Penn-Dion Corp. v. Great American Insurance Co. of N.Y., U. S. District Court Eastern District of Pennsylvania CIVIL ACTION NO. 17-4634, 2019 U.S. Dist. LEXIS 117635, 2019 WL 3202503 (E.D. Pa. July 16, 2019) (Slomsky, J.)

BAD FAITH STATUTE OF LIMITATIONS NOT TOLLED, OR RENEWED, BY CHANGE IN THE LAW ON COVERAGE; NO PLAUSIBLE CLAIM PLEADED; BAD FAITH POSSIBLE EVEN IF BENEFIT NOT DUE (Philadelphia Federal)

This UIM case was stimulated by the Pennsylvania Supreme Court’s recent decision reversing precedent on the household vehicle exclusion. In dismissing the bad faith claim, the court found:

  1. The two-year statute of limitations was not tolled by a change in the law.

  2. The change in the law, which resulted in the insured renewing her demand for coverage, did not re-start the statute of limitations.

  3. Alternatively, the insured failed to plead sufficient facts to set forth a plausible bad faith claim; rather she only made a few conclusory allegations.

The court did have a significant footnote, which addresses the long-standing debate over whether there can be statutory bad faith where no coverage is due. Judge Pappert clearly comes down on the side that bad faith can still exist, noting that “a claim for bad faith pursuant to 42 Pa. C.S. § 8371 is a separate and distinct cause of action and is not contingent on the resolution of the underlying contract claim. … Thus, if bad faith is asserted as to conduct beyond a denial of coverage, the bad faith claim is actionable as to that conduct regardless of whether the contract claim survives.” As we have noted before on this blog, other courts dispute this view.

Date of Decision: July 3, 2019

O’Brien v. GEICO Employees Insurance Co., U. S. District Court Eastern District of Pennsylvania CIVIL ACTION NO. 19-01920, 2019 U.S. Dist. LEXIS 110914 (E.D. Pa. July 3, 2019) (Pappert, J.)

PUNITIVE DAMAGES CLAIM PREVENTS REMAND; BAD FAITH PLEADED WHERE CASE IS NOT MERELY A VALUATION DISPUTE (Middle District)

On July 1, 2019, Judge Munley issued two opinions in this UIM bad faith case: (1) finding removal proper; and (2) finding the insured pleaded a plausible bad faith case.

Removal was proper where potential punitive damages could take the case above the $75,000 jurisdictional minimum

Judge Munley ruled that the case would remain in federal court, after removal from state court. The insured allegedly suffered severe personal injuries, and the carrier refused to pay the $25,000 UIM policy limits. The state court complaint sought damages in excess of $50,000, punitive damages, interest, counsel fees and costs.

The court recognized that actual damages were limited to $25,000, and the punitive damage and attorney’s fees claims would have to exceed $50,000 to meet the $75,000 jurisdictional minimum. Judge Munley found that “[a] punitive damages award which is double the amount of the policy limit is reasonable and possible in such a case.” As remand is only proper when it appears to “a legal certainty that the plaintiff cannot recover, or was never entitled to recover, the jurisdictional amount [$75,000],” he denied the motion to remand.

The insured pleads a plausible bad faith claim where delays and refusal to pay the sum demanded are not mere disagreements over valuation

Judge Munley observed the insured alleged a severe injury, with damages beyond the tortfeasor’s coverage limits. The insured’s UIM coverage was $25,000, which the defendant carrier refused to pay. Judge Munley concluded the case, as pleaded, was not merely a disagreement over claim valuation, but made out a plausible bad faith claim.

The following averments were sufficient to survive the insurer’s motion to dismiss:

  1. “The amended complaint avers that defendant failed to effectuate a prompt fair and equitable settlement of plaintiff’s claim and compelled her to seek legal redress and commence litigation to recover the benefits to which she was entitled.”

  2. “Further, defendant ignored and discounted the severity of plaintiff’s injuries.”

  3. “Also, defendant did not promptly evaluate the claim, but rather engaged in dilatory and abusive claims handling by delaying the valuation of plaintiff’s claim and failing to pay the claim.”

  4. “The amended complaint also suggests that defendant failed to timely investigate or to make a reasonable settlement offer.”

  5. “Defendant further delayed by asking for authorization to receive medical records which were already in its possession.”

The court also refused to dismiss an attorney’s fee demand under the breach of contract count, as such fees might prove permissible under the Motor Vehicle Financial Responsibility Act (MVFRL).

Dates of Decision: July 1, 2019

Pivtchev v. State Farm Mutual Auto Insurance Co., U. S. District Court Middle District of Pennsylvania No. 3:19cv150, 2019 U.S. Dist. LEXIS 109378 (M.D. Pa. July 1, 2019) (Munley, J.)

Pivtchev v. State Farm Mutual Auto Insurance Co., U. S. District Court Middle District of Pennsylvania No. 3:19cv150, 2019 U.S. Dist. LEXIS 109377 (M.D. Pa. July 1, 2019) (Munley, J.)

COURT DISMISSES PREMATURE UIM BASED CLAIMS (Lackawanna Common Pleas)

The excellent Tort Talk Blog has posted a summary of Judge Nealon’s trial court opinion dismissing a prematurely filed UIM and bad faith action, where the tortfeasor’s policy limits were unknown at the time of filing. A link to this summary can be found here. Our thanks to Dan Cummins, author of the Tort Talk Blog.

NO BAD FAITH WHERE INSURER JUSTIFIABLY RELIES ON EXISTING CASE LAW PRECEDENT (New Jersey Appellate Division)

In this case, the parties disputed the law governing the allocation of insurance coverage payments. At the end of the day, there was no actionable bad faith.

The insurer paid costs for home modifications to cover the needs of the quadriplegic insured, as well as some medical costs, both payments totaling the number provided as the policy limit. The partially paid hospital providing services to the insured asserted, however, that the insurer’s manner of allocating the funds was incorrect, i.e., the policy limits should have gone entirely to its medical costs and expenses. Thus, the hospital argued the insurer must pay additional sums for medical costs it should have paid originally, instead of paying for the home modifications.

The New Jersey Appellate Division panel agreed that the insurer properly relied upon prior Appellate Division precedent both in the manner of allocating payment, and the insurer’s refusal to pay the hospital any sums beyond its policy limits. The court stated the insurer “processed the claim in good faith for the benefit of its insured” in justifiably relying on this case law.

The court recognized that an “insurance carrier may be liable for payments even if such payment exceeds the policy’s coverage limit, if the manner in which the carrier has handled a claim evidences ‘misconduct or bad faith.’” In this case, however, the insurer “acted in good faith reliance on” controlling precedent, “which is evidenced by the fact that it actually exhausted [the insured’s] policy in paying for his necessary home modifications.” There was no evidence of misconduct or bad faith, and no damages beyond what was already paid could be awarded.

Date of Decision: June 25, 2019

Robert Wood Johnson University Hospital v. Plymouth Rock Assurance Insurance Co., New Jersey Superior Court Appellate Division DOCKET NO. A-4195-17T3, 2019 N.J. Super. Unpub. LEXIS 1453 (App. Div. June 25, 2019) (Hass, Mitterhoff, Sabatino, JJ.)