Daily Archive for November 7th, 2019

GENERAL ALLEGATIONS OF KNOWLEDGE OR RECKLESSNESS SUFFICIENT, AND THE INSURER’S INTENT CAN BE PURSUED IN DISCOVERY (Middle District)

In his second bad faith opinion this week, Middle District Judge James Munley found bad faith adequately pleaded, and denied a motion to dismiss. The case involved an uninsured motorist claim. The insured suffered injuries, the insurer had $300,000 on its policy, and it appears the insurer refused to pay policy limits or make a payment meeting the insured’s demands.

First, on the reasonableness prong of the bad faith test, Judge Munley stated: “Plaintiff’s complaint pleads facts indicating that defendant’s actions were unreasonable. Plaintiff alleges that she was injured in an automobile accident that was covered by the insurance policy. … She notified defendant of the damages and provide it with sufficient documentation to support her claim, including updating records for ongoing medical treatment. … Defendant refused to make a reasonable offer of settlement despite plaintiff trying to work with it and despite the ‘mountain of evidence’ that she had provided. … ‘[D]espite the results of any investigations performed by [defendant] and the clear medical documentation supporting their claim for UM benefits, [defendant] has blatantly ignored the evidence, has done no further investigation and has simply denied [plaintiff] the recovery of appropriate UM benefits without explaining its reason for the denial. … These allegations are sufficiently specific to make out a claim for bad faith — at least with respect to the first prong, that defendant lacked a reasonable basis for denying the benefits at issue.”

The court rejected the argument that these allegations were akin to the failed pleadings in the Third Circuit’s 2012 Smith v. State Farm case. By contrast to the “much more general” allegations in Smith, and the exhibits attached to the Smith Complaint indicating there was no bad faith, the instant allegations “are much more specific and no exhibits indicate that the defendant acted in good faith.”

As to the second prong, i.e., whether the benefit denial was known to be unreasonable or its unreasonableness was recklessly disregarded, Judge Munley states: “Additionally, we find that plaintiff has sufficiently pled the second element of a bad faith claim, that is, that defendant knew or recklessly disregarded its lack of reasonable basis to deny the benefits. Plaintiff’s complaint makes a general allegation that defendant knew it had no basis to deny the claim. … We find that at this stage of the proceedings, such an allegation is sufficient to survive a motion to dismiss. This element goes to the knowledge and state of mind of the defendant. Plaintiff will not be able to fully inquire into such matters until discovery occurs in the case. Accordingly, we find that the motion to dismiss should be denied.”

Date of Decision: November 6, 2019

Deluca v. Progressive Advanced Ins. Co., U. S. District Court Middle District of Pennsylvania No. 3:19cv1661 (M.D. Pa. Nov. 6, 2019) (Munley, J.)