Monthly Archive for March, 2021

NO BAD FAITH WHERE (1) NO COVERAGE DUE, (2) ALLEGED BAD FAITH COMMUNICATIONS WITH CLIENT WERE EITHER IMMATERIAL OR ACCURATE, AND (3) ANY OMISSIONS IN THOSE COMMUNICATIONS ONLY AMOUNTED TO NEGLIGENCE AT MOST, NOT BAD FAITH (Western District)

The insured brings this breach of contract and bad faith case based on the insurer’s denying virtually all of her water damage claim, and its allegedly improper claim handling in communications to the insured.  Western District Magistrate Judge Dodge grants the insurer’s motion to dismiss, but with leave to file an amended complaint.

First, the court dismissed the breach of contract claim.  Magistrate Judge Dodge found there was no coverage for the claims pleaded because the damages specifically alleged, when compared to the clear policy language, were not insured losses. There was, however, enough ambiguity in the plaintiff’s allegation that she suffered “resulting damages”, to allow the insured to amend if she could identify any other forms of damages that might be covered under the policy.

As to the bad faith claim, Magistrate Judge Dodge first observed that her contract ruling explained how the coverage denial was proper.  Further, “[t]he bad faith claim does not refer to any circumstances other than [plaintiff’s] contention that [the insurer] failed to communicate all of the policy language to her in one of its letters.” This was of no moment. The policy exclusion language omitted in the letter was irrelevant because the insurer did not rely on the omitted exclusion in denying coverage.

The insured alleged that the insurer also omitted a distinct important policy provision in correspondence to the insured. This was belied, however, by the correspondence itself. The purportedly omitted provision actually was included in the letter. Moreover, even if the omission occurred, this amounted at most to negligence, mistake, or poor judgment, none of which makes out an actionable bad faith claim.

Thus, the motion to dismiss the bad faith claim was granted, but without prejudice.

Date of Decision:  March 19, 2021

Blanton v. State Farm Fire & Casualty Co., U.S. District Court Western District of Pennsylvania Civil Action No. 20-1534, 2021 WL 1060661 (W.D. Pa. Mar. 19, 2021) (Dodge, M.J.)

Our thanks to the insurer’s counsel, Mark A. Martini, of Robb Leonard Mulvihill LLP, for bringing this case to our attention.

BAD FAITH CANNOT EXIST IN A VACUUM – NO BREACH OF CONTRACT = NO BAD FAITH (Middle District)

The court dismissed the insured’s breach of contract claim because the damages were speculative. The court then dismissed the bad faith claim because there was no predicate cause of action on which the bad faith claim rested.  Both dismissals were without prejudice.

Middle District Judge Wilson ruled as follows:

A bad faith claim under section 8371 is distinct from the predicate claim. Nealy v. State Farm Mut. Auto. Ins. Co., 695 A.2d 790, 793 (Pa. Super. Ct. 1997) (ruling bad faith claims are distinct from underlying contract claims). As such, there must be a predicate contract claim in order for a section 8371 claim to proceed. Polselli v. Nationwide Mut. Fire. Ins. Co., 126 F.3d 524, 530 (3d Cir. 1997) (observing that “a section 8371 claim may not be the sole claim of an insured”). A breach of contract claim can serve as one such predicate action. See, e.g., Rancoscky, 170 A.3d at 161 (recognizing a section 8371 claim brought along with a breach of contract claim). While the predicate claim need not be tried together with the section 8371 claim, the predicate cause of action “must be ripe for a § 8371 claim to be recognized.” Polselli, 126 F.3d at 530. The Pennsylvania Supreme Court has also recognized this requirement. See Ash v Continental Ins. Co., 593 Pa. 523, 932 A.2d 877, 882 (Pa. 2007) (holding that section 8371 “applies only in limited circumstances—i.e., where the insured has first filed ‘an action arising under an insurance policy’ against his insurer”).

In this case, while Moses Taylor has alleged a breach of contract claim along with its section 8371 bad faith claim, the court’s dismissal of the breach of contract claim removes the predicate cause of action otherwise required to accompany the section 8371 claim. As another court within this circuit has articulated, a bad faith claim in a vacuum is not actionable. MP III Holdings, Inc. v. Hartford Cas. Ins. Co., No. 08-CV-4958, 2011 U.S. Dist. LEXIS 72370, at *83–88 (E.D. Pa. June 30, 2011). Thus, because there are no other actionable claims raised in this case that could serve as a predicate cause of action, Moses Taylor’s section 8371 claim for bad faith will be dismissed without prejudice to reinstatement if the breach of contract claim is replead. See Polselli, 126 F.3d at 530.

This Blog has long discussed the argument that there is no statutory bad faith claim possible absent the denial of a benefit, i.e., either a refusal to defend or indemnify third party claims, or to pay damages on first party claims.  See this post as one of many examples.

Date of Decision: March 17, 2021

Moses Taylor Foundation v. Coverys & Proselect Insurance Co., U.S. District Court Middle District of Pennsylvania No. 3:20-CV-00990, 2021 WL 1017371 (M.D. Pa. Mar. 17, 2021) (Wilson, J.)

CLAIM HANDLING REASONABLE + NO CLEAR AND CONVINCING EVIDENCE ON INTENT = NO BAD FAITH (Middle District)

Middle District Judge Conner closely examined the claims handling history before granting the insurer summary judgment on plaintiff’s bad faith uninsured motorist claim.

The record’s details show the claims handler actively investigating the claim and injuries, communicating with the insured’s counsel, and discussing the case with two other involved insurers as to their valuation before making a settlement offer.  The settlement offer was a small fraction of the policy limit demand, but that could not create bad faith under the circumstances.

As the court stated,

At bottom, the record establishes nothing more than a legitimate disagreement over causation of [plaintiff’s] injuries and valuation of her claim. It is well settled that genuinely disputing causation and value is not tantamount to bad faith. That [the insurer] did not “immediately accede to” [a] demand for policy limits also is not, by itself, evidence of bad faith. … Nor does [the insured’s] belief that the preliminary offer was too low, without more, establish that [the insurer] acted unreasonably. … “[O]ur Courts have not recognized bad faith where the insurer makes a low but reasonable estimate of the insured’s losses.” … This is particularly true given that [the insurer] articulated legitimate reasons for doubting causation; reasonably concluded the claim would not pierce the limited-tort threshold; had not been advised of any wage-loss claim by [plaintiff’s] legal team; and, perhaps most importantly, made clear that its offer was not final.”

Judge Conner concluded that the insured “failed to identify any evidence—much less clear and convincing evidence—from which a reasonable juror could find that [the insurer] lacked a reasonable basis for its preliminary settlement offer.” Thus, the insured could not establish that the insurer’s conduct was unreasonable.  Summary judgment was warranted for failing to meet this first element of statutory bad faith.

Judge Connor also addressed the knowing or reckless disregard element as well.  The insured offered no clear and convincing evidence on intent to take an unreasonable position.  The insured argued, in conclusory language, that “critical information” was withheld and “irrefutable proof” existed to prove intent; but there were no facts adduced from the record to support these assertions. The documents referenced that purportedly provided clear and convincing proof did not even exist at the time of the insurer’s purported bad faith settlement offer.

Thus, summary judgment also was warranted for this failure to make out the second bad faith element.

Date of Decision: March 15, 2021

Castillo v. Progressive Insurance, U.S. District Court Middle District of Pennsylvania No. 3:19-CV-1628, 2021 WL 963478 (M.D. Pa. Mar. 15, 2021) (Conner, J.)

INSURER HAD STANDING AS ASSIGNEE TO BRING BAD FAITH CLAIM AGAINST ADDITIONAL INSURANCE PROVIDER; BAD FAITH CLAIM ADEQUATELY STATED FOR FAILURE TO PROVIDE FIRST LEVEL OF COVERAGE AND A DEFENSE UNDER ADDITIONAL INSURED ENDORSEMENT (Philadelphia Federal)

This case involves a dispute between a defendant’s own insurer and another carrier obligated to provide coverage to defendant as an additional insured.  The issues involved which insurer has the primary coverage/defense obligations, and which was excess.

There were several tenders to the additional insurance provider to assume the defense, which were either ignored or denied.  The defendant’s insurer brought a declaratory judgment action seeking to have the additional insurance provider assume the defense, and to reimburse the defendant’s insurer for attorney’s fees and costs, as well as for the attorney’s fees and costs associated with bringing the declaratory judgment action.

It is also clear from the court’s opinion that a statutory bad faith claim under 42 Pa.C.S. § 8371 was at issue.

There was a motion to dismiss all claims.

There was a duty to defend the additional insured

Among other things, Eastern District Judge Robreno found the underlying complaint adequately alleged facts invoking the additional insurance provider’s duty of defend, when compared to the additional insured endorsement language.  Thus, the additional insurance provider was in error in failing to accept the tenders and assume the defense.

There was standing to bring a statutory bad faith claim as an assignee

The additional insurance provider challenged plaintiff’s standing to bring a section 8371 bad faith claim because it was not the named insured.  Judge Robreno disagreed, citing the Third Circuit’s 2015 Wolfe decision making clear that assignees can bring statutory bad faith claims.

[Note: Earlier in Wolfe, the Third Circuit certified to Pennsylvania’s Supreme Court the fundamental issue of whether bad faith claims can ever be assigned. In the Supreme Court’s own Wolfe decision, assignments were recognized as permissible, but only within limited parameters.  A summary of that case can be found here. The assignment in the present case falls within those acceptable parameters.]

The assignee-insurer pleaded a plausible bad faith claim

Next, Judge Robreno rejected the insurer’s arguments that the complaint was devoid of facts setting out a plausible bad faith claim.

To the contrary, Judge Robreno found the following sufficient:

  1. The complaint alleged the additional insurance provider failed to acknowledge its primary duty to defend, without a reasonable basis, breaching the duty of good faith and fair dealing.

  2. The complaint specifically set out numerous instances where that insurer denied or ignored tender letters.

  3. “Accepting as true all of the allegations in the Complaint and all reasonable inferences that can be drawn therefrom, and based on this record, [the plaintiff] has sufficiently pled that based on the correspondence submitted to [the insurer], [the additional insurance provider] did not adequately investigate, respond, or explain their refusal to defend and potentially indemnify [the insured] in the underlying action.”

The motion to dismiss was denied.

Date of Decision:  March 10, 2021

Liberty Mutual Fire Insurance Co. v. Harleysville Worcester Insurance Co., U.S. District Court Eastern District of Pennsylvania No. CV 20-5093, 2021 WL 909625 (E.D. Pa. Mar. 10, 2021) (Robreno, J.)

NO COMMON LAW BAD FAITH WHERE DENIAL OF COVERAGE FOR LATE NOTICE IS REASONABLE (Philadelphia Federal)

In this breach of contract and common law bad faith action, on a lawyer’s professional liability policy, the court found a number of bases for denying coverage.  As such, the insurer had a reasonable basis to deny coverage and there could be no bad faith. Thus, the court granted the insurer’s summary judgment motion.

First, because this was a claims made policy, “Pennsylvania law does not require an insurer to demonstrate prejudice when the relevant notice provision is contained in a claims-made policy like the one before us.” The court found the insured did not give the required notice in a timely manner.

Next, to the extent no damages were sought, there was no coverage due under the policy.

In addition, there was no coverage due because some of the claims against the insured did not arise out of legal services, as required by the policy

Further, the court found a number of exclusions applicable, and no coverage was due on this additional basis.

Finally, as to bad faith, the court stated: “That leaves only [the insured’s claims] for breach of contract and breach of the duty of good faith and fair dealing (i.e., bad faith). However, because [the insurer] had a reasonable basis for denying coverage under the policy, we grant summary judgment in favor of [the insurer].” In support, the court cited a 2004 case for the proposition that the insurer should be successful where it “’reasonably believed that [the insured] had forfeited coverage under the Policy by failing to timely comply with the notice provision,’ and ‘[t]hus, the [insurance company’s] actions cannot be the basis for a bad faith claim[.]’”

Date of Decision: March 9, 2021

American Guarantee and Liability Insurance Company v. Law Offices of Richard C. Weisberg, U.S. District Court for the Eastern District of Pennsylvania No. 2:19-CV-05055-KSM, 2021 WL 915425 (E.D. Pa. Mar. 9, 2021) (Marston, J.)

COURT PERMITS DISCOVERY OF DOCUMENTS AND EMAILS THAT WERE NOT ACTUALLY PRIVILEGED SIMPLY BECAUSE THEY MENTION LEGAL COUNSEL; LIMITS CLAIMS REP DISCOVERY TO MENTAL IMPRESSIONS NOT PREPARED IN ANTICIPATION OF LITIGATION; AND ALLOWS DISCOVERY OF RESERVES IN VALUATION BAD FAITH CASE (Middle District)

This Pennsylvania federal opinion addresses bad faith discovery disputes.  The case involved first party fire damage losses. Plaintiffs sought various claims file documents, and the insurer produced a privilege log in connection with its objections and redactions. Magistrate Judge Saporito reviewed the documents in camera before ruling.

He identified four areas at issue: “(1) communications regarding expenses incurred and paid by the defendant; (2) communications with counsel; (3) mental impressions; and (4) other financial information.”

  1. Approvals of Legal Fees and Expenses Discoverable

“In general, the mere facts of legal consultation or employment, client identities, attorney’s fees and the scope and nature of employment are not privileged.” Further, “[a]ttorney billing records may be privileged if they reveal the nature of the services rendered.”

Here, documents reflecting only that legal fees and expenses were approved, without any reference to attorney-client communications or the nature of the work performed, are not privileged. Rather, they are administrative in nature, whether involving pre or post-litigation approvals.

  1. Emails strings at issue were not privileged

Under Pennsylvania law, a party seeking the protection of the attorney-client privilege must show there was “’(1) a communication (2) made between privileged persons (3) in confidence (4) for the purpose of obtaining or providing legal assistance for the client.’”

Here, the court had to review a number of email strings.  Judge Saporito observed that “’each version of an email string (i.e. a forward or reply of a previous email message) must be considered as a separate, unique document.’” Further, in preparing a privilege log, “’each message of the string which is privileged must be separately logged in order to claim privilege in that particular document.’” In practice, this “’simply requires that Defendants ensure that each withheld email within a string be logged in some fashion at least once.’”

The emails at issue all referenced legal counsel in some way, but were not themselves communications with counsel. Nor did they disclosure any attorney-client communications.  Thus, the attorney-client privilege did not apply.

  1. Claims representatives’ mental impressions prepared in anticipation of litigation were protected as work-product

“Mental impressions and opinions of a party and its agents are not generally protected by the work product doctrine unless they are prepared in anticipation of litigation.” “To that end, ‘work product prepared in the ordinary course of business is not immune from discovery.’”

Here, the insurer redacted documents in the claims file that included its claims representatives’ impressions, conclusions, and opinions. Judge Saporito had to make the fact-specific inquiry into when these representatives anticipated litigation.  He recognized that prudence requires parties to anticipate litigation, and to start preparing themselves for litigation at some time before the litigation is actually instituted.

Judge Saporito found a number of redactions warranted because the claims representatives anticipated litigation.  On the other hand, he ordered other redactions eliminated, and documents produced, where: (1) there wasn’t actually any work product, (2) the materials only involved an analysis of general business practices concerning “the investigation and evaluation of future, notional property claims involving suspicious circumstances,” and (3) the representative’s notations were made on an insurance application, which was clearly not done at a time when litigation would be anticipated.

  1. Reserves discoverable in bad faith action over valuation

Judge Saporito observed that courts in the Third Circuit are split over whether reserves are discoverable in bad faith cases. He followed Middle District Magistrate Judge Carlson’s Barnard decision, summarized here, for the proposition that the prevailing position favors discoverability if the bad faith claim at issue “relates to an insurer’s failure to settle or where there is a discrepancy regarding the value of the claim.” By contrast, if the bad faith claim does not involve valuation or liability estimates, reserve information is irrelevant.

The present case involved a valuation dispute, and Judge Saporito ordered production of reserve information.

Finally, Judge Saporito ordered production of certain information concerning the agent who sold plaintiffs the policy at issue.  He qualified this order by stating he was not ruling on whether this information could ultimately be admissible at trial.

Date of Decision:  March 5, 2021

Mazer v. Frederick Mutual Insurance Company, U.S. District Court Middle District of Pennsylvania No. 1:19-CV-01838, 2021 WL 850984 (M.D. Pa. Mar. 5, 2021) (Saporito, M.J.)

NO BAD FAITH WHERE INSURED FAILS TO PLEAD BREACH OF CONTRACT; INSURED CAN’T DICTATE MANNER OF INVESTIGATION (Western District)

The insured suffered a fire loss and asserted the carrier’s actual cash value estimate was unreasonably low.  It brought breach of contract and bad faith claims.  The insurer moved to dismiss.

Breach of contract claim dismissed, without prejudice, for failing to allege damages

The court dismissed the breach of contract claim, without prejudice, because the insured failed to plead damages adequately.  The policy required, “as a condition of reporting a loss that ‘the insured … give immediate written notice to this company of any loss … showing in detail actual cash value and amount of loss claimed.’ … [The] Amended Complaint does not detail an actual cash value and amount of loss claimed. Therefore, without sufficient pleading as to the damage[]s element, [the insured] has not adequately pleaded a breach of contract claim.”

No bad faith in denying payment, or in the manner of investigation that is justified under express policy language

On the bad faith claim, the insured claimed the same unreasonably low valuation, and a bad faith investigation via “propounding unnecessary, burdensome, and overbroad document requests related to mutual funds, life insurance policies, five years of tax returns, and bankruptcy documents, which allegedly served no legitimate purpose in Defendants’ investigation of this commercial insurance claim.” In making these claims, however, the insured did “not account for the requirements under the Policy and [the pleadings merely] contain conclusory allegations.”

As to the document requests, the bad faith allegations were conclusory, “given that the allegations do not specify how the documents requested would not support the requirements of proof under the … Policy.”  The policy provided a specific and wide range of categories subject to investigation as a prerequisite to paying a loss.  In rejecting the insurer’s offer, the insured “placed the … valuation at issue and invited further investigation under the Policy, which could include some of the documentation requested by the Defendant. Defendants are placed in a position where they have a duty to conduct a thorough investigation; however, they are hamstrung by their insured’s unilateral determinations of what Defendant’s should be allowed to investigate.”

Analogizing this to inevitable discovery requests and objections should the claim be allowed to proceed, the court found the insured would not meet its burden in objecting to the same requests posed in discovery.  Thus, the allegations these document requests constitute bad faith were conclusory and inadequate.

Finally, the “claims that the Defendants’ determination of actual cash value was unreasonable are similarly conclusory, and [the insured] has provided neither a specific claim for damage nor an alternative valuation method. Thus, [the insured] has not adequately pleaded a statutory bad faith claim.”

Plaintiff was, however, given leave to amend.

Date of Decision:  March 4, 2021

Integral Scrap & Recycling, Inc. v. Conifer Holdings, Inc., U.S. District Court Western District of Pennsylvania No. 2:20-CV-00871-MJH, 2021 WL 826747 (W.D. Pa. Mar. 4, 2021) (Horan, J.)

BAD FAITH CLAIM FOR INSURER’S BRINGING RESCISSION SUIT ALLOWED TO PROCEED; LITIGATION PRIVILEGE NOT APPLICABLE (New Jersey Federal)

Plaintiff was a life insurer and defendant trust owned life insurance policies issued by the insurer. The insurer brought suit seeking rescission based on putative fraudulent representations, which the trust denied. The trust asserted a breach of the duty of good faith and fair dealing counterclaim, among other things. The carrier moved to dismiss the counterclaims.

We only address the motion to dismiss the good faith and fair dealing counterclaim, a claim founded on the insurer’s bringing the rescission suit in bad faith.

The trust pleaded the carrier “breached the duty of good faith and fair dealing by commencing the instant action ‘based on interpretations of the Policies that it knew were clearly contradicted by the medical waiver it had granted, and by the information contained in its underwriting file … relating to [illness at issue].’”  The insurer also allegedly acted in bad faith by “conjuring” up pretend disputes against the trust for the purpose of bringing suit to intimidate the trust into dropping its insurance claims, and “unfairly attempt[ing] to manipulate the sworn testimony of third-party witnesses with the intent to mislead the Court and the parties to this litigation.’”

The insurer argued these claims were “barred by the litigation privilege, which ‘grants absolute privilege and immunity to statements or communications made by attorneys, parties, and their representatives in the course of judicial and quasi-judicial proceedings[.]’” The court rejected this argument.

The court found the carrier “fail[ed] to provide any legal authority demonstrating that (1) the filing of a complaint and commencement of an action constitutes a ‘communication’ protected by the litigation privilege, or (2) the litigation privilege applies to claims alleging breach of the duty of good faith and fair dealing.”

The court relied on precedent holding “that a cause of action for breach of the implied covenant of good faith and fair dealing can be maintained under New Jersey law based on allegations that a party has assert[ed] an interpretation [of the contract] contrary to [its] own understanding of the express terms of that contract.” Moreover, that that earlier case held that the “issue of lack of good faith … cannot be resolved on a motion to dismiss for failure to state a claim.”

Thus, Judge Shipp held the litigation privilege did not apply.  Moreover, the court found the plaintiff could “allege a breach of the duty of good faith and fair dealing related to [the] commencement of the instant action and that, at this stage of the litigation, dismissal of such a claim is inappropriate.”

Date of Decision: February 28, 2021

Symetra Life Insurance Company v. JJK 2016 Insurance Trust, U.S. District Court District of New Jersey No. 18 CV 12350 MASZNQ, 2021 WL 795267 (D.N.J. Feb. 28, 2021) (Shipp, J.)

DEFENSE VERDICT FOR INSURER AFFIRMED; NO BAD FAITH BASED ON ALLEGED LOW-BALL OFFERS OR CLAIM HANDLING (Pennsylvania Superior Court) (Non-precedential)

This fact-driver UIM bad faith case resulted in a non-jury verdict for the insurer.  Pennsylvania’s Superior Court affirmed.

[This is the second non-precedential Superior Court opinion reviewing bad faith verdicts that we’ve summarized in last three weeks, demonstrating the increasing role these non-precedential appellate decisions may come to play in briefing bad faith issues.  Per Pennsylvania Rule of Appellate Procedure 126(b), such decisions issued after May 19, 2019 can be cited for their persuasive authority.  This decision is also noteworthy in reiterating that it is not the court’s job on appeal to flesh out arguments or find support in the record that is not adduced by a party in its briefing.]

Factual and procedural background

Plaintiff was injured as a bus passenger, when another vehicle hit the bus.  The plaintiff’s symptoms and treatment concluded six months after the collision.

The tortfeasor only had $15,000 in coverage, and plaintiff sought UIM benefits under his brother’s policy. Plaintiff did not seek this UIM coverage, however, until 19 months after the collision.

The brother’s carrier began its investigation the same month the claim was reported. Both brothers were interviewed and provided evidence that would lead to there being no coverage, but plaintiff provided other evidence favoring coverage. After two months, the insurer completed its investigation, and concluded it would provide UIM coverage.

Shortly after, the insured provided a document package. The carrier evaluated the information and soon offered $5,000, additionally telling plaintiff’s counsel the insurer needed proof that plaintiff’s work loss was due to the collision and not any other causes. Instead of replying, 17 days later plaintiff filed his bad faith suit.

The complaint alleged bad faith based only on “low ball offers and the investigation as being excessively long….” No loss of consortium claim was ever pleaded, though it was mentioned in some correspondence between counsel.

The arbitration award and the arbitrator’s doubts

The underlying claim went to binding arbitration, while the bad faith claim was pursued in court.  Before the arbitration hearing, the insurer offered $12,500, and then $30,000, to settle. Plaintiff never lowered his demand below the $100,000 policy limit.  The arbitrator’s award “was not far above the final offer of $30,000.00.”

Although the arbitrator awarded money damages, he expressed doubts about plaintiff’s case.  He observed the contradiction between plaintiff’s telling medical personnel in October 2013 that his medical issues had resolved, while later claiming they did not resolve but continued to get worse.  The arbitrator also expressed concern over apparent conflicts between the plaintiff’s claim he could not, and did not, work, compared to the actual work and medical history. Among other things, the arbitrator recited details as to the funds plaintiff alleged he and his wife lived on for years, and how it appeared highly unlikely they could actually have survived on this amount without plaintiff himself having also worked (despite his assertions that he could not work).

In later reviewing the arbitration award for loss of consortium, the court expressed concerned that while the arbitrator observed the complaint failed to actually include any claim for loss of consortium, he still awarded $15,000 in loss of consortium damages. The arbitrator did so because the wife’s name was in the caption and the policy provided for loss of consortium damages.

The Superior Court was also concerned that the arbitrator never explained the basis for its other damage awards. “While the arbitrator awarded [plaintiff] $21,905.00 for lost wages and $35,000 for pain and suffering, this Court is again unable to determine the bases for these figures.”

The trial court’s verdict and reasoning, and Superior Court’s affirmance

The trial court ruled against plaintiffs on the merits.  First, the passenger’s wife claimed bad faith for the carrier failing to pay on the loss of consortium claim. But the trial court only learned of this loss of consortium claim the day of trial, and it refused to consider that belated claim. The Superior Court ultimately found this issue waived on appeal.

As to the bad faith claims for delays in the investigation and low ball offers, the trial court observed that plaintiff and his wife did not even appear at trial to support their claims. Rather they relied on witnesses associated with the insured to focus on the allegedly improper claims handling, and apparently an expert witness (whose testimony or report was not persuasive to the trial court judge). The trial court found plaintiff failed to meet his burden by putting on clear and convincing evidence of bad faith.

The Superior Court affirmed.

The “low ball” offer claim fails

In addressing the “low ball offer” bad faith claim, the court contrasted the instant facts with those in the seminal Boneberger case.  In Boneberger, the trial court found the insurer’s witnesses lacked credibility, did not conduct at IME when challenging medical records, actively promoted unethical claim handling practices, and that the insureds only brought suit after long negotiations and an arbitration award. In the present case, there were no similar credibility rulings against the insurer, there was an IME, and there was no finding the carrier promoted an unethical philosophy. Further, instead of allowing the investigation to develop, the bad faith suit was filed in short order, without any prolonged negotiations and before the arbitration award.

The Superior Court also rejected the argument that the arbitration award was evidence of bad faith “low ball” offers. As the court observed, the arbitrator did not find plaintiff and his wife credible, found their medical and wage evidence unreliable, and failed to explain sufficiently the basis for his damage awards. “The fact that the arbitrator awarded damages which were less than those sought … but more than what [was] offered does not support a finding that [the insurer] acted in bad faith.”

The claim handling argument fails

The court then rejected the argument for bad faith in evaluating the information plaintiff provided to the insurer. In rejecting this argument, the court not only found it “scattershot, unsupported by legal authority and undeveloped[,]” but made clear what courts will not do in reviewing cases on appeal.

The Superior Court will not play the role of advocate

  1. “Arguments not appropriately developed include those where the party has failed to cite any authority in support of a contention. This Court will not act as counsel and will not develop arguments on behalf of an appellant. Moreover, we observe that the Commonwealth Court, our sister appellate court, has aptly noted that [m]ere issue spotting without analysis or legal citation to support an assertion precludes our appellate review of [a] matter.”

  2. “While the [insureds] complain that [the insurer] failed to properly evaluate certain medical and wage evidence they provided, they do not specify the evidence, explain its relevance, or state where it is in the record. … The certified record, including transcripts, is nearly 6000 pages. While we have undertaken careful review, it is not our responsibility to comb through the record seeking the factual underpinnings of a claim. Commonwealth v. Mulholland, 702 A.2d 1027, 1034 n.5 (Pa. Super. 1997) (‘In a record containing thousands of pages, this court will not search every page to substantiate a party’s incomplete argument’).”

Superior Court would not reverse trial court credibility determination on expert

The Superior Court also ruled plaintiff had waived the argument that the trial court failed to properly consider expert testimony, while still observing that the “trial court, as the finder of fact, is free to believe all, part or none of the evidence presented. Issues of credibility and conflicts in evidence are for the trial court to resolve; this Court is not permitted to reexamine the weight and credibility determination or substitute our judgment for that of the fact finder.”

Date of Decision:  February 26, 2021

Gavasto v. 21st Century Indem. Ins. Co., Superior Court of Pennsylvania No. 1625 WDA 2019, 2021 WL 754026 (Pa. Super. Ct. Feb. 26, 2021) (McCaffery, Murray, Olson, JJ.)

FEDERAL CHOICE-OF-LAW PRINCIPLES REQUIRE APPLICATION OF NEW YORK LAW, ELIMINATING PLAINTIFF’S PENNSYLVANIA STATUTORY CLAIMS (Philadelphia Federal)

The marine insurance policy at issue had a New York choice-of-law provision.  The insured attempted to assert claims under Pennsylvania law, including claims for breach of fiduciary duty, statutory bad faith under 42 Pa.C.S. § 8371, and violations of Pennsylvania’s Unfair Trade Practices and Consumer Protection Law.

Because marine insurance is governed by federal admiralty law, federal choice-of-law principles apply.  Under federal choice-of-law principles, and in light of the fact there were sufficient contacts with New York, the court enforced the choice-of-law provision and found the case subject to New York substantive law.  In addition, the court concluded, “that the public policy of a state where a case was filed cannot override the presumptive validity, under federal maritime choice-of-law principles, of a provision in a marine insurance contract where the chosen forum has a substantial relationship to the parties or the transaction.”

Thus, the court granted the insurer judgment on the pleadings, and dismissed the two Pennsylvania statutory claims, since they did not arise under New York law. The court also dismissed the breach of fiduciary duty claim, as no such cause of action exists under New York law for the mere breach of an insurance contract.

Date of Decision:  February 22, 2021

Great Lakes Ins. SE v. Raiders Retreat Realty Co., LLC, U.S. District Court Eastern District of Pennsylvania No. CV 19-04466, 2021 WL 668806 (E.D. Pa. Feb. 22, 2021) (Robreno, J.)