AUGUST 2014 BAD FAITH CASES: COURT DENIES INSURERS MOTIONS TO PRECLUDE EXPERT TESTIMONY, BIFURCATE THE TRIAL AND FOR SUMMARY JUDGMENT WHERE INSURER REQUIRED 3 IMES WHICH REACHED INCONSISTENT RESULTS (Middle District)

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In Monaghan v. Travelers Prop. Cas. Co. of Am., the Court, in three separate opinions, addressed the issues of the adequate burden of proof in bad faith claims, admissibility of expert testimony, and proper bifurcation of trial. The Court found that the pleading standards were met, that expert testimony should not be precluded, although the scope must be limited, and that defendants failed to meet their burden to establish that bifurcation was appropriate.

In the instant case, Plaintiff was injured in a motor vehicle accident and had an insurance policy with Defendant which included medical benefits up to $100,000 and wage loss benefits up to $15,000. The insurer required Plaintiff to undergo three separate independent medical examinations (IMEs) due to her physical injury claims. The first and second IMEs concluded that Plaintiff’s injuries were due to the accident, while only the third found that the injuries were unrelated. After the third IME, the Defendants stopped providing further benefits and, in response, Plaintiff filed a complaint alleging Breach of Contract, Bad Faith, and violation of the Unfair Trade Practice and Consumer Protection law.

In the Court’s first opinion, on a motion for summary judgment, it addressed Defendant’s claim that Plaintiff failed to provide evidence to support her contention that the discontinuance of benefits was due to self-interest or ill-will. According to Third Circuit precedent, a plaintiff must prevent clear and convincing evidence which shows that both 1) the insurer lacked a reasonable basis for denying benefits, and 2) the insurer knew or recklessly disregarded the lack of a reasonable basis. The Court held that Plaintiff had presented evidence that the third IME resulted in an opinion adverse to the first two, and that it was for a jury to determine whether the defendants engaged in bad faith by repeatedly sending Plaintiff to different doctors until one found that her injuries were unrelated to the accident.

The Court’s second opinion addressed the Defendant’s motion in limine seeking to preclude the testimony of Plaintiff’s insurance expert witness. Defendants argued that 1) the finder of fact does not need the assistance of expert testimony to comprehend the plaintiffs’ bad faith allegations, 2) that some of the expert’s opinions related to the ultimate issues of fact, and 3) the remainder of the expert’s opinions are not based on recognized insurance industry standards. The court first asked whether the factfinder would benefit from hearing the additional expert testimony and concluded that the case before it involved complicated issues of law under the insurance policy and Pennsylvania law which could potentially confuse a jury.

Specifically: “The issue of whether an expert is warranted in a bad faith action is very fact specific to each case and dependent on the complexity of the issues. Not all bad faith claims are equally complex. This case, however, appears to be one which is somewhat complex and in which the factfinder may find an expert useful. The allegations of bad faith involve medical professionals employed by defendant and their use of independent medical examiners’ opinions. It will be important for the factfinder to understand the obligations of first party medical benefit claims handlers in such situations. Moreover, plaintiff’s bad faith allegations include not only the defendants’ legal obligations under the policy, but also under Pennsylvania law.”

Next, the Court held that Defendants could object at trial to any testimony addressing the ultimate issue of fact, but refused to preclude the testimony before it was heard. Finally, in addressing the argument that Plaintiff’s expert’s opinion was not based on “insurance standards”, the Court observed the expert’s level of experience with automobile insurance, and stated that Defendants would have ample opportunity to attack the validity of the witness’s findings through cross-examination and argument at trial, and therefore, the motion in limine should be denied.

In its third opinion, the Court addressed the issue of bifurcation raised by Defendants, who sought to separate the bad faith liability trial from a trial on determining punitive damages if liability were to be found. The Defendants argued that there was significant danger of unfair prejudice once the jury heard the size of their net worth, and so bifurcation would be appropriate. Evidence presented in support of Plaintiff’s punitive damages claim included an estimate of Defendant’s net worth — $113.459 million in surplus and $412.275 million in total assets. Defendant claimed that the estimate of net worth could improperly induce the jury to find that bad faith existed, while Plaintiff contended that it was common knowledge that insurance carriers, as large corporations, had high net worth.

The Court agreed with Plaintiff finding that the Court could construct a jury charge and verdict slip to eliminate prejudice such that the benefit derived from bifurcating the trial would be “vastly outweighed by the waste of time and resources inherent to holding two trials.” Therefore, Defendants’ motion to bifurcate was denied.

In sum, the Court found for plaintiff in all three opinions, denying Defendants’ motions for summary judgment, motion in limine to preclude expert testimony, and motion to bifurcate the trial.

Dates of Decision: June 16, 2014 (Opinion 1) and July 16, 2014 (Opinions 2 and 3)

Monaghan v. Travelers Prop. Cas. Co. of Am., No. 3:12cv1285, 2014 U.S. Dist. LEXIS 82368, (M.D. Pa. June 16, 2014) (Munley, J.)

Monaghan v. Travelers Prop. Cas. Co. of Am., No. 3:12cv1285, 2014 U.S. Dist. LEXIS 96524, (M.D. Pa. July 16, 2014) (Munley, J.)

Monaghan v. Travelers Prop. Cas. Co. of Am., No. 3:12cv1285, 2014 U.S. Dist. LEXIS 96525, (M.D. Pa. July 16, 2014) (Munley, J.)

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