BAD FAITH CLAIM PLAUSIBLE BASED ON UNREASONABLY LOW SETTLEMENT OFFER MADE AFTER LONG DELAY (Philadelphia Federal)

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This UIM bad faith claim was allowed to proceed, after Eastern District Judge Pratter denied the insurer’s motion to dismiss.

The plaintiff pleaded that he suffered serious and permanent injuries, including severe disc injuries, post-concussion syndrome and traumatic brain injury.  The insured provided the carrier notice of these injuries and his intent to pursue underinsured motorist coverage.

The policy provided $900,000 in UIM benefits, which the court described as “heightened coverage in exchange for which [the insured] paid increased premiums.”

The complaint alleges the initial demand came in October 2018, accompanied by relevant medical records and reports. The insured alleged he later sent the carrier supplemental records and expert reports on the extent of his injuries, costs of care (nearly $290,000), and estimated lost earnings ($854,000).

The insurer allegedly promised to evaluate the claim by the end of May 2020, and to make an offer at that time.  The insured alleges, however, that “[n]either were provided to him despite repeated follow-ups. Instead, in September 2020—roughly 20 months after the initial demand—[the insurer] offered … $75,000.”

Judge Pratter then states the “wide disparity between [the] demand and [the] offer prompted this case.”

Judge Pratter found “[t]he allegations as currently pled are at least sufficient to support a bad faith claim.” She recognized the many cases dismissing bad faith claims for only pleading bare bones allegations, “[b]ut the Complaint in its present iteration alleges more than boilerplate legal conclusions and a ‘normal dispute’ between insurer and insured.”

Judge Pratter observes there was no dispute that (1) the policy provided $900,000 in benefits, as a result of the insured’s paying heightened premiums; and (2) the insured was not at fault in causing the accident. Further, the complaint alleges the insured suffered significant permanent injuries, will suffer $850,000 in lost earnings, and the cost of care damages alone were five times the insurer’s offer.

Judge Pratter, then states:

“Construing these allegations as true, as the Court must, [the insured’s] estimated damages are many orders of magnitude greater than [the insurer’s] offer. Taken together, the Complaint plausibly establishes a bona fide claim that [the insurer] lacked a reasonable basis to deny benefits.” She relies here on Judge Stengel’s 2017 Davis decision, summarized here, for the proposition that an unreasonably low settlement offer compared to value of lost wages and treatment cost can make out a plausible bad faith claim.

Judge Pratter added the complaint alleged “enough facts to plausibly infer that [the insurer] knew or recklessly disregarded a lack of a reasonable basis to deny benefits.” “Chief among them is the delay between [the insured’s] initial demand and [the insurer’s] onetime offer.”

She cited Judge Stengel’s 2014 Padilla opinion, summarized here, for the point that “’[d]elay is a relevant factor in determining whether bad faith has occurred.’” The complaint alleges “a delay of nearly two years from the initial demand and over three years from the injury.” Moreover, the insurer failed to fulfil its alleged promise to finish its analysis and make an offer in May 2020, and failed to explain this “nonfeasance”.

Date of Decision:  April 15, 2021

Volgraf v. Garrison Property and Casualty Insurance Company, U.S. District Court Eastern District of Pennsylvania No. CV 21-1394, 2021 WL 1427337 (E.D. Pa. Apr. 15, 2021) (Pratter, J.)

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