BAD FAITH CLAIM PLAUSIBLY STATED FOR INSURER FORCING A CLAIM INTO LITIGATION WHEN IT ALLEGEDLY KNEW POLICY LIMITS WERE DUE AND REFUSED TO PAY THEM (Western District)

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Plaintiff successfully stated a bad faith claim in this underinsured motorist case.

Plaintiff alleged serious injuries, lost earnings and earning capacity, and emotional injuries. The UIM policy limit was $50,000.  The insured submitted documented medical claims showing the severity of his injuries, and a life care plan indicating over $388,000 in future medical expenses.  More specifically, the insured “provided documentation and medical records for a period immediately following the accident through October 1, 2020 connecting cervical root compression and bilateral disc protrusion with surgical ablation to the motor vehicle accident on August 11, 2018, and reflecting that [the insured] will require $388,117 in future medical care and related expenses).”

In addition, the insured alleged the carrier “failed (and continues to fail) to investigate and process his claim given information showing the seriousness of his injuries and resulting economic loss stemming from the accident.  Moreover, [the insurer] allegedly is “[f]orcing the plaintiff … to proceed to litigate his claims to recover underinsured motorist benefits.”

The carrier refused to pay the $50,000 limit, and the insured brought claims for breach of contract and bad faith.  Magistrate Judge Kelly found the insured set out a plausible bad faith claim, based on these allegations over the severity of the injuries, the huge gap between the policy limit and the alleged medical damages, and the insurer’s forcing the insured to litigate the UIM claim instead of paying policy limits.

The court recited the usual bad faith standards, including the standards that statutory bad faith can exist in the absence of a benefit denial, solely for a variety of poor claims handling practices.  [As noted for the last 14 years on this Blog, poor claim handling in the absence of any duty to pay or provide a benefit, as opposed to delaying in paying a benefit owed, should very likely not be the basis of a bad faith claim under Toy v. Metropolitan.  One of our many posts on the subject can be found here.]

In addition, and of considerable interest, the court stated that:

As particularly relevant to the allegations here, “bad faith is actionable regardless of whether it occurs before, during or after litigation…. [Moreover], using litigation in a bad faith effort to evade a duty owed under a policy would be actionable under Section 8371.” Hart v. Progressive Preferred Ins. Co., No. 17-1158, 2017 WL 11485593, at *3 (W.D. Pa. Dec. 6, 2017) (quoting W.V. Realty, Inc. v. Northern Ins. Co., 334 F.3d 306, 313 (3d Cir. 2003)). The required inquiry is fact specific and “depend[s] on the conduct of the insurer vis à vis the insured.” Condio v. Erie Ins. Exch., 899 A.2d 1136, 1143 (Pa. Super. 2006).

A summary of Hart,  a Report and Recommendation issued by Western District Magistrate Judge Mitchell, can be found here. He has served in the capacity of a Magistrate Judge since 1972.  The 2017 Hart case was dismissed before the R&R was adopted, but as any seasoned Pennsylvania practitioner knows that even Magistrate Judge Mitchell’s Reports and Recommendations will be treated seriously.

Date of Decision:  September 8, 2021

Faith v. State Farm Mut. Auto. Ins. Co., U.S. District Court Western District of Pennsylvania No. 21-CV-0013, 2021 WL 4078658 (W.D. Pa. Sept. 8, 2021) (Kelly, M.J.)

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