BROKERS AND AGENTS ARE NOT INSURERS SUBJECT TO STATUTORY BAD FAITH CLAIMS (Western District)

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This is Magistrate Judge Eddy’s Report and Recommendation on the issue of whether certain statutory bad faith defendants were insurers subject to the bad faith statute. The case was voluntarily dismissed the same day the R&R was issued, and it was never reviewed by the District Court.

Two sets of the defendants moved to dismiss the bad faith claim on the basis they were not insurers. Magistrate Judge Eddy observed that insurers are entities that issue policies, collect premiums, or agree to accept others’ liability in exchange for consideration. Further, insurers are also defined “as the underwriter or insurance company with whom a contract of insurance is made.”

The plaintiffs alleged that the moving defendants were brokers or insurance agents. They argued, however, that the moving defendants were “insurers of some form,” because these defendants “failed to make reasonable efforts to identify the policies of insurance and account for the premium payments made by Plaintiffs to Defendants….” Specifically, plaintiffs alleged these agents or brokers became insurers by telling the insured the claim could not be submitted to insurance, by denying aid to plaintiffs, by unreasonably failing to identify plaintiffs’ insurance policies, and by failing to account for premiums.

The reality was that the defendants at most sold the plaintiffs insurance as agents or brokers. “An entity that only sells an insurance policy is not an insurer pursuant to the statute.” There are no allegations “that these entities collected their insurance premiums in exchange for assuming the risks associated with the policy.” Further, there were no allegations these defendants were underwriters or insurers, but all allegations and documents indicated they were brokers or agents.

Thus, Magistrate Judge Eddy recommended the motion to dismiss be granted. As stated above, the case was dismissed that same day and thus the issue was never finally resolved by the District Court.

Date of Decision: March 5, 2020

McKinney v. Boser, U.S. District Court Western District of Pennsylvania 2:19-CV-00771, 2020 U.S. Dist. LEXIS 39001 (W.D. Pa. Mar. 5, 2020) (Eddy, M.J.) (Report and Recommendation)

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