Archive for the 'PA – Experts' Category

BAD FAITH CLAIM SURVIVES SUMMARY JUDGMENT WHERE INSURER ALLEGEDLY DID NOT KNOW BASIS OF ITS EXPERT'S ESTIMATES (Middle District)

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In this property loss case arising from a home fire, the insurer’s public adjuster estimated personal property damages at over $220,000. The insurer’s various experts estimated the personal property losses at approximately $51,000.

The insurer’s claim handler relied upon two vendors, one to inventory the lost property and the other to value the items inventoried. The claim handler concluded that the public adjuster’s inventory and photographs did not justify the $220,000 claim, so he adhered to the results of the insurer’s expert vendors.

The insured brought claims for breach of contract and bad faith, and the insurer moved for summary judgment on the bad faith claim.

The court denied summary judgment. It found the following facts in the record supported a potential bad faith claim:

  1. The insureds offered evidence the insurer’s claim handler did not know how his valuation expert obtained the price and depreciation schedules in the lower estimate.

  2. The insurer’s proof of loss requirements for the burned items was “significantly burdensome.”

  3. The insurer’s adjuster failed to send a proof of loss.

Taking these facts in the light most favorable to the insureds, the court concluded they may show the insurer knew there was no reasonable basis for failing to increase its value estimate, or recklessly disregarded the absence of a reasonable basis to do so.

Date of Decision: June 20, 2019

Obelkevich v. Safeco Insurance Co., U. S. District Court Middle District of Pennsylvania No. 3:18cv1111, 2019 U.S. Dist. LEXIS 103177 (M.D. Pa. June 20, 2019) (Munley, J.)

(1) NO BAD FAITH POSSIBLE WHERE NO COVERAGE DUE; (2) INSURER’S REASONABLE RELIANCE ON ENGINEERING EXPERT’S REPORT FOR A COVERAGE DECISION DOES NOT CONSTITUTE BAD FAITH (Western District)

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There were two bad faith claims arising out of a building’s wall collapse case. The first was over whether any coverage was due in connection with building walls that had not collapsed, for which the insured sought replacement to match restoration of the collapsed wall. The second had to do with whether the carrier owed additional damage payments for claims more directly related to the collapse.

The court determined no coverage was due for the other walls, and granted summary judgment on that coverage issue. Because no coverage was due, the court necessarily found “no basis for a bad faith claim based upon an unreasonable denial of coverage.”

Second, the court observed the parties’ experts disagreed on the scope of damages and amount due concerning the wall collapse. The court granted summary judgment on bad faith on this claim as well, finding insurer reasonably relied on its experts in determining the amount of damages it would pay.

The court stated:

As regards additional payment of damages, [the insured] argues that disagreements between the parties’ experts precludes the entry of summary judgment on the bad faith claim. Courts have held that “an insurer’s reasonable reliance on an engineering expert’s report for a coverage decision does not constitute bad faith.” Hamm v. Allstate Prop. & Cas. Ins. Co., 908 F.Supp.2d 656, 673 (W.D.Pa.2012) (citing El Bor Corp. v. Fireman’s Fund Ins. Co., 787 F.Supp.2d 341, 349 (E.D.Pa.2011) (insurance company’s reliance on engineer’s findings as a basis for denial of coverage provides reasonable grounds to deny benefits)) “Moreover, even if the expert incorrectly assessed the cause of damage, this is not evidence that his conclusions were unreasonable or that Defendant acted unreasonably in relying upon them.” Totty v. Chubb Corp., 455 F.Supp.2d 376, 390 (W.D.Pa.2006) (citing Pirino v. Allstate Ins. Co., No. 3:04CV698, 2005 U.S. Dist. LEXIS 27519, 2005 WL 2709014, at *5 (M.D.Pa. Oct. 21, 2005)).

Here, [the insured] only identifies conflicts amongst the expert’s opinions on causation and damages and not the reasonableness of [the carrier’s] expert opinions. The conflict between experts may preclude summary judgment on other claims, but not for bad faith. Based upon the reasonableness standard in the bad faith statute coupled with the high burden of proof of clear and convincing evidence, the Court concludes that a reasonable juror could not find bad faith in [the insured’s] favor. …

Date of Decision: May 14, 2019

Keyser v. State Farm Fire & Casualty Co., U. S. District Court Western District of Pennsylvania 2:18-CV-00226-MJH, 2019 U.S. Dist. LEXIS 81194 (W.D. Pa. May 14, 2019) (Horan, J.)

BAD FAITH ADEQUATELY PLEADED IN RAISING BIAS ON PART OF INSURER’S EXPERT (Middle District)

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As we posted earlier today, the theme is plaintiffs adequately pleading bad faith claims in federal court.

In this second post, the insured set out plausible bad faith claims in this property damage case by making specific factual allegations. The key assertions were that the insurer improperly “hired, retained and relied upon the opinion of an engineer or other professional knowing that such opinion would be favorable to [the insurer] on a financial incentive basis; and (2) disregarded information provided to it from the Plaintiffs that [the insurer’s] inspection and engineering report was inadequate, flawed, and erroneous.”

The court found the “complaint, taken as a whole, goes beyond a mere boilerplate recital of the elements of the statute. Rather, as we construe the complaint, it provides a chronology detailing alleged failures … to evaluate this claim in good faith. Instead, according to the plaintiffs [the insurer] relied upon false justifications to deny their claim; under-valuated their property; failed to account for the loss of use of the property; and demonstrated bad faith in its investigation of this insurance claim in 14 different ways, including specific allegations that [the insurer]: (1) hired, retained and relied upon the opinion of an engineer or other professional knowing that such opinion would be favorable to Allstate on a financial incentive basis; and (2) disregarded information provided to it from the Plaintiffs that Allstate’s inspection and engineering report was inadequate, flawed, and erroneous.”

The issue of the expert’s alleged financial bias could not be resolved in a judgment on the pleadings. “Thus, the plaintiffs’ complaint raises questions of motivation and bias which cannot be resolved on the pleadings alone. Therefore, the task of determining whether this expert report provides a defense as a matter of law to the bad faith claim in this case, in our view, may not be performed on consideration of a motion for judgment on the pleadings, where we must simply assess the adequacy of the pleadings. Instead, assessment of any such defense must await a properly documented motion for summary judgment.”

Date of Decisions: January 8, 2019 (Report and Recommendation), adopted by District Court on April 25, 2019

Flower v. Allstate Property & Casualty Insurance Co., U.S. District Court Middle District of Pennsylvania Civil No. 3:18-CV-1321, 2019 U.S. Dist. LEXIS 4096 (M.D. Pa. Jan. 8, 2019) (Carlson, M.J.) (Report and Recommendation), adopted by District Judge Mariani on April 25, 2019

NO BAD FAITH WHERE (1) REASONABLE AND TIMELY INVESTIGATION AND (2) INSURED FAILED TO MEET CONTRACTUAL BURDEN TO SHOW CONNECTION BETWEEN CLAIM AND PROPERTY DAMAGE (Philadelphia Federal)

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In this homeowner’s case, the insured attempted to tie a fallen tree to water pipe damage. The court laid out a detailed history of the insurer’s responses to the insured’s claims and communications, demonstrating the insurer’s active role in investigating the claim. The court also detailed the carriers’ review of documents and information from the insured’s contractors. The court found the insured’s communications and investigation timely and reasonable.

Further, the insured was contractually obligated to show property damage resulting from a covered event, but failed to do so, e.g., there were no photographs of the fallen tree, nor sufficient evidence of how the tree could have damaged concrete encased pipes. Under the circumstances, the insured “had to retain a contractor to provide a report making the connection.”

Moreover, the insured’s “plumbing and heating contractors both testified the fallen tree did not cause the pipe damage, rather, the pipes needed to be replaced because of their age.” On these facts, the carrier could not be expected to “make payments on claims devoid of some evidence linking damage to an event.”

In light of the delineated efforts by the insurer to investigate the claim, and the insured’s failure to produce evidence of the necessary connection between the fallen tree and the pipe damage, the court granted summary judgment on the bad faith claim.

Date of Decision: March 29, 2019

Mitchell v. Allstate Insurance Co., U. S. District Court Eastern District of Pennsylvania CIVIL ACTION NO. 17-1806, 2019 U.S. Dist. LEXIS 55613, 2019 WL 1440043 (E.D. Pa. Mar. 29, 2019) (Kearney, J.)

INSURERS DO NOT AUTOMATICALLY ACT IN BAD FAITH BY RELYING ON THEIR OWN EXPERT’S CONCLUSIONS INSTEAD OF THE INSURED’S EXPERTS (Middle District)

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The insured claimed it was bad faith for the insurer to rely upon its medical expert’s opinion rather than the insured’s medical experts. The court found that such allegations alone do not make out a bad faith case.

The court stated that it “is well-settled that, when making a claim determination, an insurer may reasonably rely on the findings of an independent medical examination—even in the face of contrary medical opinions.” In addressing the allegation that the insurer “improperly favored” its own expert’s conclusions, the court further observed that “an insurer is not required to give greater credence to opinions of treating medical providers.”

Finally, even if relying on its own medical expert amounted to negligence or bad judgment, this does not equate to statutory bad faith in Pennsylvania.

Thus, the court dismissed the bad faith count, but the insured was given leave to replead her claims in an amended complaint if these deficiencies could be cured.

Date of Decision: December 17, 2018

Phillips v. State Farm Mut. Auto. Ins. Co., U.S. District Court Middle District of Pennsylvania No. 4:18-CV-01672, 2018 U.S. Dist. LEXIS 211729 (M.D. Pa. Dec. 17, 2018) (Brann, J.)

DECEMBER 2018 BAD FAITH CASES: REJECTING POLICY LIMITS DEMAND, STANDING ALONE, IS NOT EVIDENCE OF BAD FAITH ABSENT UNREASONABLE AND INTENTIONAL UNDERVALUATION (Middle District)

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In this UIM bad faith case, the insured asserted that (1) the insurer failed to provide a reasonable basis for its valuation of plaintiff’s claim, and (2) the insurer refused to negotiate in good faith. The court recited a detailed history of: medical examinations, medical history and treatment (or absence thereof); the parties’ negotiations – during which plaintiff never lowered its policy limits demand; and the details of a high/low arbitration that ultimately resulted in the insurer paying less than policy limits, but more than its valuation.

The court granted summary judgment to the insurer. The record demonstrated the insurer came forward “with sufficient evidence to establish an absence of any genuine dispute of material fact as to its conduct in pre-arbitration dealings” with the insured. The court found that in valuing the claim, the insurer relied upon expert reports and the absence of documentation from the insured showing any surgical history for which damages might be due.

As to claim handling, investigation, and valuation, the court observed that the essence of a bad faith claim is the unreasonable and intentional/reckless denial of a benefit. While the insurer’s settlement offers were lower than the policy limit demand and the ultimate arbitration award, this cannot create bad faith per se. Rather, a low but reasonable valuation is not bad faith. The court found the insurer’s valuations reasonable based on its investigation, and the sum it was willing to pay in setting the high/low arbitration parameters.

It was also significant to the court that the insured never lowered her policy limits settlement demand. Again, an insurer is not required to automatically submit to a policy limits demand or subject itself to bad faith liability. An insurer has a duty to investigate the claim fairly and objectively in coming to a valuation, and standing alone, a refusal to pay policy limits is not evidence of bad faith or unreasonable valuation. An insurer may even “aggressively investigate and protect its interests in the normal course of litigation” absent doing so in bad faith.

Finally, in finding an absence of bad faith, the court observed that the claim handler did in fact change her valuation over time.

Date of Decision: December 6, 2018

Rau v. Allstate Fire & Casualty Insurance Co., U.S. District Court Middle District of Pennsylvania No. 3:16-CV-0359, 2018 U.S. Dist. LEXIS 206343 (M.D. Pa. Dec. 6, 2018) (Mariani, J.)

Thanks to Dan Cummins of the excellent Tort Talk Blog for bringing this case to our attention.

DECEMBER 2018 BAD FAITH CASES: INSURER PERMITTED TO PUT ON BAD FAITH EXPERT (Western District)

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The court faced a motion in limine to preclude the insurer’s bad faith expert testimony in this UIM case. The court observed the divided case law on whether expert testimony concerning an insurer’s bad faith is permissible, and found the issue controversial. The court, however, permitted the insurer to put on its bad faith expert, with certain limitations.

The court observed that trial judges have discretion on whether to allow expert testimony, and that “expert testimony may be appropriate with respect to issues such as insurance claims adjusting procedure, an insurer’s compliance with industry customs and standards, and whether the insurer lacked a reasonable basis for denying an insured’s claim.”

In this case, after noting this was a non-jury trial and that the court was familiar with bad faith law, the court concluded that the expert testimony might assist the judge as the trier of fact “assuming [the carrier’s] claims handling procedures are complex.” However, the expert could not testify or give opinions that the court ultimately construed as legal conclusions. The judge also stated that he would give the expert testimony appropriate weight, cautioning that the testimony would be wholly disregarded if it appeared to be “nothing more than speculation unsupported by any scientific or specialized knowledge….”

Date of Decision: November 25, 2018

Debellis v. Mid-Century Ins. Co., U.S. District Court Western District of Pennsylvania No. 18cv0214, 2018 U.S. Dist. LEXIS 199353 (W.D. Pa. Nov. 25, 2018) (Schwab, J.)

Hema P. Mehta of Fineman, Krekstein & Harris represented the carrier in this matter.

 

NOVEMBER 2018 BAD FAITH CASES: CLAIMS HANDLING REASONABLE WHEN INSURER RELIES ON EXPERTS AND CONDUCTS THOROUGH INVESTIGATION; INSINUATION OF BAD INTENT IS NOT PROOF OF BAD FAITH (Middle District)

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The insurer ceased making payments under a disability policy on the basis of two independent medical examinations, and its interpretation that the results of those examinations fell outside the policy’s coverage. The insured brought various claims, including bad faith. The court ruled in the insurer’s favor on summary judgment.

First, the insurer had a reasonable basis to deny the claim. Insurers “may reasonably rely on the findings of an independent medical examination—even in the face of contrary medical opinions.” The insured argued the insurer unfairly favored its physician/expert opinion over the treating physicians’ opinions, however, “an insurer is not required to give greater credence to opinions of treating medical providers.”

Second, the record did not yield an inference that there was a frivolous or unfounded refusal to pay. The record showed a thorough investigation, with reviews by medical experts, and requests and reviews of relevant documents. This created a reasonable basis for denial.

Finally, “an insurer has a right to evaluate legitimate coverage issues and does not act in bad faith by aggressively protecting its interests.” Merely insinuating a pre-determined intent to deny a claim is not sufficient to meet the burden of actually establishing bad faith. Plaintiff’s claims handling examples adduced to discredit the insurer, did not actually evidence improper claims handling, “or that their methods otherwise went beyond mere negligence and constituted conduct amounting to bad faith.”

Date of Decision: November 2, 2018

Brugler v. Unum Group & Provident Life & Accident Ins. Co., U. S. District Court Middle District of Pennsylvania No. 4:15-CV-01031, 2018 U.S. Dist. LEXIS 187836 (M.D. Pa. Nov. 2, 2018) (Brann, J.)

OCTOBER 2018 BAD FAITH CASES: $10,000 OFFER ON CLAIM IN EXCESS OF $200,000 NOT FRIVOLOUS OR UNFOUNDED WHERE ALTERNATE CAUSE OF LOSS WOULD NOT BE COVERED (Middle District)

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In this UIM bad faith case, the insured received $15,000 from the tortfeasor, and was offered $10,000 by his own insurer, on a $200,000 policy. The insurer had already paid $5,000 in medical bills on the claim. The insured brought breach of contract and bad faith claims. The insurer successfully moved for summary judgment on the bad faith claim.

The insured claimed $180,000 to $230,000 in lost income. On medical bills, the court found that the actual costs to date were less than $15,000 and the insurer had already paid $5,000 of that sum, though the insured’s expert said he might need future surgery. Thus, $20,000 was paid to date, with another $10,000 on the table for plaintiff.

The key issue on bad faith was causation. Both the insured’s and insurer’s medical experts found that the insured’s pre-existing medical condition contributed to his ailments. Thus, while the insurer’s $10,000 offer did not satisfy the insured’s six figure demand, the insurer “was not prohibited from considering the doctors’ opinions regarding alternate causation.” Thus, the court ruled: “On balance, while minds may differ as to the true sum of the … loss, it cannot be said that [the insurer’s] estimate was ‘frivolous or unfounded.’”

Date of Decision: October 12, 2018

Newhouse v. Geico Casualty Company, U.S. District Court Middle District of Pennsylvania No. 17-cv-477, 2018 U.S. Dist. LEXIS 175785 (M.D. Pa. Oct. 12, 2018) (Brann, J.)

Our thanks to Dan Cummins of the excellent Tort Talk Blog for bringing this case to our attention.

The court previously denied a motion to sever and stay the bad faith claim.

 

JULY 2018 BAD FAITH CASES: (1) RELIANCE ON INADEQUATE EXPERT REPORT CAN BE BAD FAITH; (2) COURT REFUSES TO STRIKE REFERENCE TO CARRIER’S PRIOR ATTEMPT TO TERMINATE POLICY AFTER A DIFFERENT LOSS (Philadelphia Federal)

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In this case, the insured argued that the carrier’s reliance on its expert (an unidentified plumber) was unreasonable. The insurer took the position that reliance on an expert makes a decision reasonable as a matter of course. The court found that bad faith could be found if the plaintiff could prove unreasonable reliance on an inadequate expert report.

In this case, the plaintiff alleged the report did not name the expert, was unsigned, and provided no factual basis to support its conclusions. While the court did find there was some factual support in the report, the report was still inadequate because the expert did not go beyond the surface in inspecting the damage at issue, and “offered quite a thin analysis of the potential evidence available for determining the cause of the damage.”

Thus, a plausible claim was stated that the carrier’s reliance on this expert report was unreasonable. By contrast, the court reviewed other cases where there was “a much more comprehensive investigation process and more detail relied upon than is alleged here.”

The carrier also sought to strike references to its prior efforts to terminate the insured’s policy which arose out of a different loss. The carrier’s termination effort was overturned by the insurance department. The insured argued this was “relevant to the question of whether [the carrier] had knowledge of, or recklessly disregarded its lack of any reasonable basis for denying Plaintiffs’ coverage claim for the [claim now at issue].”

The court refused to strike this language from the complaint.

More generally, the Court provided an overview of the law on analyzing what constitutes a reasonable basis to deny coverage: “An insurer need not demonstrate that their evaluation of an insured’s claim was correct in order to show that they had a reasonable basis for a coverage decision, and thereby prevail against a statutory bad faith claim. … ‘Bad faith cannot be found where the insurer’s conduct is in accordance with a reasonable but incorrect interpretation of the insurance policy and the law.’ … Rather, an insurer simply must show that it had a reasonable basis for a coverage decision based on the information available at the time the decision was made. … ‘In deciding whether an insurer had a reasonable basis for denying benefits, a court should examine what factors the insurer considered in evaluating a claim.’ The reasonable basis standard imposes a requirement ‘that the insurer properly investigate claims prior to refusing to pay the proceeds of the policy to its insured.’ … Ultimately, ‘[b]ad faith claims are fact-specific and depend on the conduct of the insurer vis-à-vis its insured.’ … Courts must analyze the facts at hand to determine whether an insurer’s decision process on a particular insurance claim was sufficient such that it cannot be said to constitute bad faith as a matter of law.”

Date of Decision: July 18, 2018

Overbrook Properties, LLC v. Allstate Indem. Co., U. S. District Court Eastern District of Pennsylvania, CIVIL ACTION NO. 18-630, 2018 U.S. Dist. LEXIS 118766 (E.D. Pa. July 17, 2018) (Baylson, J.)