Archive for the 'PA – Common Law Bad Faith (contractual or fiduciary basis)' Category

WHERE THERE IS NO DUTY TO DEFEND THERE IS NO STATUTORY BAD FAITH; NO COMMON LAW BAD FAITH WHERE NO BREACH OF CONTRACT (Western District)

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The court determined there was no coverage due under an additional insured endorsement. Thus the insured lost on its breach of contract and declaratory judgments claims. It likewise failed to salvage its bad faith claims.

In addressing the bad faith claim, the court relied on the Third Circuit’s recent decision in 631 N. Broad Street v. Commonwealth Land Title, observing “that where there is ‘no duty to defend, there could be no [statutory] bad faith claim against’ the insurer.”

The insured tried to evade this result by asserting it still had a common law bad faith claim. However, the only common law bad faith cause of action available in Pennsylvania arises out of the insurance contract. If the contract claim fails, the common law bad faith claim fails of necessity. Thus, “[b]ecause the Court dismisses [the] breach-of-contract claim based on lack of potential for coverage, so too must it dismiss a subsumed claim of common law bad faith.”

On the common law bad faith holding, the court relied upon the Eastern District decisions in CRS Auto Parts and Tubman, and the Middle District decisions in Bukofsi and Porter.

Date of Decision: March 13, 2020

NVR, Inc. v. Mutual Benefit Insurance Co., U.S. District Court Western District of Pennsylvania No. 2:19-cv-26-NR, 2020 U.S. Dist. LEXIS 44135 (W.D. Pa. Mar. 13, 2020) (Ranjan, J.)

BOILERPLATE BAD FAITH COMPLAINT FAILS; NO COMMON LAW BAD FAITH CLAIM RECOGNIZED (Philadelphia Federal)

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This bad faith case involved a first party property damage dispute. The insured alleged he fully cooperated in the insurer’s investigation, but the insurer wrongly denied his claim. He brought a breach of contract, common law bad faith, and statutory bad faith action. The insurer moved to dismiss both bad faith claims. The court found the insured’s bare bones and conclusory allegations did not meet federal pleading standards, and dismissed the complaint.

On the statutory bad faith claim, the insured did “nothing more than set forth a threadbare recital of the elements of this cause of action, alleging [the] denial of his claim ‘was unreasonable, baseless, without foundation, made in bad faith, and made without any basis in fact whatsoever.’”

The following alleged facts failed to make out a statutory bad faith claim:

  1. The insured had a policy with the insurer;

  2. His car was stolen, stripped and destroyed;

  3. He submitted a proof of loss, other documentation, and sat for a lengthy statement under oath;

  4. He was truthful throughout the investigation and engaged in no fraudulent commissions or omissions;

  5. He demanded an actual cash value payment; and

  6. The insurer denied the claim.

These allegations, however, allowed for no plausible inference that (1) the insurer lacked a reasonable basis to deny benefits or (2) the insurer knew or recklessly disregarded its lack of a reasonable basis.

Next, the court observed that there is no common law bad faith cause of action in Pennsylvania for refusing to pay benefits or as to claims handling. The insured did not oppose the motion to dismiss on this basis, and the common law count was dismissed as well. [Note: There is no discussion of any distinction between a tort-based common law claim, as rejected in D’Ambrosio, and the type of contractual common law bad faith claims permitted in cases like Cowden or Birth Center.]

Date of Decision: February 21, 2020

Diaz v. Progressive Advanced Ins. Co., U. S. District Court Eastern District of Pennsylvania Case No. 5:19-cv-06052-JDW, 2020 U.S. Dist. LEXIS 29708 (E.D. Pa. Feb. 21, 2020) (Wolson, J.)

STATUTORY BAD FAITH CLAIM BARRED BY TWO-YEAR STATUTE OF LIMITATIONS; PUTATIVE COMMON LAW BAD FAITH BARRED BY TWO-YEAR CONTRACTUAL LIMITATION; NO COMMON LAW BAD FAITH IN FIRST PARTY CASES (Middle District)

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The insurer denied coverage on November 3, 2015. The insured sued for breach of contract and bad faith on September 20, 2019. The insurer moved to dismiss the contract claim based on a contractual two-year limitation period, and the bad faith claim under the controlling two-year statute of limitations. The relevant facts were evident on the face of the complaint. Therefore, the court could decide the issues on a motion to dismiss.

As to the contract claim, because the “policy had a 2-year suit limitation, there is no merit to plaintiff’s contention that Pennsylvania’s 4-year statute of limitations for contract claims under 42 Pa.C.S.A. §5501 should control in this case.” The insured nowhere alleged the insurer “led her to believe the two-year limitations period would not be enforced or that [the insurer] committed any actions that induced her to file her complaint after the two year deadline.” The contract claim was dismissed with prejudice.

As to the bad faith claim, “since ‘Plaintiff’s claim of bad faith is … based on Defendant’s denial of benefits to Plaintiff under the Policy, [the] Court can therefore consider the [November 3, 2015 denial of coverage letter] attached by Defendant to its Motion to Dismiss.” The court would not let the plaintiff escape the timing issue by simply leaving out the denial date and not attaching a document on which it relied in its complaint in pleading its case, where the defendant then attaches to its motion.

Further, the court found “[no] doubt that the two year statute of limitations for a bad faith suit begins to run when insured first learned that the insurance company was denying coverage.” Thus, the statutory bad faith claim was time barred.

[Note on statute of limitations triggers and the scope of the bad faith statute. The court observes that the two year bad faith statute of limitations begins to run at the time coverage is denied, and cites case law for this proposition, also phrased as when claims for benefits are denied. As noted previously on this blog, there are cases holding that the bad faith statute applies not only to coverage denial, but distinctly to various claims handling misconduct. Under this theory, the statute of limitations cannot begin to run at the time coverage is denied, because, e.g., no coverage may be due and bad faith is based solely on egregious claims handling failures. Does this mean that the statute of limitations case law makes clear that statutory bad faith must be based on a benefit denial, see one example here, and these bad faith claims handling cases are wrongly decided; or that there are other triggers for the two-year statute beginning to run wholly independent of a coverage denial?

The governing case on the statutory bad faith statute of limitations is the Pennsylvania Supreme Court’s decision in Ash v. Continental Ins. Co., 932 A.2d 877 (Pa. 2007). In Ash, a clear majority of Pennsylvania’s Supreme Court followed Chief Justice Cappy’s Toy v. Metropolitan Life Ins. Co. opinion. The Ash majority states: “The bad faith insurance statute, on the other hand, is concerned with “the duty of good faith and fair dealing in the parties’ contract and the manner by which an insurer discharge[s] its obligation of defense and indemnification in the third party claim context or its obligation to pay for a loss in the first party claim context.” See Toy v. Metropolitan Life Ins. Co., 928 A.2d 186, 199 (Pa. 2007). It applies only in limited circumstances–i.e., where the insured first has filed ‘an action arising under an insurance policy’ against his insurer, see 42 Pa.C.S. § 8371–and it only permits a narrow class of plaintiffs to pursue the bad faith claim against a narrow class of defendants.” An article discussing Toy and Ash can be found here.]

The insured attempted to claim there was somehow a common law bad faith claim, subject to the four-year contract statute of limitations. Aside from the fact that the complaint alleged statutory bad faith, common law bad faith is solely contract based in Pennsylvania, and merges with the breach of contract claim. Thus, it would be subject to the same two-year contractual limitations period.

Finally, the court stated that in any event, common law bad faith did not apply to first party property damage claims, as were at issue in this case. The court relied on Judge Munley’s 2009 Bukofski decision on this point.

Date of Decision: February 13, 2020

Mazzoni v. Travelers Home & Mutual Insurance Co., U.S. District Court Middle District of Pennsylvania CIVIL ACTION NO. 3:19-2169, 2020 U.S. Dist. LEXIS 25513 (M.D. Pa. Feb. 13, 2020) (Mannion, J.)

MERELY RECITING THE ELEMENTS OF A BAD FAITH CLAIM WITHOUT SUPPORTING FACTS MERITS DISMISSAL; COMPENSATORY, CONSEQUENTIAL, AND INCIDENTAL DAMAGES NOT RECOVERABLE UNDER BAD FAITH STATUTE (Western District)

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The insured and insurer disputed the amount of coverage due on a homeowner’s property loss claim. The insured brought breach of contract and bad faith claims. The insurer moved to dismiss the bad faith claim for (1) inadequate pleading and (2) seeking damages not available under the bad faith statute.

The court observed, among other principles, that “[m]ere restatements of the elements of a claim are not entitled to the assumption of truth.” Similarly, the “generic invocation of statutory language is insufficient to satisfy [the] federal pleading burden.” Further, a plaintiff fails to state a plausible basis for recovery under the bad faith statute if the complaint is devoid of facts describing the “who, what, where, when, and how the alleged bad faith conduct occurred.” The insured’s complaint failed the test.

The complaint only set out “boilerplate legal conclusions such as [the insurer] failed to pay [the insured], failed to objectively and fairly evaluate the Claim, unreasonably withheld Policy benefits, acted unreasonably and unfairly, and denied the Claim without justification or good faith basis to deny the Claim.” Thus, the court dismissed the bad faith claim for failing to plead a plausible claim. It relied on the following cases, summarized previously on this Blog: Mondron, Myers, and Plummer.

Still, the dismissal was without prejudice, and the insured was given leave to amend her complaint.

On the other hand, the court dismissed with prejudice the insured’s statutory bad faith claims for compensatory, consequential, and/or incidental damages. Such damages are only available in common law bad faith cases, not for statutory bad faith claims.

Date of Decision: December 31, 2019

Bick v. State Farm Fire & Casualty, U. S. District Court Western District of Pennsylvania No. 2:19-cv-00821-CRE, 2019 U.S. Dist. LEXIS 222775 (W.D. Pa. Dec. 31, 2019) (Reed Eddy, M.J.)

BAD FAITH NOT ADEQUATELY PLEADED; NO PRIVATE ACTION FOR UIPA VIOLATIONS; ATTORNEY’S FEES NOT AVAILABLE FOR BREACH OF CONTRACT CLAIM (Middle District)

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The court reiterates here that (1) bad faith claims must be pleaded with supporting factual allegations, (2) there is no private cause of action for UIPA or Unfair Claims Settlement Practices regulation violations, and (3) attorney’s fees are not recoverable under a breach of contract claim.

This is a UIM case for breach of contract and bad faith, as well as unfair claim settlement practices violations. The insurer moved to dismiss the bad faith claim as improperly pleaded. It moved to dismiss the unfair claim settlement count on the basis that the Unfair Insurance Practices Act (UIPA) and Unfair Claim Settlement Practices regulations do not provide for a private cause of action. Finally, the insurer moved to dismiss the attorney’s fee claims in the breach of contract count.

  1. Bare-bones bad faith claims dismissed without prejudice

The court dismissed the bad faith claim, without prejudice, because the insureds only pleaded conclusory bare-bones allegations. The complaint did not include any factual allegations supporting the conclusory pleadings.

These inadequate bare-bones allegations were as follows:

Delay. Even after determining that Plaintiffs had a right to the insurance proceeds claimed, the Defendant has delayed paying Plaintiffs their policy proceeds for unknown reasons.

Forcing Insured to Seek Legal Redress. By delaying payment of Plaintiffs’ claim, Defendant Progressive Corporation, knowing that it had no legal justification for doing so, purposefully forced Plaintiffs to file this Complaint in order to obtain the insurance proceeds to which they are entitled. Defendant, Progressive Corporation, forced Plaintiffs to seek legal redress for unknown reasons.

Deception. Defendant realizing that it had no legal grounds for denying or delaying payment of Plaintiffs’ claim, and/or engaged [sic] in deceptive acts relating to Plaintiffs’ policy for the purposes of creating an apparent reason for denying the Plaintiffs’ claim where no such reason existed.

False Accusations. Defendant realizing that it had no legal grounds for denying or delaying payment of Plaintiffs’ claim, made false statements to the Plaintiffs’ representatives and/or other persons for the purposes of creating an apparent reason for denying the Plaintiffs’ claim where no such reason existed.

Oppressive Demands. In the course of adjusting Plaintiffs’ claim, Defendant made oppressive demands of the Plaintiffs for the purposes of delaying payment of Plaintiffs’ claim.

The court looked to the following decisions in supporting this result: Myers, Peters, Sowinski, Moran, and Grustas.

  1. There is no private cause of action under the UIPA or under Pennsylvania’s Unfair Claim Settlement Practices Regulations

The insureds relied upon the Supreme Court’s 1981 D’Ambrosio decision in asserting causes of action for UIPA and Unfair Claim Settlement Practices violations. They contended the Supreme Court’s 2017 Rancosky decision superseded D’Ambrosio, and created these private causes of action. The court rejected this argument, observing that Rancosky simply observed that the 1989 bad faith statute superseded D’Ambrosio to the extent it created a new statutory bad faith cause of action years after D’Ambrosio was decided. Rancosky, however, still recognized D’Ambrosio’s holding there is no private UIPA cause of action.

The insurer “therefore did not err in relying on D’Ambrosio for the proposition that there is no private cause of action under UIPA. It remains the case that neither UIPA nor the regulations governing unfair claim settlement practices allow a plaintiff to bring a private cause of action.” The “unfair claim settlement practices claim will accordingly be dismissed with prejudice because there is no private cause of action for unfair claim settlement practices under Pennsylvania law.”

The court looked to the recent Excel and Neri cases in reaching this decision.

3. Attorney’s fees cannot be recovered under a breach of contract theory

Litigants are responsible for their own attorney’s fees and legal costs absent a statute authorizing fees, a contractual provision for fees, or some other recognized exception to the general rule. None of these circumstances applied to the insureds’ breach of contract claim. The court rejected the argument that fees were allowed because attorney’s fees may be permitted during the pendency of litigation for dilatory, obdurate, vexatious or bad faith conduct in the course of litigation. This was irrelevant as neither party filed a sanctions motion, and such behavior was not part of the actual case pleaded.

Date of Decision: December 17, 2019

Kline v. Progressive Corp., U.S. District Court Middle District of Pennsylvania Civil No. 1:19-CV-00676, 2019 U.S. Dist. LEXIS 216258 (M.D. Pa. Dec. 17, 2019) (Wilson, J.)

REASONABLENESS OF INVESTIGATION IS NOT SOLELY DETERMINED BY THE LENGTH OF TIME USED BY THE ADJUSTER TO REACH A CONCLUSION ON COVERAGE (Middle District)

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Through an unusual set of circumstances, the insureds’ electricity service at a vacation home was terminated by third parties, unbeknownst to the insureds. This led to the heating system’s not functioning, which in turn led to frozen pipes bursting, and significant water damage to their home. Their insurer denied coverage under a policy provision that required the insureds to take reasonable care in maintaining heat while the property was unoccupied, or in shutting down the water system.

The insureds brought claims for breach of contract, negligence, and bad faith. The negligence claim was dismissed under the gist of the action doctrine, as the claim was based on the breach of an insurance contract and any duties arose out of that contract. The breach of contract claim was dismissed as being initiated after the one-year contract period for bringing suit, expressly required in the insurance policy.

The court analyzed the bad faith came under both the common law and Pennsylvania’s Bad Faith Statute, 42 Pa.C.S. § 8371. One difference between the two claims is that common law bad faith permits recovery of compensatory and consequential damages, while statutory bad faith is limited to interest, punitive damages, legal fees and costs.

In this case, the common law bad faith claim was time barred, being subject to the same analysis as the breach of contract claim.

The statutory bad faith claim was based upon an allegedly unreasonable failure to investigate the facts as to the history of the termination of the insureds’ electric service as the cause of the loss. The insureds argued that the adjuster’s single day visit to “the property was insufficient to ascertain the information necessary to determine the cause of the damage, particularly in light of the adjuster’s failure to contact [other relevant parties] to determine what events led to the transfer and termination of electric service at the [insureds’] Pennsylvania vacation home.” The court, however, granted the insurer summary judgment on this issue.

While the “adjuster may not have pursued an investigation into the ultimate cause of the property damage to the extent the [insureds] desired, a single, one-day visit to the home was sufficient for the adjuster to ascertain that the property was vacant for an extended period of time, that electric service to the home had been shut off for a period of months resulting in a failure to maintain heat inside the home over an extended period of time, and that the cause of property damage was a freeze out. This information, together with that gathered by claims handlers—including, in particular, the [insureds’] failure to note over the course of several months that they were no longer being billed for electric service—was sufficient … to reasonably determine that the [insureds] had failed to use reasonable care to maintain heat in the home while it was vacant for several months of winter weather. Stated another way, we find that, based on the evidence adduced by the parties on summary judgment, viewed in the light most favorable to the plaintiffs, no reasonable jury could find that [the insurer’s] investigation was inadequate or that its denial of coverage was frivolous or unfounded.

Date of Decision: September 27, 2019

Pager v. Metro. Edison, U. S. District Court Middle District of Pennsylvania CIVIL ACTION NO. 3:17-cv-00934, 2019 U.S. Dist. LEXIS 166052 (M.D. Pa. Sept. 27, 2019) (Saporito, M.J.)

(1) NOT ACCEDING TO INSURED’S DEMAND IS NOT BAD FAITH PER SE (2) THERE IS NO FIDUCIARY DUTY IN UIM CONTEXT AND (3) COMPENSATORY DAMAGES NOT AVAILABLE UNDER BAD FAITH STATUTE (Western District)

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In this UIM bad faith case, the court dismissed the bad faith count with leave to amend, struck all allegations referencing fiduciary duty, and dismissed the claim for compensatory damages under the Bad Faith Statute, 42 Pa.C.S. § 8371.

The insured was injured in a motor vehicle accident. The tortfeasor’s carrier paid his $25,000 policy limits. The insured sought additional recovery under the UIM provisions of his own policy.

The insured provided various medical records, economic reports, and other documents to the carrier, and ultimately demanded $250,000 in UIM policy limits. The insured’s carrier did not meet this demand, and the insured sued for breach of contract and bad faith, as well as loss of consortium for his wife.

The insurer moved to dismiss the bad faith count for failure to state a claim. It also moved to strike all averments concerning fiduciary duty, and to dismiss any claim for compensatory damages under the Bad Faith Statute.

The insured fails to plead a plausible bad faith claim

In reviewing the complaint, the court observed that while the list of 15 allegations in the bad faith count was long, it only pleaded “essentially conclusory acts and omissions,” which are insufficient to make out a plausible bad faith cause of action. These flawed allegations included:

a) “failing to objectively and fairly evaluate Plaintiffs’ claim”; b) “failing to objectively and fairly reevaluate Plaintiffs’ claim based on new information”; c) “engaging in dilatory and abusive claims handling”; d) “failing to adopt or implement reasonable standards in evaluating Plaintiffs’ claim”; e) “acting unreasonably and unfairly in response to Plaintiffs’ claim”; f) “not attempting in good faith to effectuate a fair, prompt, and equitable settlement of Plaintiffs’ claim in which the Defendant’s liability under the policy had become reasonably clear”; g) “subordinating the interests of its insured and those entitled under its insureds’ coverage to its own financial monetary interests”; h) “failing to promptly offer reasonable payment to the Plaintiffs”; i) “failing reasonably and adequately to investigate Plaintiffs’ claim”; j) “failing reasonably and adequately to evaluate or review the medical documentation in Defendant’s possession”; k) “violating the fiduciary duty owed to the Plaintiffs”; l) “acting unreasonably and unfairly by withholding underinsured motorist benefits justly due and owing to the Plaintiffs”; m) “failing to make an honest, intelligent, and objective settlement offer”; n) “causing Plaintiffs to expend money on the presentation of their claim”; and o) “causing the plaintiffs to bear the stress and anxiety associated with litigation.”

Beyond these conclusory allegations, the bad faith count was “devoid of facts explaining ‘who, what, where, when, and how’ Defendant failed to handle Plaintiffs’ UIM claim in good faith.”

The court did scour the complaint for facts. However, those facts did “not detail which of Defendant’s acts or omissions constitute bad faith, separately or in conjunction with others.” All those facts amounted to was that the insured was (1) injured in a motor vehicle accident, (2) the tortfeasor’s liability limit did not cover all of the insured’s injury claims, (3) the insured submitted his claim to his UIM carrier, and (4) the claim made has not been paid.

“While such facts might be sufficient to plead a claim for breach of contract, they are insufficient to support a claim of bad faith under the Pennsylvania statute. Simply put, requiring the Court to infer bad faith through Defendant’s ‘failure to immediately accede to a demand [under an insurance policy] cannot, without more, amount to bad faith.’”

Plaintiff’s citation to documents in his pleadings did not cure this problem. These documents simply show there may be some merit to the UIM claim, but do not show the “where, when and how” of a bad faith claim. These documents do not show how the denial was unreasonable or that that the allegedly unreasonable denial was knowing or reckless.

Again, the complaint simply amounted to an argument that bad faith should be inferred from the carrier’s refusing the insured’s demand. This is not enough.

There is no fiduciary duty in the UIM context

The court also struck all references in the complaint to breaches of fiduciary duty. The court rejected the notion that an insurer bears a fiduciary duty to the insured in all circumstances. Rather, while there may be a fiduciary duty in the context of third party claims against the insured, there is no such duty in first party claims, such as UIM claims.

Compensatory damages cannot be recovered under the Bad Faith Statute

Pennsylvania’s Bad Faith Statute only allows for recovery of punitive damages, interest, attorney’s fees, and costs. It essentially provides for additional remedies other than compensatory damages, which must be recovered under other theories, principally breach of contract.

Date of Decision: September 9, 2019

Ream v. Nationwide Property & Casualty Insurance Co., NAIC, U.S. District Court Western District of Pennsylvania No. 2:19-cv-00768, 2019 U.S. Dist. LEXIS 152870, 2019 WL 4254059 (W.D. Pa. Sept. 9, 2019) (Hornak, J.)

POTPOURRI OF ISSUES ADDRESSED IN RESPONSE TO 11 COUNT COMPLAINT: (1) REMAND (2) GIST OF THE ACTION/ECONOMIC LOSS (3) UIPA; (4) DUTY OF GOOD FAITH AND FAIR DEALING; (5) UNFAIR TRADE PRACTICES AND CONSUMER PROTECTION LAW (6) DECLARATORY JUDGMENT ACTIONS BY BREACH OF CONTRACT PLAINTIFFS AND (7) ADEQUATELY PLEADING BAD FAITH (Philadelphia Federal)

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In this Opinion, Eastern District Judge Tucker addresses a wide range of fundamental legal issues in the context of ruling on a motion to dismiss the insured’s 11 count complaint. The complaint includes not only breach of contract and bad faith claims, but tort claims, UIPA claims, declaratory judgment claims, and injunctive relief claims, all arising out of the alleged failure to pay on an insurance claim. The court also addresses a motion to remand after removal.

We do not address all of the issues Judge Tucker discusses, but highlight a few of the key principles adduced in her opinion. Her full opinion can be found here.

  1. Motion to remand denied.  (i) In determining the jurisdictional minimum amount-in-controversy, the court may consider the possibility of punitive damages under the bad faith statute. (ii) Diversity of citizenship can be established by showing the defendant is not a citizen of plaintiff’s state, just as well as by affirmatively showing the state(s) in which defendant is a citizen.

  2. The gist of the action doctrine and/or the economic loss doctrine will typically bar tort claims based on violations of an insurance contract.

  3. Violating the Unfair Insurance Practices Act (UIPA) (i) does not create a private right of action, and (ii) some courts hold it may not be used to establish violation of statutory bad faith.

As the court states: “Plaintiff’s claim is also barred to the extent that it relies on an alleged violation of the Pennsylvania Unfair Insurance Practices Act (‘UIPA’) because the UIPA does not permit private recovery for a violation of its provisions. Plaintiff advances a claim for damages based, in part, on a theory that [the insurer] was negligent having breached duties imposed upon it by the UIPA, 40 Pa Const. Stat. Ann. § 1171.1, et seq. ‘Courts within the Third Circuit and the Commonwealth of Pennsylvania continue to recognize [, however,] that the UIPA does not provide plaintiffs with a private cause of action.’ Tippett, 2015 U.S. Dist. LEXIS 37513, 2015 WL 1345442 at *2 (quoting Weinberg v. Nationwide Cas. and Ins. Co., 949 F. Supp. 2d 588, 598 (E.D. Pa. 2013)) (internal quotation marks omitted). Indeed, in Tippett, the district court not only rejected a plaintiff’s attempt to state a separate claim under the UIPA, but also rejected the plaintiff’s arguments that proof of a UIPA violation might otherwise provide support for the plaintiff’s independent bad faith claim. Id. Plaintiff’s claim under the UIPA in this case is similarly barred.”

  1. Breach of the common law duty of good faith and fair dealing is subsumed in the breach of contract claim.

  2. The Unfair Trade Practices and Consumer Protection Law applies to the sale of insurance policies, not claims handling.

As the court states: “While Plaintiff rightly notes that the ‘UTPCPL creates a private right of action in persons upon whom unfair methods of competition and/or unfair or deceptive acts or practices are employed and who, as a result, sustain an ascertainable loss,’ … Plaintiff fails to note that ‘the UTPCPL applies to the sale of an insurance policy [but] does not apply to the handling of insurance claims.’” Thus, as the alleged “wrongful conduct under the UTPCPL relate[s] solely to [the insurer’s] actions after the execution of the homeowner’s insurance policy,” the UTPCPL claim was dismissed.

  1. Declaratory judgment count not permitted in light of breach of contract claim.

The court states: “Federal courts routinely dismiss actions seeking declaratory judgment that, if entered, would be duplicative of a judgment on an underlying breach of contract claim.” Judge Tucker cites case law for the propositions that “granting a defendant’s motion to dismiss a plaintiff’s independent cause of action for declaratory judgment because the claim for declaratory judgment was duplicative of an underlying breach of contract claim,” and “dismissing a plaintiff’s duplicative claim for declaratory judgment in the face of an underlying breach of insurance contract claim and observing that ‘pursuant to discretionary declaratory judgment authority, district courts have dismissed declaratory judgment claims at the motion to dismiss stage when they duplicate breach of contract claims within the same action.’”

  1. The insured pleads a plausible bad faith claim.

Judge Tucker highlighted the following allegations in ruling that the bad faith claim could proceed:

i the insurer “attempted to close her insurance claim despite never having sent an adjuster or inspector to evaluate the damage to the Property.”;

ii the insurer “engaged in intentional ‘telephone tag’ to delay and deny Plaintiff coverage under the homeowner’s insurance policy.”;

iii. the insurer never “scheduled an inspection of the Property or otherwise [took] any action to deny or grant coverage under the homeowner’s insurance policy.”

Thus, at the end of the day, after reviewing all of the claims and motion to remand, the insured was allowed to proceed on the breach of contract and bad faith claims.

Date of Decision: August 13, 2019

Neri v. State Farm Fire & Cas. Co., U. S. District Court Eastern District of Pennsylvania CIVIL ACTION NO. 19-0355, 2019 U.S. Dist. LEXIS 136820 (E.D. Pa. Aug. 13, 2019) (Tucker, J.)

NEW JERSEY FEDERAL COURT WOULD ALLOW PA BAD FAITH CLAIM TO PROCEED ON BASIS THAT INSURER KNEW ITS REPRESENTATIVE MISREPRESENTED THE POLICY’S SCOPE PRIOR TO POLICY BEING ISSUED (New Jersey Federal)

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In this case, the insured alleged that promises made in selling a disability policy differed from the terms of the policy itself, to the insured’s detriment. Although a New Jersey federal action, the case involved Pennsylvania law, including the Pennsylvania bad faith statute. The insurer moved to dismiss the bad faith count, and well as claims for breach of the duty of good faith and fair dealing and fraud.

First, the court quickly dismissed the separate claim for breach of good faith and fair dealing as subsumed in the breach of contract claim.

As to the bad faith claim, the insured asserted in his brief the carrier was aware of prior misrepresentations by its sales representative about the scope of coverage. Therefore, the insurer could not in good faith enforce the terms of the policy that limited coverage more narrowly that the sales representative’s promises, which had induced the insured to purchase the policy.

The factual basis of these allegations was that the insurer had been sued before on the same basis, and the sales representative’s deposition had been taken where he admitted his conduct.

This was only included in the insured’s briefing on a motion to dismiss. The complaint itself made no reference to the prior suit or the deposition; nor did the insured plead that the carrier was aware of the sales representative’s misstatement before issuing the policy. Thus, this count was dismissed without prejudice, presumably to replead with these allegations included in an amended complaint.

[Note: There is case law indicating that pre-suit misrepresentations are addressed via Pennsylvania’s Unfair Trade Practices and Consumer Protection Law, whereas statutory bad faith is based on post-policy conduct in the handling and disposition of claims made against the policy. An example can be found here.]

The court refused to dismiss a separate fraud count on the gist of the action theory, finding that the fraudulent inducement preceded the contract; however, again, the facts were not adequately set forth and dismissal was without prejudice.

Date of Decision: August 8, 2019

Javie v. Mass. Cas. Ins. Co., U. S. District Court District of New Jersey Civil Action No. 18-2748, 2019 U.S. Dist. LEXIS 133123 (D.N.J. Aug. 8, 2019) (Vazguez, J.)

INSURED CANNOT RELY ON (1) FACTS OUTSIDE THE COMPLAINT OR (2) CONCLUSORY ALLEGATIONS TO DEFEAT MOTION TO DISMISS; AND INSURER OWES NO FIDUCIARY DUTY IN UIM CONTEXT (Philadelphia Federal)

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This UIM case involved a dispute over the available amount of coverage under an auto policy.  The complaint included breach of contract, statutory bad faith, and breach of the duty of good faith and fair dealing claims. The insurer also believed a breach of fiduciary duty claim may have been alleged.  The insurer moved to dismiss all claims.

The insured argued facts outside the complaint in responding to the insurer’s motion to dismiss. These facts may have stated a cause of action for breach of contract had they been properly pleaded, but the court could not consider them in ruling on the motion to dismiss. Thus, the motion to dismiss the contract claim was granted, but without prejudice.

The court also found the insured failed to plead a UIM bad faith claim. As stated, in opposing the motion to dismiss the insured relied on facts not pleaded to argue the carrier improperly refused stacking. Unpleaded facts could not support a bad faith claim, though again, the insured was allowed to amend and presumably assert these factual allegations in a future pleading.

As to the bad faith allegations actually pleaded, these were conclusory and could not make out a plausible bad faith claim.

The conclusory averments included: “[the insurer] committed bad faith by acting with a dishonest purpose and knowingly breaching a duty because of its self-interest …; denying coverage …; collecting premiums and then denying coverage…; and [c]onspiring to create a defense for its own self-interest which its [sic] knows has no factual basis….”

The court further observed there is no fiduciary duty in the UIM context, and dismissed any such claims.

The court finally found the common law bad faith claim to be subsumed in the breach of contract claim, as there is no common law bad faith claim in Pennsylvania outside the contractual duty to act in good faith.

Date of Decision: June 3, 2019

Pommells v. State Farm Insurance, U. S. District Court Eastern District of Pennsylvania CIVIL ACTION No. 18-5143, 2019 U.S. Dist. LEXIS 92435, 2019 WL 2339992 (E.D. Pa. June 3, 2019) (Kelly, J.)