Archive for the 'PA – Damages' Category

THIRD CIRCUIT FINDS: (1) EXPERT PROPERLY EXCLUDED FROM TESTIFYING ABOUT OTHER CASES; (2) REPORT NEVER PROVIDED TO INSURER DURING CLAIM HANDLING CANNOT BE CONSIDERED DURING BAD FAITH CASE; (3) INSURED WAS FULLY ABLE TO PRESENT CLAIM HANDLING EVIDENCE THROUGH HERSELF AND ADJUSTER; (4) USING HAND GESTURES IN JURY INSTRUCTION ON CLEAR AND CONVINCING EVIDENCE NOT AN ERROR (Third Circuit – Pennsylvania Law)

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This is a post-verdict appeal after the jury found for the insurer in a UIM bad faith case. The insured challenged various pre-trial evidentiary rulings from the District Court Judge, and one of the judge’s jury instructions.

Before trial, the insurer moved to preclude plaintiff’s expert report and testimony, medical evidence that was not provided to the insurer during the UIM claim’s pendency, evidence of mental suffering and emotional distress, and evidence concerning non-recoverable damages. The insured also challenged the trial judge’s use of hand gestures during jury instructions to explain the clear and convincing evidence standard.

  1. Decision to Exclude Expert Upheld

The Third Circuit agreed there was no abuse of discretion by the trial judge in not holding a Daubert hearing. There was a sufficient record on the papers, making a hearing unnecessary. Further, the insured failed to explain how a hearing would have benefitted her or the court.

Next, the appellate court found no abuse of discretion in the trial court’s decision barring the expert’s testimony. Plaintiff wanted her expert to testify “for the very limited purpose of establishing a range of value for [her] underlying UIM claim.” However, this involved looking at other cases not before the court. The District Judge found that “’what other cases have paid is not relevant to this case, [and] what the value of this case is’ and [] the jury ‘will be instructed to use their common sense’ in compensating [the insured] should she prevail.”

The Third Circuit found no abuse of discretion in the District Court’s determination that the proposed expert testimony would not aid the jury, which had to rely on the facts in the case before it to determine bad faith.

  1. Medical Report Never Given to Insurer During Claim Handling Inadmissible

The insured wanted to introduce a medical report as evidence, addressing the extent of her injury and damages. However, she never provided that report to the insurer during the claim process. The Third Circuit found no abuse of discretion in the District Court excluding this evidence. “Because [the insurer] was not in possession of the report when it was evaluating [the] claim, it could not have considered the report’s findings when making its settlement offers. Therefore, the report had no relevance to the issue of whether [the insurer] acted in bad faith. Accordingly, we see no abuse of discretion in the District Court’s decision to exclude the report.”

  1. The Insured was Able to Present the Value of Her Case through Her Own Testimony and that of the Claim Adjuster

The insured argued the trial judge’s rulings prevented her from putting on a full case from which the jury could evaluate her claim. The Third Circuit found no abuse of discretion. Rather, the insured was able to put on her case directly through her own testimony, and to examine the claim adjuster at length on the relevant issues as to how the adjuster evaluated the claim.

  1. The District Judge’s Use of Hand Gestures to Explain the Clear and Convincing Evidence Standard was not an Error

The insured challenged the jury charge on the applicable burden of proof because the judge used “hand gestures demonstrating [the insured’s] burden in the ‘clear and convincing’ standard as a point midway between proof by preponderance of the evidence and proof beyond a reasonable doubt.” The Third Circuit found no plain error here that would merit relief for the insured.

“The District Court instructed the jury that clear and convincing evidence ‘means that the evidence is so clear, direct, substantial that you are convinced without hesitation that a fact is true.’ Language used by the District Court was substantially similar to language we have previously approved of. While [the insured] takes issue with the District Court’s use of ‘hand gestures’ during the jury charge, there is no reason to believe that those ‘hand gestures’ confused or in any way distracted the jury from the District Court’s correct instruction on clear and convincing evidence. Therefore, we find no error, much less plain error.”

In sum, the Third Circuit affirmed the District Court’s decisions.

Date of Decision: January 8, 2020

Antonio v. Progressive Insurance Co., U.S. Court of Appeals for the Third Circuit No. 19-1074, 2020 U.S. App. LEXIS 455 (3d Cir. Jan. 8, 2020) (Fuentes, Scirica, Shwartz, JJ.)

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.)

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.)

PUNITIVE DAMAGES CLAIM PREVENTS REMAND; BAD FAITH PLEADED WHERE CASE IS NOT MERELY A VALUATION DISPUTE (Middle District)

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On July 1, 2019, Judge Munley issued two opinions in this UIM bad faith case: (1) finding removal proper; and (2) finding the insured pleaded a plausible bad faith case.

Removal was proper where potential punitive damages could take the case above the $75,000 jurisdictional minimum

Judge Munley ruled that the case would remain in federal court, after removal from state court. The insured allegedly suffered severe personal injuries, and the carrier refused to pay the $25,000 UIM policy limits. The state court complaint sought damages in excess of $50,000, punitive damages, interest, counsel fees and costs.

The court recognized that actual damages were limited to $25,000, and the punitive damage and attorney’s fees claims would have to exceed $50,000 to meet the $75,000 jurisdictional minimum. Judge Munley found that “[a] punitive damages award which is double the amount of the policy limit is reasonable and possible in such a case.” As remand is only proper when it appears to “a legal certainty that the plaintiff cannot recover, or was never entitled to recover, the jurisdictional amount [$75,000],” he denied the motion to remand.

The insured pleads a plausible bad faith claim where delays and refusal to pay the sum demanded are not mere disagreements over valuation

Judge Munley observed the insured alleged a severe injury, with damages beyond the tortfeasor’s coverage limits. The insured’s UIM coverage was $25,000, which the defendant carrier refused to pay. Judge Munley concluded the case, as pleaded, was not merely a disagreement over claim valuation, but made out a plausible bad faith claim.

The following averments were sufficient to survive the insurer’s motion to dismiss:

  1. “The amended complaint avers that defendant failed to effectuate a prompt fair and equitable settlement of plaintiff’s claim and compelled her to seek legal redress and commence litigation to recover the benefits to which she was entitled.”

  2. “Further, defendant ignored and discounted the severity of plaintiff’s injuries.”

  3. “Also, defendant did not promptly evaluate the claim, but rather engaged in dilatory and abusive claims handling by delaying the valuation of plaintiff’s claim and failing to pay the claim.”

  4. “The amended complaint also suggests that defendant failed to timely investigate or to make a reasonable settlement offer.”

  5. “Defendant further delayed by asking for authorization to receive medical records which were already in its possession.”

The court also refused to dismiss an attorney’s fee demand under the breach of contract count, as such fees might prove permissible under the Motor Vehicle Financial Responsibility Act (MVFRL).

Dates of Decision: July 1, 2019

Pivtchev v. State Farm Mutual Auto Insurance Co., U. S. District Court Middle District of Pennsylvania No. 3:19cv150, 2019 U.S. Dist. LEXIS 109378 (M.D. Pa. July 1, 2019) (Munley, J.)

Pivtchev v. State Farm Mutual Auto Insurance Co., U. S. District Court Middle District of Pennsylvania No. 3:19cv150, 2019 U.S. Dist. LEXIS 109377 (M.D. Pa. July 1, 2019) (Munley, J.)

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.)