Archive for the 'PA – Delay (Insured)' Category

MAY 2018 BAD FAITH CASES: (1) DENIAL OF BENEFITS (2) INADEQUATE INVESTIGATION AND (3) UNREASONABLE DELAY AS POTENTIAL BASES FOR STATUTORY BAD FAITH (Philadelphia Federal)

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This post includes two opinions from consecutive days issued by the same judge in the Eastern District. In these two opinions, the court sets forth various standards for pursuing potential statutory bad faith claims, including (1) benefit denial; or (2) unreasonable investigations; or (3) delays in either (a) the claim handling process or (b) paying benefits due. As noted before on this blog, there is an issue whether statutory bad faith can exist for poor investigation or claim handling practices where no benefit was due.

CASE 1

In the first case, the insurer denied disability benefits. The insured sued for breach of contract and bad faith. The bad faith claim was based on two theories: (1) unreasonable denial of benefits and (2) improper claim handling during the investigation. The court denied the motion to dismiss the coverage based bad faith claim for denying benefits, but granted the motion to dismiss the bad faith claim based on an inadequate investigation.

DENIAL OF BENEFIT BAD FAITH

The court’s bad faith analysis began with basic statements of statutory bad faith law:

  1. “To establish bad faith under 42 Pa.C.S. § 8371, a plaintiff must demonstrate that the insurer (1) lacked a reasonable basis for denying benefits and (2) knew or recklessly disregarded its lack of a reasonable basis.”

  2. “In the insurance context, bad faith denotes a ‘frivolous or unfounded’ refusal to pay policy proceeds, which imports a dishonest purpose and a breach of a known duty, such as good faith and fair dealing.”

  3. “To defeat a claim of bad faith an insurer need not show that the insurer was correct; rather, an insurer must demonstrate that it had a reasonable basis for its decision to deny benefits.”

  4. “A reasonable basis is all that is required to defeat a claim of bad faith.”

  5. “On the other hand, ‘an unreasonable interpretation of the policy provisions as well as a blatant misrepresentation of the facts or policy provisions will support a bad faith claim.’”

INADEQUATE INVESTIGATION BAD FAITH

These principles, however, were not the sole means to define bad faith. The court cited case law for potential bad faith conduct that went beyond these basic parameters, beginning with the proposition that “[s]ection 8371 also encompasses a broad range of other conduct including inadequate investigations.”

Concerning “inadequate investigation” bad faith, the court stated the following:

  1. “Courts have held that an insurer must ‘properly investigate claims prior to refusing to pay the proceeds of the policy to its insured.’”

  2. “Bad faith may occur ‘when an insurance company makes an inadequate investigation or fails to perform adequate legal research concerning a coverage issue.’”

  3. An insurer, however, need not demonstrate that its investigation resulted in the correct conclusion or that its investigation was perfect; rather it must simply show that its investigation was ‘sufficiently thorough to justify its decision to deny the claim.’”

The insured’s amended complaint based her bad faith claims on two distinct theories: “(1) a denial of benefits predicated either on an unreasonable interpretation of the terms and conditions of the Policy or on imposition of requirements that do not exist in the Policy; and (2) a failure to conduct a reasonable or adequate investigation into the nature and extent of either Plaintiff’s physical condition or Plaintiff’s occupation.”

The court refused to dismiss under the first theory, finding that factual issues remained on the coverage questions. However, it did dismiss the bad faith claim under the second theory. Although the plaintiff had added some allegations to support her inadequate investigation claim, “[t]hese additional allegations fail to successfully move Plaintiff’s bad faith claim from the realm of mere possibility to that of plausibility.”

Exhibits to the amended complaint showed, among other things, that the insurer had considered the insured’s medical information as well as statements regarding her occupational duties. Further, the insured failed to report her disability for years, with this delay and its consequences solely her responsibility. As the court summed up its dismissal: “Although Defendant’s investigation may not have been perfect, the allegations of the Amended Complaint do not raise a plausible inference that it was so deficient as to rise to the level of bad faith.”

Date of Decision: May 22, 2018

Wiessmann v. Northwestern Mutual Life Ins. Co., U. S. District Court Eastern District of Pennsylvania CIVIL ACTION NO. 16-6261, 2018 U.S. Dist. LEXIS 86103 (E.D. Pa. May 22, 2018) (Goldberg, J.)

CASE 2

The second case involved UIM breach of contract and bad faith claims. The insurer moved for summary judgment on the bad faith claim. In carrying out its bad faith analysis, the court observes the same principles quoted above concerning denial of benefits, burden of proof, and inadequate investigation, but also adds more detailed principles concerning delay as a basis for bad faith.

Similar to the first decision, the court initially observes basic bad faith principles: “In Pennsylvania, ‘bad faith’ in insurance cases is defined as ‘any frivolous or unfounded refusal to pay proceeds of a policy. … Bad faith must be demonstrated by clear and convincing evidence, ‘a burden that applies even on summary judgment.’ … To establish bad faith under 42 Pa.C.S. § 8371, a plaintiff must demonstrate that the insurer (1) lacked a reasonable basis for denying benefits and (2) knew or recklessly disregarded its lack of a reasonable basis. … In the insurance context, bad faith denotes a ‘frivolous or unfounded’ refusal to pay policy proceeds, which imports a dishonest purpose and a breach of a known duty, such as good faith and fair dealing. … While mere negligence or bad judgment are insufficient, a showing of reckless disregard will suffice to establish bad faith.”

UNREASONABLE DELAY BAD FAITH

Next, as in the first case, the court states “Section 8371 is not restricted to an insurer’s bad faith in denying a claim. An action for bad faith may extend to the insurer’s investigative practices.” The court then observes standards for another measure of bad faith not detailed in the first opinion: “A bad faith insurance practice can also include an unreasonable delay in handling or paying claims. … Thus, even when ‘an insurance claim has been settled and paid, Pennsylvania’s bad faith statute provides insurance claimants a means of redressing unreasonable delays by their insurers.’”

The court sets forth the following principles concerning bad faith delay claims:

  1. “To establish a claim of bad faith based on the insurer’s delay in paying the claim, the plaintiff must show that (1) the delay was attributable to the insurer; (2) the insurer had no reasonable basis for causing the delay; and (3) the insurer knew or recklessly disregarded the lack of a reasonable basis for the delay.”

  2. The plaintiff bears the burden of establishing delay by clear and convincing evidence.”

  3. A long period of time between demand and settlement does not, on its own, necessarily constitute bad faith.”

  4. “[I]f delay is attributable to the need to investigate further or even to simple negligence, no bad faith has occurred.”

The court uses examples from prior case law to show specific time periods that did not constitute bad faith delays. In one precedent, “a delay of fifteen months to resolve a claim—during which the insurer took the insured’s deposition nine months after notification of the claim, waited one year before taking the insured’s deposition and waited fourteen months to obtain a vocational assessment—was not an unreasonable length of time so as to rise to the level of bad faith, even though the insurer could have completed its investigation with greater speed”. In another, “even if all delay were attributable to the insurer, a period of approximately thirteen months between notification of UIM claim and resolution of claim through arbitration would not, without more, be sufficient to establish bad faith”.

In applying these principles, the court lays out a detailed factual history of the insurer’s claim handling during the adjuster’s investigation, including the history of communications between the adjuster and the insured’s attorney and requests for various documents and records. Despite this detailed factual record, however, the insured solely relied on his complaint’s averments to oppose summary judgment. These amounted to conclusory allegations that could not meet the clear and convincing evidence standard.

Independently, the court found “the undisputed evidence reveal[ed] no bad faith investigation or delay on Defendant’s part.” In conclusion, the court observed that “any delay was attributable to both Defendant’s well-founded need to investigate the claim and Plaintiff’s own delays in providing the requested information. Based on this undisputed record, no reasonable factfinder could determine that Defendant acted in bad faith in investigating and/or evaluating Plaintiff’s UIM claim.” Thus, the court granted summary judgment on the bad faith claim.

Date of Decision: May 23, 2018

Williams v. Liberty Mutual Insurance, U. S. District Court, Eastern District of Pennsylvania CIVIL ACTION No. 17-3862, 2018 U.S. Dist. LEXIS 86356 (E.D. Pa. May 23, 2018) (Goldberg, J.)

 

 

MARCH 2018 BAD FAITH CASES: NEGLIGENCE IS NOT BAD FAITH; SUMMARY JUDGMENT CANNOT BE DEFEATED WHERE RECORD CONTRADICTS BALD ALLEGATIONS OF BAD FAITH (Philadelphia Federal)

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In this UIM case, the actual record warranted summary judgment for the insurer, despite allegations of bad faith to the contrary.

The insured submitted a UIM claim for injuries sustained to his elbow. The insured recovered $100,000 from the tortfeasor’s insurer, and then requested maximum UIM benefits of $200,000. Three weeks before the accident, the insured had injured the elbow when he fell at his home.

The insured’s counsel initially attempted to contact a claims specialist who no longer worked for insurer. Nearly four months later, the insurer responded that that this adjuster no longer worked there, but the UIM claim was being transferred to another claims specialist immediately. The insurer did immediately begin processing the claim, and continually requested additional medical records from the insured, to no avail.

The insured filed suit for bad faith and breach of contract, and the insurer moved for summary judgment on the bad faith claim, which was granted for the following reasons:

Negligence is not bad faith.

  1. The insured argued bad faith in delaying the UIM investigation for four months. The Court ruled that in light of the fact that the initial demand letter was sent to the wrong person, the delay in opening the claim amounted to mere negligence, not bad faith.

The record contradicts the insured’s alleged bases for bad faith.

  1. The insured argued a failure to tender reasonable UIM benefits. The Court rejected this argument, stating that a partial valuation of the claim had neither been made nor requested by the insured.

  2. The insured argued the insurer used dilatory tactics and failed to investigate the claim. The Court found this “patently false,” because the record showed the insurer continually communicated with the insured and retained three separate physicians who all concluded the insured suffered no additional elbow injury due to the auto accident.

  3. The insured argued the claim was frivolously denied. The Court rejected this argument, citing the thorough investigation conducted by the insurer.

Date of Decision: March 6, 2018

Smith v. LM General Insurance Co., CIVIL ACTION NO. 17-02310, 2018 U.S. Dist. LEXIS 35773 (E.D. Pa. Mar. 6, 2018) (Pappert, J.)

AUGUST 2017 BAD FAITH CASES: NO BAD FAITH WHERE THE INSURED OBFUSCATED THE CLAIMS HANDLING PROCESS AND REFUSED TO COOPERATE WITH INSURER (Philadelphia Federal)

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This 95-page opinion granting the insurer summary judgment provides an extremely detailed review of the facts, and considerable exposition of bad faith case law concerning investigation and claims handling.

As set forth in the Opinion, the insured owned multiple rental properties that she leased out to college students. Beginning in 2005, she purchased landlord property insurance policies from the insurer. In 2014, tenants moved into the properties and alerted township police to deplorable conditions.

The police report catalogued broken windows, buckled hardwood floors, water damage, ceiling damage, removed and damaged fixtures and doors, detached ceiling lights and smoke alarms, peeling paint, an overgrown lawn, broken appliances, trash, and mice droppings. The tenants then broke their leases, citing a breach of the implied warranty of habitability.

A township code official inspected and photographed the properties and prepared a list of code violations. The official posted violation notices, and revoked the insured’s student rental licenses. The insured notified both the insurer and her insurance broker, and made a claim for the property damage and lost rent.

The insurer mistakenly filed the insured’s communication in a preexisting file related to another claim with the same insured. However, an employee of the insurance broker immediately called the insured to request more facts relevant to the claim. The insured did not pick up the call and did not return the voicemail.

The township later brought a code violation action against the insured in the Court of Common Pleas, as well as for the insured’s failure to allow mandated property inspections over several years. The insured then reached out to the insurer, and repeatedly claimed that her earlier communications went unanswered.

The insured’s story changed, however, after the insurer produced evidence of phone calls and emails from claims adjusters. The insured conceded that she did in fact speak to someone, but she only “sort of” recalled the conversation.

Even after the rental license revocations, the insured again rented properties to two other college students. Similar physical problems arose, and the new tenants were likewise unable to reside at the properties. The township locked the insured out of the properties.

Throughout this period, the insurer’s claims handlers continually attempted to communicate with the insured to gather more facts concerning the insured’s claim. The insured received an email stating “‘it is imperative that I make voice to voice contact with you to get accurate loss facts regarding the claim that you submitted’ since ‘the claims process is reliant on the information that is shared between ‘you’ the insured and ‘me’ the claims adjuster.’”

Several days after the insured received that email, the adjuster had a telephone call with the insured, but the insured said she could not speak with the adjuster due to ongoing litigation. The insured then hung up the phone.

The insurer took the position that the policy did not provide coverage for property damage, lost rents or the township’s suit against the insured.

The insured sued the insurer for breach of contract, bad faith, and alleged violations of Pennsylvania’s Unfair Trade Practices and Consumer Protection Law (“UTPCPL”). The Court granted the insurer’s motion for summary judgment on the breach of contract claim, stating that the insurance policies were not “all risk” policies whereby coverage is automatically triggered in the event of loss.

Furthermore, the insured failed to show that the losses occurred suddenly and accidentally, and the insured had no reasonable expectation of coverage. The court also found that the insurer had no duty to defend the insured in the state court action. Additionally, the court granted the insurer summary judgment on the UTPCPL claim, finding no fraud or misrepresentations to the insured with regard to the policies.

As to the bad faith claim, the insured alleged that the insurer intentionally delayed opening a claim, delayed commencing its investigation, and that it lacked a reasonable basis for refusing to pay the insured benefits under the policies.

The Court found that there existed no clear and convincing evidence that the insurer acted in bad faith. The Court stated that “the record makes clear that [the insurer’s] delays are attributable to mistake, possible confusion between [the insurer] and [the broker,] and [the insured’s] obfuscation and refusal to cooperate with [the claims] representatives.”

The Court further opined that the bad faith claim must fail because the evidence shows the insurer conducted an adequate investigation and had a reasonable basis for denying coverage. Any delays on the part of the insurer were attributable to the insured’s “repeated failures to provide the information necessary to open a claim….”

The Court granted the insurer’s motion for summary judgment in its entirety.

Date of Decision: April 6, 2017

Doherty v. Allstate Indem. Co., No. 15-05165, 2017 U.S. Dist. LEXIS 52795 (E.D. Pa. April 6, 2017) (Pappert, J.)

This decision was affirmed on appeal.

Doherty v. Allstate Indem. Co., U. S. Court of Appeals Third Circuit No. 17-1860, 2018 U.S. App. LEXIS 13900 (3d Cir. May 25, 2018) (Fuentes, Greenaway, Rendell, JJ.)

 

JUNE 2017 BAD FAITH CASES: NO BAD FAITH DELAY IN CLAIMS HANDLING PROCESS (Philadelphia Federal)

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This summary judgment opinion involved a bad faith dispute based on alleged delay in claims handling in the course of an appraisal process valuing property loss. The court had earlier dismissed the insureds’ breach of contract claim, but had allowed the bad faith claim to proceed.

The court first observed that in its earlier decision, the dispute over the claim value was not the basis for a breach of contract claim, where the insureds could not show the actual breach of a contractual duty.

In allowing the bad faith claim to proceed, the court had “expressly found that the amended complaint limited the bad faith claim to the delay in the appraisal process,” not value. Thus, it rejected the insureds’ current effort to assert bad faith for undervaluing of the claim, which the court found “irrelevant.”

The court summarized the law concerning delay and bad faith. “[A] bad faith insurance practice can include an unreasonable delay in handling or paying claims.” “Thus, even when ‘an insurance claim has been settled and paid, Pennsylvania’s bad faith statute provides insurance claimants a means of redressing unreasonable delays by their insurers.’”

To establish a claim of bad faith based on the insurer’s delay in paying the claim, the plaintiff must show that (1) the delay was attributable to the insurer; (2) the insurer had no reasonable basis for causing the delay; and (3) the insurer knew or recklessly disregarded the lack of a reasonable basis for the delay.”

It is “[t]he plaintiff [who] bears the burden of establishing delay by clear and convincing evidence.” “A long period of time between demand and settlement does not, on its own, necessarily constitute bad faith.” Further, “’[i]f delay is attributable to the need to investigate further or even to simple negligence, no bad faith has occurred.’”

The court closely analyzed the history of the parties’ conduct of the appraisal process. The court found the first alleged delay of 5 weeks in acknowledging the appraisal demand was de minimis, and could not lead a reasonable jury to find bad faith.

Moreover, after acknowledging the demand, the insurer’s appraiser reached out to the insureds’ appraiser, but the insureds’ appraiser stated he could not begin work until he had a signed agreement with the insureds. Once he had that signed agreement, the two appraisers then executed a joint declaration and began their inspections. This could not be the basis for a bad faith claim.

The court also rejected the argument for bad faith during a subsequent 5-month period during the appraisal process. Both appraisers carried out investigations during the first three months of this period. The insurer’s appraiser also had lab tests done regarding asbestos remediation, investigated the HVAC system, and conducted extensive research in response to the insureds’ claim for engineering and architectural fees, which involved multiple interviews with the plaintiffs’ engineer and architect.

Part of a month-long time lapse thereafter included deference by the insurer to the insureds’ appraiser traveling to Florida for his mother’s funeral. Once he returned, both appraisers spoke again, and submitted the claim to an umpire.

In sum, plaintiffs could not meet their burden to establish that the putative “delay was unreasonable, that it was solely attributable to [the insurer] or that [the insurer] had no reasonable basis for causing any such delay.” Any alleged delays were “an ordinary part of legal and insurance work.”

The eight months at issue from the time of demand to the time of the umpire’s meeting was “relatively minimal,” and during “that period, both parties’ appraisers were actively conducting investigations, with much of the actual delay attributable to plaintiffs’ own adjuster.”

The court granted summary judgment for the insurer.

Date of Decision: June 8, 2017

Dagit v. Allstate Property & Casualty Insurance Company, No. 16-3843, 2017 U.S. Dist. LEXIS 87971 (E.D. Pa. June 8, 2017) (O’Neill, Jr., J.)

JUNE 2017 BAD FAITH CASES: INSURED CANNOT PROFIT BY BRINGING A BAD FAITH CASE DUE TO THEIR OWN LACK OF ACTION DURING CLAIM HANDLING (Middle District)

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This property loss case provides a good summary of basic bad faith law leading into its analysis of the facts, and then some strong language on bringing a bad faith claim where the insured’s own conduct led to the delays at issue.

Quoting the Court:

“To succeed on a bad faith claim, a Plaintiff must demonstrate “(1) that the insurer lacked a reasonable basis for denying benefits; and (2) that the insurer knew or recklessly disregarded its lack of reasonable basis.” Verdetto v. State Farm Fire and Casualty Company, 837 F.Supp 2d. 480, 484 (M.D.Pa. 2011), affirmed 510 Fed. Appx. 209, 2013 W.L. 175175 (3d. Cir. 2013)(quoting Klinger v. State Farm Mutual Insurance Company, 115 F.3d 230, 233 (3d. Cir. 1997). In addition, a Plaintiff must demonstrate bad faith by clear and convincing evidence. Polselli v. Nationwide Mutual Fire Insurance Company, 23 F.3d 747, 751 (3d. Cir. 1994). For an insurance company to show that it had a reasonable basis to deny or delay paying a claim it need not demonstrate that its investigation yielded the correct conclusion, or that its conclusion more likely than not was accurate. Krisa v. Equitable Life Assurance Company, 113 F.Supp 2d. 694, 704 (M.D.Pa. 2000). The insurance company is not required to show that “the process by which it reached its conclusion was flawless or that the investigatory methods it employed eliminated possibilities at odds with its conclusion.” Id. Instead, an insurance company must show that it conducted a review or investigation sufficiently thorough to yield a reasonable foundation for its action. Id. “The ‘clear and convincing’ standard requires that the Plaintiff show ‘that the evidence is so clear, direct, weighty and convincing as to enable a clear conviction without hesitation, about whether or not the defendants acted in bad faith.'” J.C. Penney Life Insurance Company v. Pilosi, 393 F.3d 356, 367 (3d. Cir. 2004).”

In this case, the insurer paid “no less than $347,000” for real and personal property loss from fire, with a remaining dispute over $17,000 for landscaping issues. That contract dispute could not be resolved on summary judgment. However, the bad faith claim was resolved on summary judgment, where the court found it “unthinkable” on the facts that a jury could find bad faith.

The bad faith claim centered on the timing of making payments for personal property loss (which had been ultimately paid to the policy limits). The court observed that the analytic framework for measuring claims of delay in making such payments began with the terms of the insurance policy itself. Unambiguous policy language placed most responsibility for the timing and amount of payments on actions required of the insureds. In this case, the insureds did not provide required documentation for over a year.

The court analyzed the history and concluded: “In short, Plaintiffs’ failure to perform their reporting duty under the contract impeded, wittingly or unwittingly, [the insurer’s] investigation of their claim. Thus, the delay in payment for the value of their personal property was a direct result of Plaintiffs’ failure to perform their contractual duties and, as such, may not serve as an appropriate basis for a finding of bad faith on Defendant’s part. Stated another way, Plaintiffs may not now seek to profit due to their lack of action.”

Date of Decision: May 30, 2017

Turner v. State Farm Fire & Cas. Co., No. 3:15-CV-906, 2017 U.S. Dist. LEXIS 81922 (M.D. Pa. May 30, 2017) (Conaboy, J.)

 

 

MAY 2017 BAD FAITH CASES: DELAY ALONE IS NOT SYNONYMOUS WITH BAD FAITH; SWORN STATEMENT NOT PROHIBITED SIMPLY BECAUSE OF PRIOR DEPOSITION IN UNDERLYING CASE; TECHNICAL REGULATORY VIOLATIONS NOT BAD FAITH PER SE (Middle District)

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A UIM claimant alleged bad faith based upon: “misstatement of … coverage limits, alleged delay in claims processing, insistence upon a sworn statement under oath …, persistence in collecting medical records and failure to comply with insurances regulations regarding periodic status notices to insureds as evidence of bad faith.”

The insurer wanted summary judgment on the bad faith claim, which the court granted, stating: “that, while both parties indulged in occasional missteps in the process of reviewing and litigating this claim, the essentially uncontested evidence does not meet the demanding, precise and exacting legal standards prescribed under Pennsylvania law for a bad faith insurance processing claim.”

The court observed the “well-established” principle “that it is not bad faith for an insurance company to ‘conduct a thorough investigation into a questionable claim.’” Insurers can be successful in defending against bad faith claim by showing that there were “red flags” warranting further investigation.

Thus, delay alone does not equate to bad faith: “the mere passage of time does not define bad faith. Rather, an inference of bad faith only arises when time passes as part of a pattern of knowing or reckless delay in processing a meritorious insurance claim.”

The court observed that insurers in UIM cases need to deal with the claim against the underlying tortfeasor, which in this case went on for a number of years. Further, the insured did not place the insurer on notice of the UIM claim until nearly 5 years after the accident. Once the claim was made, the parties engaged in an ongoing process to attempt to resolve the dispute.

Further, though the carrier did originally misstate the scope of coverage, this was an understandable mistake and was corrected, resulting only in a brief delay.

In addition, there was nothing untoward in seeking a sworn statement in light of multiple circumstances, including, e.g., incomplete medical information. The court did not accept the argument that no sworn statement was needed because the insured had been deposed two years earlier in the underlying litigation. Further, as stated, each party engaged in some missteps in exchanging medical information, and the insurer was justified in seeking further medical information after having obtained some records.

Next, in evaluating the claim the underlying tortfeasor only settled years after the accident, and for a sum less than policy limits; a factor going to the UIM insurer’s ability to evaluate the claim. The insured had originally demanded over double the UIM policy limits to settle, and then policy limits.

The final argument involved alleged violations of Pennsylvania’s Unfair Claims Settlement Practices Act and the Unfair Insurance Practices Act, specifically concerning the regulatory requirement to provide 45 day updates on the status of insurance claims.

The court recognized that a “violation of these insurance rules can be considered when examining a bad faith claim under §8371.” The court then went on: “However, it is also clear beyond peradventure ‘that a violation of the UIPA or the UCSP is not a per se violation of the bad faith standard.’”

Applying these principles, the court concluded: “This case aptly illustrates why technical violations of these state insurance regulations cannot be equated with bad faith. The record before us amply reveals active, extensive and on-going communications …. Our review of the substance of these multiple communications … reveals that even when the communications are viewed in a light most favorable to [the insured], these communications do not support a claim of bad faith shown by clear and convincing evidence.”

The court then observed: “Given that the communications, in their substance, do not allow for a finding of bad faith here, it would be anomalous to conclude that the fact that the communications did not meet the technical frequency requirements mandated by insurance regulations, standing alone, established a bad faith claim in this case.”

Date of Decision: April 10, 2017

Ridolfi v. State Farm Mut. Auto. Ins. Co., No. 15-859, 2017 U.S. Dist. LEXIS 54267 (M.D. Pa. Apr. 10, 2017) (Carlson, M.J.)

 

MARCH 2017 BAD FAITH CASES: SUMMARY JUDGMENT GRANTED TO INSURER WHERE ITS CLAIMS HANDLING DECISIONS AND CONDUCT WERE REASONABLE (Middle District)

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The court described the insured’s UIM bad faith claim as follows: “[the] bad-faith claim is predicated largely on his contention that [the insurer] conducted a dilatory and meandering investigation into his claim, despite having had sufficient information to evaluate the claim and make a coverage decision, which [the insured] argues was obvious given the severity of the injuries he suffered.”

The insurer sought summary judgment on the bad faith claims, its position being “that the claim in this case was unusual and warranted a careful investigation, which suffered from a number of delays that cannot be attributed to the insurer.” Moreover, the insurer adduced evidence calling into doubt the insured’s policy limits demand and the viability of the insured’s claim based on his own conduct.

In granting the insurer’s summary judgment motion, the court observed that if an insurer can defeat the lack of a reasonable basis component of a bad faith cause of action, it can obtain summary judgment. Moreover, in light of the heavier burden of proof in bad faith cases, “the insured’s burden in opposing a summary judgment motion brought by the insurer is commensurately high because the court must view the evidence presented in light of the substantive evidentiary burden at trial.”

Further, “[i]t is not bad faith for an insurance company to conduct a thorough investigation into a questionable claim.” Thus, “courts applying Pennsylvania law have found that an insurer satisfies its burden by showing a reasonable basis’ for investigating a claim, and is thus entitled to judgment as a matter of law, where it demonstrates the existence of certain red flags which prompted it to further investigate an insured’s claim.”

In finding the insurer’s conduct reasonable, the court focused on the putative delays, the nature of the insured’s policy limit demand in light of another potential source of primary insurance, and the insured’s own culpability in the accident leading to his injury. The court went through the alleged delays, and who caused them, in detail.

It also observed that while phrased as a $100,000 demand against the insured’s carrier, the tortfeasor’s insurer had a $500,000 limit, and settled the underlying claim for $240,000. Thus, in effect, seeking the $100,000 UIM limit when combined with the underlying available insurance made the personal injury claim a $600,000 claim, not a $100,000 claim; and again, the underlying claim was settled for far less than the underlying insurer’s policy limit. Moreover, the arbitrators found the insured 1/3 responsible for the accident leading to his own injuries, which provided some substantiation to the insurer’s position that the insured’s claim may not have been viable.

Date of Decision: November 29, 2016

Walter v. Travelers Pers. Ins. Co., No. 4:12-CV-346, 2016 U.S. Dist. LEXIS 164012 (M.D. Pa. Nov. 29, 2016) (Carlson, M.J.)

 

FEBRUARY 2017 BAD FAITH CASES: COURT DENIES SUMMARY JUDGMENT ON BAD FAITH CLAIM AS TO CARRIER’S ALLEGED FAILURE TO PROVIDE WRITTEN EXPLANATION OF COVERAGE DECISION; GRANTS SUMMARY JUDGMENT AFTER FINDING NO BAD FAITH ON CARRIER’S REASONABLE INTERPRETATION OF AMBIGUOUS POLICY LANGUAGE (Western District)

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Judge Conti granted in part and denied the insurer’s summary judgment motion on the insured’s bad faith allegations. The insured’s claims rested on two arguments: (1) the insurer failed to provide a written explanation of its coverage decision relative to a machine used to generate radiation to treat patients with cancer; and (2) the insurer lacked a reasonable basis for treating the machine as business personal property subject to lower coverage limits.

The machine at issue was a linear accelerator designed to generate radiation used to treat cancer patients. Installation took approximately two months and required a team of specialized workers. The insured argued that the machine was permanently attached to the building, and should be covered under “building” coverage. The insurer argued that the machine was a “fixture” or “machinery and equipment” that is “business personal property.”

The court found the Policy’s language ambiguous, but that the insurer’s interpretation of the phrase “permanently attached” was reasonable. Given these facts, the court found that the insured could not show that the insurer acted in bad faith when it decided to cover the radiation machine as personal property of the insured.

However, the court denied the insurer’s motion for summary judgment as it related to the insurer’s failure to respond to the insured. Specifically, the insured’s expert noted that the insurer failed to respond to seven written requests from the insured for the carrier’s coverage position, which constituted a breach of industry standards. In response, the insurer alleged that the resolution of the claim was delayed due to the insured’s refusal to assist in the investigation of the claim and fulfill certain obligations under the policy.

Thus, the court concluded that the insurer’s arguments did not support a grant of summary judgment with regard to the insurer’s failure to provide a written explanation of a coverage decision, but did support a grant of summary judgment as it related to any other bad faith allegations.

Date of Decision: September 28, 2016

Rosewood Cancer Care, Inc. v. Travelers Indem. Co., No. 14-434, 2016 U.S. Dist. LEXIS 133075 (W.D. Pa. Sept. 28, 2016) (Conti, J.)

JANUARY 2016 BAD FAITH CASES: COURT DISMISSES BAD FAITH CLAIM BASED ON MISSTATEMENT OF POLICY LIMITS AND UNREASONABLE DELAY AFTER FINDING THAT INSURED FAILED TO PROVIDE ADDITIONAL FACTUAL SUPPORT FOR ALLEGATIONS (Middle District)

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In Ridolfi v. State Farm Mutual Automobile Insurance Company, the insured brought claims for bad faith and breach of duty of good faith and fair dealing. The insurer moved to dismiss, arguing that the insured’s allegations were conclusory and boilerplate assertions.

The underlying claim arose out of a motor vehicle accident. The insured filed claims with both the insurer of the other driver, as well as her own insurer. She ultimately settled with the other insurer, and demanded policy limits from her insurer. She subsequently found a document in her legal file from her suit against the other insurer showing that the policy limits were higher than originally reported by her insurer.

The insured alleged that her insurer’s actions constituted bad faith, specifically that the insurer “knowingly and fraudulently” incorrectly reported her policy limits, and delayed its investigation into her claim.

With regard to the insured’s first contention, the court found that the insured failed to provide facts to support the assertion that the insurer acted “knowingly and fraudulently” in reporting incorrect policy limits. The court further reasoned that the insured’s allegation of a knowing and fraudulent misstatement of policy limits amounted to no more than a conclusory allegation that the information must have been sent with some motive of self-interest or ill will simply because it was inaccurate.

Similarly, with regard to the insured’s second contention, that the insurer delayed its investigation into her claim, the court found that the insured failed to allege facts allowing the court to draw a reasonable inference that the insurer acted in bad faith. Specifically, the insured alleged that the insurer made “ongoing requests for information from physicians who [the insured] was never treated by and other inquiries which are irrelevant and duplicative.” However, the court reasoned that the insured’s allegations did not identify how the requests were irrelevant, duplicative, or designed to delay settlement, and were nothing more than conclusory assertions of delay. Accordingly, the court dismissed the insured’s claim of bad faith, without prejudice to re-plead.

Date of Decision:  November 19, 2015

Ridolfi v. State Farm Mut. Auto. Ins. Co., No. 1:15-cv-00859, 2015 U.S. Dist. LEXIS 156687 (M.D. Pa. November 19, 2015,) (Kane, J.)

NOVEMBER 2015 BAD FAITH CASES: COURT GRANTS INSURER SUMMARY JUDGMENT AFTER FINDING THAT (1) INSURER CONDUCTED REASONABLE INVESTIGATION AND (2) ANY DELAYS IN CLAIM INVESTIGATION WERE NOT SOLELY ATTRIBUTABLE TO INSURER (Philadelphia Federal)

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In Tran v. Seneca Insurance Company, a case defended by Jay Barry Harris  of Fineman, Krekstein & Harris, the insured alleged that the insurer denied coverage in breach of contract and in bad faith. In support of her bad faith claim, the insured argued that the insurer used “unfair investigation techniques” and intentionally “delayed the payment of her claim,” which, according to the insured, showed that the insurer never intended to pay for the loss. The insurer moved for summary judgment. In response, the insured averred that there was a dispute of material fact as to two particular allegations of bad faith: (1) that the insurer and its agents never attempted to estimate the size of the insured’s loss, and (2) that the insurer unreasonably delayed the investigation.

The court first found that nothing in the record supported the insured’s assertion that the insurer was indifferent to the loss or “never intended to honor the policy.” The court further concluded that the insurer conducted a reasonable investigation, which included employing specialists to investigate the loss, reviewing the fire department’s investigation and the insured’s estimate for the loss, conducting an examination under oath, and requesting additional documents over the course of the year. Based on the record, the court found that the insured could not show by clear and convincing evidence that the insurer was indifferent to the loss or conducted an investigation in a way that would suggest that the insurer never intended to honor the policy.

As to the insured’s claim that the investigation was unreasonably delayed, the court noted that in order to prevail on this claim, the insured must demonstrate that “the delay is attributable to the [insurer], that the [insurer] had no reasonable basis for the actions it undertook which resulted in the delay, and that the [the insurer] knew or recklessly disregarded the fact that it had no reasonable basis to deny payment.” The court stated that bad faith does not occur where a delay is “attributable to the need to investigate further or even to simple negligence.”

Here, the insurer assigned an adjuster to investigate the loss immediately after being notified of the incident, and the adjuster performed an inspection within three days of the loss. While an engineer hired by the insurer to inspect the roof and investigate the cause of loss did not begin its investigation until approximately six months after the incident, the court observed that the insured refused to respond to the insurer’s requests for information for several months, and that the insurer only retained the engineer after months of attempting to communicate with the insured without a response. Further, while the insurer waited several months after the engineer’s investigation to deny the claim, the court recognized that the insurer continued to investigate during this period as well.

Thus, the court found that the record did not provide clear and convincing evidence of bad faith, and that the delays in the investigation were not solely attributable to the insurer. Accordingly, the court granted the insurer’s motion for summary judgment with respect to the insured’s bad faith claim.

Date of Decision: October 14, 2015

Tran v. Seneca Ins. Co., CIVIL ACTION NO. 14-5491, 2015 U.S. Dist. LEXIS 139527 (E.D. Pa. October 14, 2015) (DuBois, J.)