Archive for the 'PA – Estimates, Valuation or Appraisal' Category

NO BAD FAITH: (1) LOW BUT REASONABLE SETTLEMENT OFFER; (2) FAILURE TO PAY FULL RESERVES NOT BAD FAITH; (3) ADDITIONAL INVESTIGATION WOULD NOT HAVE CHANGED RESULT; (4) INSURED DELAYED CLAIMS HANDLING (Western District)

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In this UIM bad faith case, the court set out a detailed claims handling history. It shows an active claims handler, conflicting expert reports, and what appears to be a genuine dispute over the scope of the insured’s injury. The central discrepancy is between permanent disability vs. no medical record of serious injury.

The court granted summary judgment on bad faith, finding the insured could not meet the clear and convincing evidence standard. It specifically addressed four issues in reaching this conclusion.

  1. Was the Settlement Offer Unreasonably Low?

The insured claimed losses in excess of $2,000,000. The UIM insurer offered $25,000. As the tortfeasor’s carrier paid $100,000, this meant the UIM carrier valued the claim at $125,000.

The court set out the relevant law. Low but reasonable offers are not bad faith, but “low-ball offers which bear no reasonable relationship to an insured’s actual losses can constitute bad faith….” A carrier can reasonably rely on expert opinion when investigating claims. In this context, insurers “can rely on IMEs of qualified health professionals who examine claimants in a usual and customary manner.”

First, the court found the claims handler’s well documented file showed an IME was warranted. Next, the court examined the claims handler’s review of the insured’s economic expert’s report of over a $2,000,000. The court found that multiple medical reports provided the claims handler with a reasonable basis to question the economic expert’s critical assumption of permanent disabled. “Thus, with no other evidence to establish [the insured’s] economic losses other than [the economic expert’s] report that assumes total disability, no reasonable juror could find bad faith by clear and convincing evidence from [the] $25,000 settlement offer to [the insured].”

  1. Reserves

Reserves were set at $55,000. The insured asserted the insurer should have offered the $55,000, rather than $25,000. The court stated that an insurance company must set reserves aside when placed on notice of a possible loss arising under its policy. “However, the failure of a carrier to offer its full settlement authority does not constitute bad faith.” In the present case, “because the Court finds no sufficient evidence of bad faith as to the $25,000 settlement offer, there is likewise no bad faith in [the insurer’s] reserve for this UIM claim.”

  1. Adequacy of Investigation

To prove bad faith investigation, the insured “must show that the outcome of the case would have been different if the insurer had done what the insured wanted done.” The putative investigative failures here would not have changed the result.

Thus, even if the claims handler had reviewed the economic loss reports with her own economic experts, sought medical authorizations, or spoken to treating physicians or the tortfeasor’s lawyer, this additional investigation would not have altered the IME opinions that there was no permanent injury, and that any injuries had resolved. These IMEs provided a reasonable basis to contest value. “Therefore, [the insured] cannot meet his burden to show that a reasonable juror could find by clear and convincing evidence that [the insurer] would have evaluated [the] claim differently had it conducted an earlier or different investigation as argued by plaintiff’s counsel.”

  1. Unnecessary Delay in Investigation

“In order for an insured to recover for bad faith from delay, an insured must demonstrate that ‘the delay is attributable to the defendant, that the defendant had no reasonable basis for the actions it undertook which resulted in the delay, and that the defendant knew or recklessly disregarded the fact that it had no reasonable basis to deny payment.’”

The court first observed that much of the delay in this matter was caused by the insured. There were delays in providing information and producing documents to the insurer. The insured also changed his damage theory during the claims handling process, which led to insurer to require additional evaluations. Thus, “no reasonable juror could conclude by clear and convincing evidence that [the insurer] acted in bad faith in the timeline of its investigation….”

Date of Decision: February 19, 2020

Stewart v. GEICO Insurance, U.S. District Court Western District of Pennsylvania 2:18-CV-00791-MJH, 2020 U.S. Dist. LEXIS 28459 (W.D. Pa. Feb. 19, 2020) (Horan, J.)

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

 

FAILURES TO COMMUNICATE WITH THE INSURED UNDERMINE INSURER’S SUMMARY JUDGMENT EFFORTS; INSURER MUST SHOW ACTUAL DISAGREEMENT OVER VALUE OCCURRED (Western District)

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The court denied the insurer’s motion for summary judgment on plaintiff’s UIM bad faith. Key issues were the insurer’s having failed to adduce evidence explaining the basis for its denial, and not sufficiently adducing facts contrary to the claims handling allegations in the insured’s complaint. The carrier focused on the fact that the insured did not take discovery, but this was not as detrimental to plaintiff’s case as the insurer believed.

The insured received $50,000 from the tortfeasor’s carrier, and had $250,000 in UIM coverage under his own policy. The complaint alleged detailed facts supporting the position that the insured was highly cooperative in producing information, both independently and upon the insurer’s request. Moreover, the insured submitted to an examination under oath and an independent medical examination, and follow up requests after both.

The claim/investigation process went on for eight months, with the insured’s counsel repeatedly making policy limits demands, with no counteroffer. Ultimately, the insurer offered no payment of any kind to the insured.

During the claim/investigation process, the insured filed a writ of summons. The insurer ultimately responded with a rule to file a complaint, and after the complaint was filed it removed the action to federal court. [Note: Among the various legal principles governing bad faith claims the court recites, is “[t]he Third Circuit has also recognized that ‘using litigation in a bad faith effort to evade a duty owed under a policy [is] actionable under [Pennsylvania’s bad faith statute].’” The court did not amplify on that principle in this case.]

The court observed the carrier did not develop a factual record refuting the detailed claims handling history in the complaint. Thus, “[w]hether the undisputed facts in the Complaint are sufficient for Plaintiff to prove by clear and convincing evidence that [the insurer] acted in bad faith is for the jury to determine.” Further, there was no evidence in the record as to how, or if, the insurer provided the basis for its claim denial to the insured. At most, the rule to file a complaint functioned as the notice of denial; but even then, the insurer never gave the insured “any information about the basis for its decision.”

The insurer did include a copy of its medical expert’s reports in moving for summary judgment. These reports concluded that the insured “required no further care, treatment or limitations as a result of his motor vehicle accident.” On the other hand, the court found that the insured had apparently produced his own medical expert report during the litigation, opining that significant medical issues resulted in a “no work” restriction.

The court stated: “It may well be that [the insurer] relied upon the results of the independent medical examination or other valid grounds, but the record does not reflect that [this] report was supplied to Plaintiff or that [the insurer] relied on this report in denying Plaintiff’s claim.”

Generally, the court accepted that there might a been a reasonable basis for evaluating the claim for eight months and then denying it, but that reasoning was not disclosed in the record. The insurer attempted to frame the issue as merely a disagreement over value (apparently $250,000+ on the insured’s end and $0 on the insurer’s end).

However, “to prevail on its motion on the ground that the parties had a legitimate value disagreement, it is [the insurer’s] burden, [1] initially, to point to evidence illustrating not only that there was indeed a disagreement over the value of Plaintiff’s claim (as opposed to an outright denial), but [2] also that [the insurer] communicated that disagreement to Plaintiff, for example, by making a counter-offer. [The insurer] has not done so.”

In sum, “[b]ecause there are genuine issues of material fact regarding Plaintiff’s bad faith claim based upon the current state of the record, [the insurer] is not entitled to judgment as matter of law.”

Date of Decision: February 10, 2020

Baldridge v. Geico Insurance Co., U.S. District Court Western District of Pennsylvania, Civil Action No. 18-1407, 2020 U.S. Dist. LEXIS 22311 (W.D. Pa. Feb. 10, 2020) (Dodge, M.J.)

On April 1, 2020, Magistrate Judge Dodge denied the insurer’s motion for reconsideration. A copy of her opinion can be found here.

THERE IS NO CAUSE OF ACTION FOR “INSTITUTIONAL BAD FAITH” (Pennsylvania Superior Court) (Non-Precedential)

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In this unpublished opinion, Pennsylvania’s Superior Court addressed whether “institutional bad faith” states a private cause of action under Pennsylvania law. Much like yesterday’s post, the Superior Court emphasized that Pennsylvania bad faith law requires focusing on the case and parties at hand, and not the insurer’s conduct toward other parties or its alleged universal practices. The court also addressed other issues concerning statutory bad faith and Pennsylvania’s Unfair Trade Practices and Consumer Protection Law (UTPCPL), among other matters. In this post, we only address all the bad faith and  UTPCPL claims against the insurer.

Factual Background and Trial Court Rulings

The case begins with a home remodeler’s attempt to destroy a bee’s nest in one small section of a house. This unfortunate effort only caused larger problems, contaminating and damaging the house. The chain of misfortune continued when remediation efforts led to more damage, with the home allegedly becoming uninhabitable. At a minimum, all sides agreed some level of reconstruction work was now needed.

The homeowners’ insurer engaged a contractor to fix the original problem. The homeowners eventually challenged the quality of that contractor’s work, which they contended added to the damage. They eventually refused to allow that contractor on site, and unilaterally hired a second contractor to take over. Both the insured and insurer retained their own engineers, who disagreed on the scope of the damage and reconstruction work required.

The second contractor was owned by the insured husband’s parents. The husband himself was the second company’s project manager on the job. The trial court stated that the husband agreed with the position that he “negotiated an oral contract on behalf of … himself and his wife… with himself, as project manager of and on behalf of [the second contractor]” for the reconstruction work. The insurer and first contractor disputed the necessity and cost of the work carried out by the second contractor, as well as other costs.

The trial court ruled for the insurer on breach of warranty, emotional distress, UTPCPL, and bad faith claims, but in favor of the insureds on their breach of contract claim.

There is no Cause of Action in Pennsylvania for Institutional Bad Faith

The insureds argued that institutional bad faith could be the basis for asserting statutory bad faith. Under this theory, a claim can be based solely on an insurer’s policies, practices, and procedures as applied universally to all insureds. The present plaintiffs wanted to introduce evidence to support such institutionalized bad faith conduct. Both the trial and appellate courts rejected this theory.

The Superior Court emphasized that a bad faith action is limited to “the company’s conduct toward the insured asserting the claim.” Thus, “’bad faith claims are fact specific and depend on the conduct of the insurer vis-à-vis the insured.’” The Superior Court agreed with the trial court “that there is no separate cause of action of institutional bad faith.” It stated, that the bad faith statute “authorizes specified actions by the trial court ‘if the court finds that the insurer has acted in bad faith toward the insured . . . ,’ not to the world at large.” (Court’s emphasis).

The Insurer did not Act in Bad Faith

  1. The policy and procedure manual/guideline arguments failed on the merits.

The Superior Court ruled that the trial court’s findings did not result in a refusal to consider evidence relating to the insurer’s conduct and practices. In fact, the insurer’s manuals, guidelines, and procedures were admitted as evidence, all of which were considered by the trial court. This evidence, however, was not considered as part of an institutional bad faith case. Rather, it was only relevant to determining if the insurer acted in bad faith toward the specific plaintiff-insureds, and not to the universe of all insureds.

In deciding the bad faith issue, when the trial court was presented with evidence of the insurer’s policies and procedures, it “did not find them to be improper when applied to the [insureds’] claim, although not a separate claim concerning ‘institutional bad faith.’” (Court’s emphasis) Thus, the actual plaintiffs could not make out a case for themselves on this evidence because they “failed to establish a nexus between [the insurer’s] business policies and the specific claims … asserted in support of bad faith.”

  1. The insureds could not meet the clear and convincing evidence standard.

The trial court found the insurer had not acted in bad faith on other facts of record, and the Superior Court found no abuse of discretion in this ruling. Both courts emphasized the insured’s burden of proof is clear and convincing evidence. Thus, the trial court stated, “[i]cannot be reasonably said, given the facts and evidence adduced at trial, that [the insurer] lacked a reasonable basis for denying benefits and/or that [it] knew or recklessly disregarded its lack of a reasonable basis to deny benefits…. Mere negligence or bad judgment in failing to pay a claim does not constitute bad faith. An insurer may always aggressively investigate and protect its interests. Particularly in light of the higher burden of proof, specifically the requirement that [insureds] must prove a bad faith claim by ‘clear and convincing’ evidence, the record in this case does not support the assertion of statutory bad faith….”

Specifically, the court focused on alleged (i) failures to pay engineering fees, (ii) delays in hiring engineers, (iii) unduly restricting the engineer’s ability to opine, and (iv) instructions that the first contractor and its engineer disregard building codes.

The insurer adduced evidence that (i) it paid engineering fees, (ii) its original decision not to hire an engineer was done based on information provided by the first contractor and a building code officer, (iii) it did agree to hire an engineer once the insureds provided their list of concerns, and (iv) the engineer opined the home was not uninhabitable. The insurer also put on evidence that its adjuster never told the first contractor to ignore the building code, but rather expected the contractor to comply with existing code requirements.

On these facts, the Superior Court found that the trial court did not abuse its discretion in finding the insureds failed to meet the clear and convincing evidence standard.

The UTPCPL does not Apply to Claim Handling

Both the trial court and Superior Court concluded that the UTPCPL does not apply to insurer claim handling cases.

Date of Decision: January 14, 2020

Wenk v. State Farm Fire & Cas. Co., Superior Court of Pennsylvania No. 1284 WDA 2018, No. 1287 WDA 2018, No. 1288 WDA 2018, 2020 Pa. Super. Unpub. LEXIS 178 (Pa. Super. Ct. Jan. 14, 2020) (Lazarus, Olson, Shogan, JJ.) (non-precedential)

The January 14, 2020 decision was not a final disposition, and a subsequent opinion was filed on February 7, 2020, attached here, which appears to be identical to the January 14, 2020 opinion.

Our thanks to Daniel Cummins of the excellent Tort Talk blog for brining this case to our attention.

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.)

A LOW BUT REASONABLE ESTIMATE IS NOT BAD FAITH (Third Circuit)

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The Third Circuit affirmed Middle District Judge Robert Mariani’s grant of summary judgment to the insurer on a bad faith claim. A summary of the trial court opinion can be found here.

In this UIM case, the tortfeasor paid $95,000 out of a $100,000 policy. The insurer initially valued the claim at $110,000 to $115,000 and offered $10,000 to settle (after deducting the $100,000 for the tortfeasor’s policy). The insured demanded the full $200,000 UIM policy limits, and filed suit when her demand was not met. The insurer upped its offer to $50,000, and the parties finally agreed to a high low arbitration ($200,000/$10,000). The arbitrator found the “total claim was worth $306,345, and calculated [the insurer’s] responsibility under the UIM policy to be $160,786.78.”

Insured’s Responses to Undisputed Facts Found Inadequate

First, the appeals court rejected the argument that the trial court improperly accepted certain of the insurer’s statements of undisputed fact as undisputed. The insured failed to set forth detailed facts contradicting the insurer’s specifically described undisputed facts. Rather, she generally denied the insurer’s undisputed facts and responded with facts that did not actually go to the issues presented in the insurer’s statements of fact. The Third Circuit found these failings amounted to admissions.

[This is a clear warning to parties opposing summary judgment that simply denying an alleged undisputed fact, without also setting out specific facts of record directly casting doubt on the putative undisputed facts, will result in an admission.]

Next, the appellate court affirmed the trial court’s discretion to disregard an additional 289 counterstatements of fact that went beyond the insured’s responsive paragraphs to the insurer’s allegations of undisputed facts. Under local district court rules, the trial court had broad discretion in reviewing such supplementary counterstatements of fact, and determined they were outside the scope of the evidentiary issues presented in the insurer’s statement of undisputed facts.

Low but Reasonable Estimate not Bad Faith

Finally, the Third Circuit observed that “[w]hile successful bad faith claims do not need to show fraudulent behavior, negligence or bad judgment will not support a bad faith claim. … Nor will ‘a low but reasonable estimate of the insured’s losses.’”

The Third Circuit found “[t]he District Court properly applied this standard and granted summary judgment because the undisputed facts in the record show that [the insurer] had a reasonable basis for contesting [the insured’s] UIM claim. The record shows that (1) a large portion of [the insured’s] valuation of her claim was attributable to potential future surgery, (2) an independent medical examination disputed [her] claim that she needed the future surgery, (3) [she] had additional health coverage that would defray the cost of future surgery, and (4) [the carrier] believed [the insured] was exaggerating her symptoms in her deposition during the underlying UIM litigation.”

Even taking any remaining factual disputes in the insured’s favor, she could not demonstrate the absence of a reasonable basis to deny benefits. As there was a reasonable basis to deny benefits, the court did not have to address the second bad faith element of knowing or reckless disregard.

Date of Decision: November 27, 2019

Rau v. Allstate Fire & Casualty Insurance Co., U. S. Court of Appeals for the Third Circuit No. 19-1078, 2019 U.S. App. LEXIS 35560 (3d Cir. Nov. 27, 2019) (Chagares, Jordan, Restrepo, JJ.)

INSURED ADEQUATELY PLEADS BAD FAITH (Middle District)

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In this UIM breach of contract and bad faith case, the insured alleged a series of physical injuries after being rear-ended at a red light. The insurer denied the UIM claim. The insurer moved to dismiss the bad faith count on the basis that plaintiff only set forth conclusory boilerplate allegations without any supporting facts. Judge Munley disagreed and denied the motion.

In denying the motion, the court found the following sufficient to survive a motion to dismiss:

Plaintiff’s complaint pleads facts indicating that defendant’s actions were unreasonable. Plaintiff alleges that he was injured in an automobile accident that was covered by the insurance policy. He further asserts that he made a claim for benefits under the policy and defendant was dilatory and abusive in the handling of the claim. … Plaintiff additionally claims that defendant failed to reasonably and adequately investigate the claim and failed to reasonably evaluate or review the medical documents and/or photographs which were in its possession. … Defendant failed to make an honest, intelligent and objective settlement offer. … The defendant, thus, compelled plaintiff to file suit and engage in litigation, when a reasonable evaluation of the claim would have avoided suit. … Moreover, the defendant failed to follow its own manual with regard to the evaluation and payment of benefits-and even failed to pay the undisputed amount owed.

We have previously summarized Judge Munley’s recent decisions in Castillo and Deluca reaching similar results.

Date of Decision: November 19, 2019

Ranieli v. State Farm Insurance Co., U.S. District Court Middle District of Pennsylvania No. 3:19cv1176, 2019 U.S. Dist. LEXIS 200380 (M.D. Pa. Nov. 19, 2019) (Munley, J.)

INSURED ADEQUATELY PLEADS BAD FAITH CLAIM AGAINST THIRD LAYER INSURER (Middle District)

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There were three policy layers in this uninsured motorist case, concerning an opinion issued yesterday by Middle District Judge James Munley. Plaintiff alleged significant and permanent injuries, and she sought payment from the third layer insurer. This insurer had $60,000 in potential coverage and offered $1,000 to settle. The insured brought claims for breach of contract and bad faith.

The insurer moved to dismiss the bad faith claim. Judge Munley denied the motion to dismiss, after examining the allegations against the two elements of statutory bad faith: (1) reasonableness of the insurer’s benefit denial and (2) knowing or reckless disregard of that denial’s unreasonable nature.

First, Judge Munley found the following allegations sufficient to set forth a claim that the settlement position and claims handling were unreasonable:

“An inadequate investigation by the insurance company may lead to a claim of bad faith. Smith v. Allstate Ins. Co., 904 F. Supp. 2d 515, 524 (W.D. Pa. 2012). Count II, of the complaint alleges that the defendant, inter alia, failed to properly investigate plaintiff’s claims, refused to pay plaintiff’s claims without conducting a prompt, reasonable investigation based upon all available information, denied the claim without conducting a completely independent review of plaintiff’s injuries and damages, and caused unreasonable delay in all aspects of the handling of plaintiff’s claim. … Plaintiff further avers that the defendant lacked a reasonable basis for underestimating the value of plaintiff’s UM claim and denying benefits. … We find that these factual allegations, which we must accept as true at this stage of the proceedings, are sufficient to meet the first element, that is, defendant lacked a reasonable basis to deny the benefits.”

Next, Judge Munley found the plaintiff met the knowing or reckless disregard element, concluding: “Plaintiff’s complaint makes a general allegation that defendant knew it had no basis to deny the claim. … We find that at this stage of the proceedings, such an allegation is sufficient to survive a motion to dismiss. This element goes to the knowledge and state of mind of the defendant. Plaintiff will not be able to fully inquire into such matters until discovery occurs in the case. Accordingly, we find that the motion to dismiss should be denied.”

Date of Decision: November 4, 2019

Castillo v. Progressive Insurance, U.S. District Court Middle District of Pennsylvania No. 3:19cv1628, 2019 U.S. Dist. LEXIS 190834 (M.D. Pa. Nov. 4, 2019) (Munley, J.)

[UPDATED JANUARY 25, 2020] COURT ACCEPTS GENERAL ALLEGATIONS OF BAD FAITH CONDUCT AS ADEQUATE, BASED ON APPARENTLY LIMITED PLEADING OF UNDERLYING FACTS CONCERNING SEVERITY OF HARM AND LENGTH OF TIME WITH NO PAYMENT, AND LATER DENIES THE INSURER SUMMARY JUDGMENT ON SAME GROUNDS AND EXPERT REPORT ON DEVIATIONS FROM INDUSTRY CLAIM HANDLING STANDARDS (Western District)

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In this UIM breach of contract and bad faith case, the insureds were severely injured by a drunk driver. There was $600,000 in UIM coverage. No UIM payments were made for two years and the insured brought suit. The insurer moved to dismiss both counts.

The court first found the plaintiffs adequately pleaded a breach of the insurance contract. Next, the court drew inferences from the complaint’s averments in allowing the bad faith claim to proceed.

Specifically, plaintiffs pleaded severe injuries, through no fault of their own, that could not be fully compensated by the tortfeasor’s insurance. The complaint alleges that two years after the accident, the insurer “had failed to make any payments whatsoever to [the insureds] under the policy’s UIM coverage provision.” The insureds complied with the terms of the insurance policy at issue, giving reasonable notice of the accident and cooperating with the investigation.

“The complaint further alleges that, in addition to [the insurer’s] unreasonable delay in claims handling and its unreasonable failure to pay benefits, [the insurer] has failed to make a reasonable settlement offer, failed to reasonably and adequately investigate their claims, and failed to reasonably evaluate or review all pertinent documentation provided by the plaintiffs in support of their claim for UIM benefits. Accepting the facts alleged in the complaint as true and viewing them in the light most favorable to the plaintiffs, we find that the plaintiffs have stated a plausible statutory bad faith claim….”

Date of Decision: October 24, 2019

Golden v. Brethren Mutual Insurance Company, U. S. District Court Middle District of Pennsylvania CIVIL ACTION NO. 3:18-cv-02425, 2019 U.S. Dist. LEXIS 183691 (M.D. Pa. Oct. 24, 2019) (Saporito, M.J.)

One month later, the court issued an opinion denying summary judgment on both breach of contract and statutory bad faith. On the contract claim, the court stated that the contractual duty of good faith can be breached through a delay in payment of an inordinate and unreasonable time period.  Within the breach of contract analysis, the court looked to such  issues as the insurer’s claims handling and investigation, the insureds cooperation, and the ultimate claim valuation.

On the statutory bad faith claim, the court identified documents produced by the parties concerning the years long claims handling process. The insurer produced a body of documents in support of its claim that it was in constant communication with the insureds, and the insureds submitted other communication documents including demands on the insurer and medical records to support their bad faith position. The court also considered the insureds expert’s testimony opining that “in the context of industry standard for claims handling, [the] investigation, evaluation and resolution of the plaintiffs UIM claims was unreasonable and intentionally dilatory.”

Taking the evidence in the light most favorable to the non-moving insured, the court found there remained a material dispute of fact concerning the alleged failure to reasonably investigate, evaluate, or pay the claim.

Date of Decision: November 25, 2019

Golden v. Brethren Mutual Insurance Co., U. S. District Court Middle District of Pennsylvania CIVIL ACTION NO. 3:18-cv-02425, 2019 U.S. Dist. LEXIS 183691 (M.D. Pa. Nov. 25, 2019) (Saporito, M.J.)

CONCLUSORY PLEADINGS INSUFFICIENT TO STATE BAD FAITH CLAIM; MERE REFUSAL TO PAY SUM DEMANDED IS NOT BAD FAITH PER SE (Philadelphia Federal)

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In this UIM case, the tortfeasor’s insurer settled for $15,000, and the injured insured demanded the $300,000 UIM policy limits from his own carrier. The insurer did not accede to that demand, and the husband and wife insureds sued for breach of contract and bad faith. Judge Schiller dismissed the bad faith claim with leave to amend, if a plausible claim could be pleaded.

Plaintiff failed to allege sufficient facts to state a plausible claim. The insureds’ conclusory allegations included “failing to evaluate Plaintiff’s claim objectively and fairly; failing to complete a prompt and thorough investigation of Plaintiff’s claim… [and] unreasonably withholding policy benefits[.]” There are, however, no specific facts pleaded supporting these conclusions. “Courts consistently hold that bare-bones allegations of bad faith such as these, without more, are insufficient to survive a motion to dismiss. Indeed, conclusory allegations that an insurer ‘unreasonably withheld the payment of [UIM] benefits under the policy…failed to engage in good faith negotiations… [and] failed to perform an adequate investigation’ are insufficient to state a claim for bad faith.”

Similarly, the complaint alleges the insurer “failed to conduct a fair and reasonable investigation into his claim but does not plead any facts related to that investigation.” The court further found the insured could not state a claim on the basis that the insurer “did not pay [the insured’s] claims even when he provided the same information that led [the tortfeasor’s insurer] to tender the limits of its policy.” The court observes that “the failure to immediately accede to a demand for the policy limit cannot, without more, amount to bad faith.” [Though the court does not so state, there appears to be no explanation in the complaint why providing information leading to a $15,000 payment automatically requires an additional $300,000 payment.]

The court provided the insureds “may file an amended complaint to add a bad faith claim, but only if they can plausibly do so.” (Emphasis in original)

Date of Decision: October 4, 2019

Doyle v. Liberty Mutual Ins., U. S. District Court Eastern District of Pennsylvania No. 19-3460, 2019 U.S. Dist. LEXIS 172581, 2019 WL 4917123 (E.D. Pa. Oct. 4, 2019) (Schiller, 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.)