Archive for the 'PA – Federal Pleading Adequate' Category

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.)

GENERAL ALLEGATIONS OF KNOWLEDGE OR RECKLESSNESS SUFFICIENT, AND THE INSURER’S INTENT CAN BE PURSUED IN DISCOVERY (Middle District)

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In his second bad faith opinion this week, Middle District Judge James Munley found bad faith adequately pleaded, and denied a motion to dismiss. The case involved an uninsured motorist claim. The insured suffered injuries, the insurer had $300,000 on its policy, and it appears the insurer refused to pay policy limits or make a payment meeting the insured’s demands.

First, on the reasonableness prong of the bad faith test, Judge Munley stated: “Plaintiff’s complaint pleads facts indicating that defendant’s actions were unreasonable. Plaintiff alleges that she was injured in an automobile accident that was covered by the insurance policy. … She notified defendant of the damages and provide it with sufficient documentation to support her claim, including updating records for ongoing medical treatment. … Defendant refused to make a reasonable offer of settlement despite plaintiff trying to work with it and despite the ‘mountain of evidence’ that she had provided. … ‘[D]espite the results of any investigations performed by [defendant] and the clear medical documentation supporting their claim for UM benefits, [defendant] has blatantly ignored the evidence, has done no further investigation and has simply denied [plaintiff] the recovery of appropriate UM benefits without explaining its reason for the denial. … These allegations are sufficiently specific to make out a claim for bad faith — at least with respect to the first prong, that defendant lacked a reasonable basis for denying the benefits at issue.”

The court rejected the argument that these allegations were akin to the failed pleadings in the Third Circuit’s 2012 Smith v. State Farm case. By contrast to the “much more general” allegations in Smith, and the exhibits attached to the Smith Complaint indicating there was no bad faith, the instant allegations “are much more specific and no exhibits indicate that the defendant acted in good faith.”

As to the second prong, i.e., whether the benefit denial was known to be unreasonable or its unreasonableness was recklessly disregarded, Judge Munley states: “Additionally, we find that plaintiff has sufficiently pled the second element of a bad faith claim, that is, that defendant knew or recklessly disregarded its lack of reasonable basis to deny the benefits. 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 6, 2019

Deluca v. Progressive Advanced Ins. Co., U. S. District Court Middle District of Pennsylvania No. 3:19cv1661 (M.D. Pa. Nov. 6, 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.)

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 (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.)

COURT WILL NOT CONSIDER EVIDENTIARY DOCUMENTS ATTACHED TO AN ANSWER IN DECIDING A MOTION FOR JUDGMENT ON THE PLEADINGS (Middle District)

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This breach of contract and bad faith action outlines what a court may consider in addressing a motion for judgment on the pleadings. In this case, the documents attached to an answer were not “written instruments” that a court could consider in deciding a motion for judgment on the pleadings.

There was an undisputed fire loss, but there was an issue of whether at least one of the insureds resided in the home at the time of the loss. If neither insured resided at the property, there would be no coverage.

The complaint alleged facts supporting the position that one of the insureds did live in the home at the time of the loss. In answering the complaint, the insurer attached that insured’s statement under oath, the insurer’s investigative report, an EMT form, and an electric usage bill. The insurer relied on the facts in these documents to argue that both insureds did not reside at the home.

The court ruled these documents could not be used in support of a motion for judgment on the pleadings. The court found these were not the kind of “written instruments” that could be incorporated into a pleading, as contemplated by the Rules of Civil Procedure. Instead, they were “lengthy exhibits containing evidentiary matter [that] should not be attached to the pleadings.”

For example, the court observed “[e]xhibits solely containing evidentiary matter, such as depositions, are not considered ‘written instruments’ under Rule 10(c) and are typically excluded from consideration of the pleadings.”

Thus, “[b]ecause the Statements Under Oath consist of only evidentiary matters, they cannot be considered at this juncture.” The same principle applied to the investigative reports and electric bills.

Date of Decision: October 9, 2019

Bloxham v. Allstate Ins. Co., U. S. District Court Middle District of Pennsylvania NO. 3:19-CV-0481, 2019 U.S. Dist. LEXIS 175198 (M.D. Pa. Oct. 9, 2019) (Caputo, 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.)

A CLOSE CALL, BUT FACTUAL CHRONOLOGY TIED TO ALLEGATIONS OF UNREASONABLE DELAY SET OUT PLAUSIBLE BAD FAITH CLAIM (Middle District)

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Stating it was a close call, Middle District Magistrate Judge Carlson found the following well-pleaded allegations sufficient to set forth a plausible bad faith claim, and recommended denying a motion to dismiss without prejudice to later bringing a summary judgment motion. District Judge Mariani adopted this report and recommendation as the opinion of the court.

The Allegations

  1. Defendant … issued a policy of insurance No. K2495825 to Plaintiffs … covering their two automobiles ….

  2. Defendant … charged and collected a premium for underinsured motorist coverage on said policy.

  3. Plaintiffs … paid all premiums requested by Defendant….

  4. The same policy was in full force and effect [at the time of the auto accident at issue].

  5. On or about August 30, 2015, Plaintiff … was involved in a motor vehicle crash which directly caused him to sustain serious and severe life-threatening injuries some of which are permanent.

  6. On August 30, 2015, Plaintiff … was insured for underinsured coverage in the amount of $250,000.00, with stacking (two cars), by Defendant … under policy K2495828.

  7. As a result of the collision, Plaintiff … suffered severe and permanent injuries including, but not limited to, the following:

(a) neck sprain with severe pain and injuries to his cervical spine, more specifically identified as narrowing of disc space at the C4-C5, C5-C6 and C6-C7 with anterior and posterior osteophytes formation and narrowing of intervertebral foramina at the corresponding bilaterally with nerve root compression. Persistent multilevel degenerative spondylosis, degenerative bilateral facet edema at the C7-T1, bilateral foraminal stenosis at the C3-4, bilateral foraminal stenosis at the C4-5 and C5-6, bilateral foraminal stenosis with left foraminal disc protrusion at the C6-7, all of which pain radiates into his upper extremities;

(b) low back pain and injuries to his lumbar spine including degenerative disc disease with sharp shooting pain radiating into his left lower extremity and sciatica pain;

(c) radiculopathy and nerve injuries to the C8-T1 area;

(d) muscle spasms throughout his cervical, thoracic and lumbar spine;

(e) severe headaches;

(f) right hip pain;

(g) left ankle pain;

(h) right elbow pain; [*4]

(i) ongoing pain management, physical therapy and chiropractic treatment;

(j) ongoing and persistent pain aggravated by standing, sitting, walking, sexual activity, physical activities and elevating his arms;

(k) sleep disruption.

  1. Defendant .. was promptly notified of Plaintiff[’s] … injuries.

  2. As a result Defendant … after and only after litigation against its parent company … was initiated, began to pay and continues to pay medical payments to Plaintiff….

  3. As a result of the aforesaid incident, Plaintiff … was offered the policy limits by the operator of the 3rd party vehicle.

  4. Plaintiff … made a claim for underinsured motorist coverage with Defendant….

  5. Plaintiff …. submitted all the pertinent medical records and bills to Defendant…, indicating the serious physical and economic injuries that he sustained as a result of the crash.

  6. Defendant …refused payment to Plaintiff … of underinsured motorist benefits.

  7. Plaintiff … has performed everything required of him under the policy and is entitled to underinsured motorist benefits from Defendant….

  8. Defendant[‘s] … denial of underinsured motorist benefits was made without any reasonable basis of fact.

  9. Defendant … acted in bad faith in that it did not have a reasonable basis for denying underinsured motorist benefits under the policy and the Defendant … knew and/or recklessly disregarded its lack of reasonable basis in denying that claim that Defendant:

(a) Failed to give equal consideration to paying the claim as to not paying the claim.

(b) Failed to objectively and fairly evaluate Plaintiff[‘s] … claim;

(c) Failed to raise a reasonable defense to not pay Plaintiff[‘s] … claim;

(d) Compelling Plaintiff … to institute arbitration to obtain underinsured motorist benefits;

(e) Defendant … engaged in dilatory and abusive claim’s handling;

(f) Unreasonably evaluating Plaintiff[‘s] … injuries and loss in the face of overwhelming evidence to the contrary;

(g) Failed to keep Plaintiff … fairly and adequately advised as to the status of the claim;

(h) Acting unreasonably and unfairly in response to Plaintiff[‘s] … claim;

(i) Failed to promptly provide a reasonable factual explanation of the basis for the denial of Plaintiff[‘s] … claim;

(j) Failed to conduct a fair and reasonable investigation and evaluation to Plaintiff[‘s] … claim;

(k) Defendant … violated the Unfair Claims Settlement Practice Act §146.5, 146.6, 146.7;

(l) Defendant … violated the Unfair Insurance Practice Act 40 P.S. §1171.5(a)(10) (ii) (iii) (iv) (v) (vi) (vii) (viii) (xi) (xii) (xiv).

The Analysis

The court found the complaint, “taken as a whole, goes beyond a mere boilerplate recital of the elements of the statute.” These allegations provided a factual chronology, and that “[despite providing [the insurer] with all pertinent medical records and bills, and fulfilling all of their policy obligations, the plaintiffs assert that [the insurer] has unreasonably refused to honor its policy obligations.” The complaint further intertwines these allegations with other bad faith averments, i.e., “unreasonable delay … in beginning to make medical payments”, and only making medical payments after suit was initiated against the insurer’s parent company, despite prompt notice of injuries well prior to suit.

While the averments are “spare,” they “go beyond the type of mere boilerplate allegations that courts have found to be too conclusory to sustain a bad faith claim.” Moreover, Magistrate Judge Carlson would not go beyond the pleadings to accept the insurer’s arguments for dismissal. The insurer asserted that the complaint should be interpreted as actually reflecting the insurer’s “prudent effort on its part to thoroughly examine and resolve a potentially meritless claim….” However, the court found “this argument invites us to go beyond the pleadings themselves and resolve essentially factual questions. This is a task which, in our view, may not be performed on consideration of a motion to dismiss, where we must simply assess the adequacy of the pleadings.”

Thus, the complaint could proceed, without prejudice to the insurer renewing its argument on summary judgment at the close of discovery.

Dates of Decision: July 19, 2019 and August 8, 2019

Vadella v. American States Ins. Co., U. S. District Court Middle District of Pennsylvania Civil No. 3:19-CV-73, 2019 U.S. Dist. LEXIS 121606 (M.D. Pa. July 19, 2019) (Carlson, M.J.) (Report and Recommendation), adopted in Vadellla v. American States Ins. Co., U. S. District Court Middle District of Pennsylvania Civil No. 3:19-CV-73, 2019 U.S. Dist. LEXIS 133764 (M.D. Pa. Aug. 8, 2019) (Mariani, J.)

BAD FAITH CLAIM STATED WHERE INSURER TELLS INSURED TO “SUE US” AS A MEANS TO GET A MORE COMPLETE RECORD (Middle District)

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In this case, Judge Caputo found plaintiff pleaded a plausible bad faith claim.

The case involved a fatal auto injury, and the issue of whether the deceased’s father, owner of the car at issue, had an applicable policy covering the accident. The other driver was uninsured.

The carrier asked for additional information after demand was made under the father’s policy. The father sent additional information, but the carrier told him to file a complaint, so it could take discovery. The father brought UM claims, as well as breach of contract and bad faith claims.

The complaint alleged the key issue was the deceased son’s residence. The father provided numerous documents showing the son resided with him; but the carrier still declined coverage on the basis that proof of residency was lacking.

Judge Caputo rejected the carrier’s argument that the complaint amounted to boilerplate conclusory allegations of bad faith. Rather, the complaint alleged sufficient “factual matter to withstand a 12(b)(6) motion.” Specifically, “the Complaint indicate[s] that [the insurer’s] coverage decision under the Policy hinged on a determination of whether [son] resided with [father] at the time of the accident. And, upon request, [father] alleges that he provided more than ample documentation to establish that both he and [his son] resided at [the father’s home] at that time.” This included copies of a driver’s license and tax forms.

Allegedly, instead of asking for more information to fill putative gaps in this information, the carrier told father “sue us”. “Although such conduct may ultimately not amount to bad faith, it is plausible based on the factual assertions in the Complaint that [the carrier] acted in reckless disregard of its obligations under the Policy.”

Date of Decision: July 22, 2019

Fuentes v. USAA General Indemnity Co., U. S. District Court Middle District of Pennsylvania NO. 19-CV-1111, 2019 U.S. Dist. LEXIS 121362, 2019 WL 3288156 (M.D. Pa. July 22, 2019) (Caputo, 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.)

TWO MIDDLE DISTRICT CASES ON PLEADING BAD FAITH, AT BOTH ENDS OF THE ADEQUACY SPECTRUM: (1) BAD FAITH CLAIM DISMISSED WITHOUT PREJUDICE FOR FAILURE TO ALLEGE KNOWING OR RECKLESS DISREGARD OF UNREASONABLE CLAIM DENIAL; (2) INSURED SUCCESSFULLY AMENDS COMPLAINT TO SURVIVE SECOND MOTION TO DISMISS

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These two recent Middle District of Pennsylvania cases provide guidance at either end of the spectrum on pleading statutory bad faith.

CASE 1: BOTH ELEMENTS OF BAD FAITH MUST BE PLEADED

This case involved a coverage dispute and bad faith claims. The insured municipality sought repayment for a $1,000,000 settlement over a death arising out of an automobile accident involving one of the city’s police officers. The underlying suit included federal constitutional claims.

There were two $1,000,000 policies at issue: an auto policy and a law enforcement policy. The insurer paid $500,000 under the auto policy, but refused payment under the law enforcement policy per an auto exclusion.

The court agreed the law enforcement policy did not provide coverage. However, it rejected an argument that the auto policy payment was limited under a state statute capping tort liability at $500,000. The court found that the cap did not apply to federal civil rights claims. Thus, coverage for the remaining $500,000 was potentially due.

The court, however, dismissed the bad faith claim without prejudice, stating:

Defendants argue that the City’s insurance bad faith claim must fail because, although the City alleged that [the insurers] lacked a reasonable basis for denying benefits under the policies, the City did not allege that [the insurers] “knew or recklessly disregarded [the] lack of reasonable basis [when] denying the … claim[s],” as required by law. This Court agrees with [the insurers], and will dismiss the City’s insurance bad faith claim. That dismissal, however, will be without prejudice, and the City may amend its complaint to satisfy the identified deficiency.

Date of Decision: May 16, 2019

City of Williamsport v. CNA Insurance. Cos., U. S. District Court Middle of Pennsylvania No. 4:19-CV-00170, 2019 U.S. Dist. LEXIS 82667 (M.D. Pa. May 16, 2019) (Brann, J.)

CASE 2: HOW TO DO IT THE SECOND TIME AROUND (PLEADING THE WHO, WHAT, WHERE, WHEN, AND HOW)

This case provides an example of an insured sufficiently amending a defectively pleaded first complaint, to survive a motion to dismiss the amended complaint.

The original complaint was dismissed without prejudice for conclusory pleading, even though it included 29 bad faith averments. The summary of the court’s first dismissal can be found here.

In addressing a motion to dismiss the amended complaint, the court restated principles from its prior decision. Unlike the first complaint, however, the court found the following allegations went beyond conclusory pleading:

In the complaint presently before the Court, [the insured’s] bad faith count, Count II, lists 20 allegations of bad faith. … The Court finds that each of these subparagraphs describe who, what, where, when, and how the bad faith alleged in each subpart of ¶73 occurred. … Further, the Court finds that the amended complaint adequately alleges that [the insurer] acted in bad faith, and sufficiently articulates the factual basis of the bad faith claim. Each subparagraph details the factual basis for the bad faith claim. These averments are sufficient to allow this claim to go forward, and the complaint satisfactorily pleads both elements of a bad faith claim, that the insurer did not have a reasonable basis for denying benefits under the policy, and that the insurer knew or recklessly disregarded its lack of reasonable basis in denying the insured’s claim.

Date of Decision: May 23, 2019

Sowinski v. New Jersey Manufacturers Insurance Co., U. S. District Court Middle District of Pennsylvania CIVIL ACTION NO. 3:17-CV-02352, 2019 U.S. Dist. LEXIS 87140 (M.D. Pa. May 23, 2019) (Mehalchick, M.J.)