Archive for the 'PA – Federal Pleading Adequate' Category
In this case, the insured made a water damage claim, as well as claims for roof damages. She hired a public adjuster to pursue the claims. The insured alleged her public adjuster met with the carrier’s adjuster, and the carrier’s adjuster authorized the insured to proceed with remediating the water damage. Five months later, the carrier sent out its own contractor to inspect the insured’s roof, and that contractor informed the public adjuster that the insured’s roof claims were covered.
The carrier subsequently denied all coverage and refused to pay on any claims. Once the insured retained counsel, however, the carrier agreed to pay part of the claim (for water damage).
The insured sued for breach of contract and bad faith, along with a variety of other claims. (The court allowed a negligent misrepresentation claim to stand against the carrier, rejecting the carrier’s gist of the action argument, on the basis that duties outside the contract were assumed and potentially violated.)
The carrier moved to dismiss the bad faith claim. It asserted that its contractor had no power to bind on coverage, and that it offered to pay the insured’s water damage losses after the insured retained counsel. The court rejected these arguments and allowed the bad faith claims to proceed.
The insured first pleaded coverage was due and her claim was denied. She then specifically alleged that two of the carrier’s representatives agreed coverage was due, establishing that the insurer was without a reasonable basis to deny coverage. This met the first bad faith element.
Next, as to proving the second element concerning the insurer’s intent, plaintiff had alleged the carrier’s two “representatives, upon reviewing [the] insurance claim and/or observing the Property, determined that the damage at issue was covered under the Policy. … These facts, if true, support a finding that [the insurer] knew or recklessly disregarded that it lacked a reasonable basis to deny [the] insurance claim, i.e. that [it] knew, through its representatives, that the damage at issue was covered under the Policy but still chose to deny benefits.”
Eventually offering to pay part of the insured’s claim did not eliminate potential bad faith, as the insured pleaded there was no reasonable basis to deny the entire claim.
The court did agree that the insured could not recover compensatory damages for unpaid insurance benefits under the bad faith statute, but this relief was available under other counts.
Date of Decision: June 3, 2020
Nelson v. State Farm Fire & Casualty Co., U.S. District Court Western District of Pennsylvania 2:19-cv-01382-RJC, 2020 U.S. Dist. LEXIS 97239 (W.D. Pa. June 3, 2020) (Colville, J.)
The plaintiffs disputed the insurer’s payout on a fire loss, and brought breach of contract and bad faith claims. The carrier moved to dismiss the bad faith claim.
To plead bad faith, an insured must do more than generally allege the insurer acted unfairly. The insured “must describe with specificity what was unfair.” (Court’s emphasis). Eastern District Judge Pratter found the complaint reached that level of specificity, and denied the motion to dismiss.
The insureds generally allege their claim was undervalued, and that the insurer engaged in “’extreme low- ball/undervaluation tactics and significantly and punitively undervaluing Plaintiffs’ losses and claim.’” The complaint then offers more detailed support for this broad statement.
Plaintiffs allege “the insurance policy provided dwelling coverage up to a limit of $281,200, along with a dwelling extension limit of $28,100. Personal property losses were covered up to a limit of $210,900. Plaintiffs also invoke several estimates they contend they submitted … for the cost of repair and restoration, and, nonetheless [the insurer] failed to indemnify Plaintiffs completely.”
The insureds assert they provided “an estimate of repair for damages to the dwelling in the amount of $57,726.99,” “another estimate of repair for structural losses in the amount of $56,839.12,” “an estimate of personal property loss in the amount of $9,900.36,” “an estimate for cleaning and remediation emergency services in the amount of $4,126.63,” “and an estimate for dry cleaning services in the amount of $21,624.00.” The insurer alloted $255.08 for the dry cleaning, fully recognized the emergency cleaning and remediation costs, and estimated the structural damage at $6,321.45. No payments were offered for any personal property losses.
Taking out depreciation and the deductible, the insurer issued a check for 4,666.46.
In deciding the motion, Judge Pratter observed, “[a]rithmetically, the insurer’s payment was no more than approximately ten percent of the claim….” This “suggest[ed] a possible obdurate refusal to consider the homeowners’ claim.” (Emphasis added). Judge Pratter thus found the factual allegations sufficient to state a bad faith claim on this basis.
Date of Decision: May 28, 2020
Scott v. State Farm Fire & Casualty Co., U.S. District Court Eastern District of Pennsylvania CIVIL ACTION No. 19-5559, 2020 U.S. Dist. LEXIS 92960 (E.D. Pa. May 28, 2020) (Pratter, J.)
The insurer denied a UIM claim 11 days after it was submitted. Denial was based solely on the policy’s household exclusion. Many months earlier, however, Pennsylvania’s Supreme Court had generally voided the household exclusion’s application under Pennsylvania law in similar circumstances. Gallagher v. GEICO Indemnity Co. Thus, the exclusion was an invalid basis to deny coverage.
The insured brought breach of contract and bad faith claims, and the carrier moved to dismiss the bad faith claim for inadequate pleading. The court denied the motion, and found a plausible bad faith claim stated.
First, the court found that the insurer was fully on notice that the household exclusion was invalid in Pennsylvania in these circumstances. Even if the carrier somehow was otherwise unaware of the case, the insured’s counsel brought it to the carrier’s attention in making the claim for coverage. Thus, the household exclusion was a plainly invalid basis to deny coverage, but the carrier denied coverage anyway.
The insurer attempted to argue the Supreme Court’s Gallagher decision only applied to Gallagher’s unique facts. Magistrate Judge Wells found this argument patently incorrect on the face of the Gallagher opinion itself.
Second, the court reasonably inferred from the facts pleaded that the carrier did nothing to investigate the claim before denying coverage. Specifically, the court inferred that the defendant carrier did not even know what the other insurers would be paying the insured toward her injuries for purposes of evaluating its own potential share due to the insured. Moreover, she found the defendant insurer made no effort to evaluate the case itself. Thus, at the time it denied the claim, the carrier could not have known if the insured was fairly compensated or was due further payment.
The facts pleaded supporting these conclusions are that the carrier did not require a medical examination, nor did it produce any contrary medical documents; that it denied the claim in only 11 days; and the insured had not even settled yet with the other insurers at the time the claim was denied.
In sum, the court stated the claim denial “was based solely upon a patently false statement of Pennsylvania law, hence, it is plausible that a jury could find [the denial] decision frivolous and issued in bad faith. …. Furthermore, since it can be inferred that [it] made no effort to value the case, it is plausible that [the insurer] violated its duty of good faith and to deal fairly with Plaintiff, its insured.”
Decision: May 6, 2020
Smith v. AAA Interinsurance Exchange of the Automobile Club, U.S. District Court Eastern District of Pennsylvania CIVIL ACTION NO. 20-768, 2020 U.S. Dist. LEXIS 79489 (E.D. Pa. May 6, 2020) (Moore Wells, M.J.)
The insureds’ complaint alleged husband-insured was riding a bicycle when hit by the tortfeasor’s car. The driver’s carrier offered to pay $50,000 towards the injuries, but the complaint alleged this was insufficient in light of the severity of the injuries, and the insureds sought UIM coverage from a set of insurers (though we will treat the claim as against one carrier for purposes of this post). The insureds allege they had $250,000 in UIM coverage, per person, and that both insureds were entitled to coverage.
They also allege they made demand on their UIM carrier. The demand package included information as to liability and damages, and was allegedly provided to a UIM adjuster. The package included the $50,000 offer from the tortfeasor’s carrier. The UIM adjuster made an “initial offer” of $10,000. The complaint alleges the adjuster was aware when making the $10,000 offer that the UIM part of the claim was worth “at least $10,000.00” and that Plaintiffs were unable to respond to this initial offer because Plaintiff [husband] was still receiving medical treatment.”
The complaint alleges that after the initial demand and response, plaintiffs’ counsel provided medical records and lien information addressing the husband’s injuries, condition, treatment and prognosis. Counsel also provided various written and oral demands on the carrier to tender UIM benefits. The demands exceeded $10,000 generally, but at some point did include a request for partial payment of the $10,000. Plaintiffs allege the carrier originally refused to pay the $10,000, but later paid that $10,000 without making any additional offers or payments “despite concluding that the value of the UIM claim exceeded this amount [$10,000].”
The insureds brought breach of contract claims, and a bad faith claim under 42 Pa. C.S.A. § 8371. The complaint also references the Unfair Insurance Practices Act (UIPA), 40 P.S. § 1171.5. The carrier moved to dismiss the bad faith claims as well as any claims based on the UIPA.
Three counts alleged identical language for bad faith claims handling, e.g. the complaint included subparagraphs alleging failure “to evaluate and re-evaluate Plaintiffs’ claim on a timely basis, failing to offer a reasonable payment to Plaintiffs, failing to effectuate an equitable settlement of Plaintiffs’ claim, failing to reasonably investigate Plaintiffs’ claim and engaging in ‘dilatory and abusive’ claims handling.”
In opposing the motion to dismiss the claims, the insureds argued that the “bad faith stems from [the insurer’s] untimely and unreasonable offer … failure to properly investigate the claim; and initially refusing to make the partial payment Plaintiffs requested from the adjustor.” The insureds asserted “that upon receipt and review of the settlement package and documentation provided, Defendants recognized that [husband’s] injuries were far in excess of $60,000 (the $50,000 limits paid by [the driver’s] insurance carrier, plus the $10,000 offered by Defendants).” They also argued bad faith because the carrier initially refused to make the partial $10,000 payment, and, for ultimately offering a minimal sum in an untimely manner while knowing the claim was worth far more than the $10,000 offer.
Refusing to Make Partial Payment Not Bad Faith
The court cited Third Circuit precedent for the proposition that “if Pennsylvania were to recognize a cause of action for bad faith for an insurance company’s refusal to pay unconditionally the undisputed amount of a UIM claim, it would do so only where the evidence demonstrated that two conditions had been met. The first is that the insurance company conducted, or the insured requested but was denied, a separate assessment of some part of her claim (i.e., that there was an undisputed amount). The second is, at least until such a duty is clearly established in law (so that the duty is a known duty), that the insured made a request for partial payment.” Pennsylvania Superior Court case law also required that a bad faith plaintiff plead that both parties agreed that the partial valuation was an undisputed amount.
In this case, the plaintiffs did not plead that the insureds requested an assessment of a part of their claim and were denied that assessment. Nor did they allege that “the parties had undertaken a partial valuation and agreed that the amount of $10,000 was an undisputed amount of benefits owed.” All they allege is the insurer made an initial offer, and the insureds initially declined that offer and later requested it be paid. The court found that an “’initial offer’ indicates that an insurer is willing to negotiate, and does not in itself represent evidence of bad faith,” citing Judge Flowers Conti’s 2013 Katta decision. Thus, “to the extent that Plaintiffs attempt to assert that the failure by Defendants to make a more timely partial payment represents bad faith, any such claim fails as a matter of law.”
The Bad Faith Claim Survived on Factual Allegations that the Insurer Knew the Claim was Worth More than it Offered, and the Insurer Failed to Re-evaluate the Claim after Receiving Additional Information
Taking the factual allegations in the complaint in plaintiffs’ favor, the court would not dismiss the bad faith claims. The insureds alleged that the carrier knew and was aware the claim value exceed $60,000 (the tortfeasor payment plus the $10,000 offer). From the subsequent $10,000 partial payment, the court had to infer on the pleadings that the carrier had concluded the claim was worth more than $10,000, and had therefore “refused to effectuate an equitable settlement.” The court stated that “[w]hile this may or may not ultimately support a bad faith claim, it is sufficient for now to defeat Defendants’ motion to dismiss.”
Further, the complaint alleges that the carrier refused to do additional investigation or re-evaluate the claim even after receiving additional information from counsel about the insured’s injuries. The insurer argued on the motion to dismiss this conduct was reasonable because there was an “understanding” with the insureds that negotiations would be put on hold pending the husband’s medical treatment. The court could not consider this argument, however, as it relied on facts and a defense outside the pleadings. Rather, it could only consider the allegations that there was a lack of good faith investigation into the facts, and the insurer failed to re-evaluate the claim even after receiving new information that merited re-evaluation.
Finally, the insureds confirmed to the court they were not asserting any claims under the UIPA, and that UIPA references in the complaint could be stricken.
Date of Decision: May 4, 2020
Kleinz v. Unitrin Auto & Home Insurance Co., U.S. District Court Western District of Pennsylvania No. 2:19-CV-01426-PLD, 2020 U.S. Dist. LEXIS 78400 (W.D. Pa. May 4, 2020) (Dodge, M.J.)
Published on
April 30, 2020 in
PA - Claims Handling (unreasonable), PA - Communication with insured, PA - Cooperation with insurer, PA - Damages, PA - Delay (Investigation/Claims handling), PA - Delay (Payment), PA - Estimates, Valuation or Appraisal, PA - Experts, PA - Federal Pleading Adequate and PA - UIM/UM Cases.
This is one of the few recent cases finding that a bad faith plaintiff met federal pleading standards, surviving a motion to dismiss.
In this UIM case, the plaintiffs alleged the insured husband suffered serious and permanent bodily injuries, requiring ongoing treatment. The tortfeasor’s carrier paid $250,000, and the insureds sought the full UIM coverage limit, $1,000,000, from the insurer. The insurer’s highest offer was $200,000, only made nearly three years after the original claim. The insureds brought breach of contract and bad faith claims.
The complaint alleged the insureds cooperated with the carrier, providing information over a 32-month period, “with the necessary liquidated and unliquidated damages information from which Defendant could fairly evaluate and make a timely and reasonable offer on the claim.” The insureds estimated their damages in excess of $1,000,000, “based on Plaintiffs’ unchallenged medical records, narrative reports, and vocational loss and medical prognosis reports, which they provided to Defendant.” They further alleged the carrier “failed to timely respond or comply with Plaintiffs’ counsel’s request for Defendant to fairly evaluate the underinsured motorist claim.”
The insureds focused their bad faith arguments on the insurer’s alleged conduct over the 32-month time period. They alleged the carrier failed to properly respond to the claim and/or failed to evaluate the UIM claim; failed to offer a payment or to pay in good faith; and failed to inform the insureds of its evaluation of their claim. The insureds asserted the carrier “did not have a reasonable basis for delaying and/or denying underinsured motorist benefits or a partial tender of such under the policy” for nearly three years. The insureds labeled the refusal to pay policy limits as frivolous and unfounded, adding that the insurer “lacked a legal and factual basis” for its valuation of the claim.
The insurer moved to dismiss for failing to adequately plead a bad faith claim.
The court first focused on delay. Delay is a bad faith factor, but standing alone does not make out an automatic case for bad faith. In evaluating whether delay might constitute bad faith, “’[t]he primary consideration is the degree to which a defendant insurer knew it had no basis to deny the claimant: if delay is attributable to the need to investigate further or even to simple negligence, no bad faith has occurred.’” (Court’s emphasis)
In beginning his analysis, Judge Jones took cognizance of the potential negative impact of a 32-month window between the claim’s submission and the carrier’s first offer, though again, standing alone this could not prove bad faith. However, as pleaded in the complaint, there were additional factual allegations fleshing out the bad faith delay argument. These included the absence of any facts suggesting the husband was at fault, or that there was any question the UIM policy limit was $1,000,000. The insureds further pleaded: (i) the husband suffered multiple injuries with ongoing expenses; (ii) they provided medical records, reports, vocational loss information and medical prognoses over the 32-month period; and (3) their liquidated and unliquidated damage estimates to the insurer exceeded the $1,000,000 policy limit.
As to the carrier’s conduct, the insureds alleged that during the 32-month period the insurer did not seek an independent medical examination, and did not conduct a records review to properly evaluate the claim. The insureds added that the carrier’s motion to dismiss did not include any argument that the “delay was attributable to the need to investigate further or even to simple negligence.”
On these facts, Judge Jones found the plaintiffs set forth a plausible bad faith claim, focusing on a lack of investigation and failure to communicate. He distinguished this pleading from numerous other cases dismissing conclusory bad faith claims. He stated, “[i]n particular, it is wholly plausible that Defendant did not have a reasonable basis for denying Plaintiffs’ monies owed based upon the information Plaintiffs provided Defendant. Additionally, viewing the time lapse in conjunction with the lack of an independent medical evaluation by Defendant, it is plausible that Defendant knew of, or recklessly disregarded, its lack of a reasonable basis for denying Plaintiffs’ benefits of the policy.”
Judge Jones also rejected the argument that this was merely a disagreement over fair valuation. On a motion to dismiss, the court had to assume the truth of the plaintiffs’ factual allegations. The allegations set out a plausible case the insurer made an unreasonably low offer, or no offer, potentially constituting bad faith conduct. Judge Jones looked to Judge Stengel’s 2017 Davis decision to support this finding.
Date of Decision: April 17, 2020
Lowndes v. Travelers Property Casualty Co. of America, U. S. District Court Eastern District of Pennsylvania CIVIL ACTION NO. 19-5823, 2020 U.S. Dist. LEXIS 67620 (E.D. Pa. April 17, 2020) (Jones, II, J.)
This UIM case involved a claim for full policy limits, amounting to $45,000. The insured alleged serious permanent injuries.
Over two years passed from the time the insured gave notice until the time of suit, with the claim neither paid nor denied. The insured filed suit for declaratory judgment, breach of contract, and bad faith. The insurer moved to dismiss the bad faith claim and attorney’s fee claim, and the court denied the motion.
Bad Faith Claim Based on Delay Adequately Pleaded
The court recognized at least two sources of statutory bad faith: (1) failure to pay and (2) delay in making payment. As to the first, “[w]here a claim of bad faith is based on a refusal to pay benefits under a policy, ‘the plaintiff must show that the defendant did not have a reasonable basis for denying benefits under the policy and that defendant knew or recklessly disregarded its lack of reasonable basis in denying the claim.’” As to the second, “[t]o sufficiently plead bad faith by way of delay, ‘a plaintiff must allege that a defendant had no reasonable basis for the delay in coverage, and that the defendant delayed coverage with knowing or reckless disregard for the unreasonableness of its action.’”
The court found bad faith delay pleaded, based on the following factual allegations:
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The insurer “was put on notice of [the] underinsured motorist benefits claim in March 2017.”
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“In January 2018, [the insurer] waived its subrogation rights and consented to … settlement with the third-party insurance carrier.”
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“On March 30, 2018, [the insurer] advised [the insured] that her claim for underinsured motorist benefits was being evaluated.”
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“From April to July 2018, the parties communicated regarding scheduling an EUO, which took place on July 9, 2018.” As pleaded, it was the insurer that sought an EUO in July, and the insured asked to move it up.
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“On July 26, 2018, [the insurer] advised [the insured] that it would likely require her to undergo an IME, however, [the insurer] never moved forward with the IME.”
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“Between August 2018 and February 2019, [the insured] provided medical records to [the insurer], both unsolicited and at their request.”
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“Between February and June 2019, [the insurer] did not notify [the insured] as to the status of her claim, and at the time of the filing of the instant Complaint in September 2019, [the insurer] had neither paid [the] claim, nor denied it.”
The court summarized how these factual allegations made out a bad faith claim. The insured repeatedly tried to have her claim evaluated. She complied with requests for information, provided unsolicited information, and inquired as to the claim status. However, “despite having over two years to conduct its investigation, [the insurer] has unreasonably and without justification failed to approve or deny her claim.” Based on these factual allegations, there appears no reasonable basis to delay the claim evaluation, which the court equated with a failure to evaluate. The knowing/reckless bad faith element was met because the insured had given notice to the insurer through her inquiries and providing information that the claim had not been paid or rejected.
The court cited the Ridolfi, Kelly, and Smerdon cases concerning a delay-based bad faith analysis.
Clear and Convincing Evidence Standard Held Irrelevant at Pleading Stage
The court rejected the argument that the factual pleadings had to be measured against the clear and convincing evidence standard at the motion to dismiss stage. The court stated this standard is relevant, e.g., to trial, but not at the pleading stage. Rather, pleadings are governed by the plausibility standard. Thus, the insured “need not ‘establish’ anything at this early point in the proceedings, let alone ‘by clear and convincing evidence.’” “Whether sufficient facts will be discovered for [the insured] to survive a motion for summary judgment is unknown and may be addressed at a later date.”
Attorney’s Fees Possible under Bad Faith Statute or MVFRL
Finally, the court refused to dismiss the attorney’s fee claim based on both the bad faith statute, and the possibility that attorney’s fees might be permitted under section 1716 of the Motor Vehicle Financial Responsibility Law.
Date of Decision: January 24, 2020
Solano-Sanchez v. State Farm Mutual Auto Insurance Co., U. S. District Court Eastern District of Pennsylvania No. No. 5:19-cv-04016, 2020 U.S. Dist. LEXIS 11784 (E.D. Pa. Jan. 24, 2020) (Leeson, Jr., J.)
Like the recent Middle District Ferguson decision, the opinion in this case involves good news and bad news. First, the court addresses head on whether statutory bad faith must be predicated on a denial of benefits, or can be independently sustained based upon a variety of poor claims handling practices. That’s good for those seeking clarity on this issue. The bad news is that, like Ferguson, this opinion never addresses head on the 2007 Pennsylvania Supreme Court decision in Toy v. Metropolitan Life Insurance Company.
As we have set forth many times on this Blog, the Toy decision strongly appears to require the denial of a benefit as a predicate to bringing a statutory bad faith claim, meaning a refusal to pay proceeds due under the policy, unreasonably delaying payment of proceeds due under the policy, or refusing to pay for a defense due under the policy. Under Toy, other types of poor conduct in claims handling go to evidence of statutory bad faith, without being actionable bad faith standing alone. See this 2014 article for a more detailed discussion.
In the present case, an excess carrier paid $19,000,000 to settle a malpractice suit, contingent on its right to recoup that payment. The insured objected. The insurer brought suit to recover the money, and the insured counterclaimed for breach of contract, common law contractual bad faith, statutory bad faith, and for a declaratory judgment.
The court denied the insurer’s motion to dismiss the counterclaims, and the insurer brought a motion for reconsideration on whether the bad faith claim was adequately pleaded, and whether the damage claims were too speculative and contingent to stand. Both motions were unsuccessful. [We only address the bad faith claim.]
The court focused on the Pennsylvania Supreme Court’s 2017 Rancosky decision to address the issue of whether an actionable statutory bad faith claims requires “the plaintiff must allege that the insurer has denied benefits under the policy. … [and] that only either a refusal to pay benefits or a delay in paying benefits that becomes an effective denial can constitute a denial of benefits sufficient to state a claim under § 8371.” The court points out that the Rancosky majority did not address that issue, but Justice Wecht’s Rancosky concurrence “listed several types of conduct, including poor claims-handling, a failure to respond to the insured, and other similar conduct, which could give rise to a § 8371 claim and that list is broader than a refusal or delay in paying benefits.” Although the majority had not adopted that concurrence, because the majority did not expressly refute the concurrence, the District Court “remain[ed] convinced that the Pennsylvania Supreme Court, if confronted with the issue … would hold that [the insured] had stated a claim.”
[Note: Per the above comment, however, it strongly appears that the Pennsylvania Supreme Court did address the issue in 2007. A review of the carrier’s brief indicates that it argued Toy stood for the proposition “that ‘bad faith’ under § 8371 is strictly limited to ‘those actions an insurer took when called upon to perform its contractual obligations of defense and indemnification or payment of a loss.’” The carrier further argued that Rancosky did not overrule or limit this principle, and if anything reaffirmed it. The District Court clearly rejected the notion that Rancosky limited statutory bad faith claims to the denial of benefits, but never addressed whether Toy did so.]
Thus, the motion for reconsideration was denied. The court held that the insured stated a claim by alleging “poor claims-handling, a failure to respond to the insured, and other similar conduct, which could give rise to a § 8371 claim,” wholly independent of any refusal to pay or delay in paying benefits.
Date of Decision: January 23, 2020
Ironshore Specialty Insurance Co. v. Conemaugh Health System, U. S. District Court Western District of Pennsylvania CASE NO. 3:18-cv-153, 2020 U.S. Dist. LEXIS 11060 (W.D. Pa. Jan. 23, 2020) (Gibson, J.)
Two recent examples of cases finding that statutory bad faith claims must be based upon a denial of benefits are Judge Dubois’ 2019 Buck decision, and Judge Kearney’s 2019 Boring decision. In her 2019 Purvi decision, Judge Beetlestone states that, with limited exceptions, “the essence of a bad faith claim must be the unreasonable and intentional (or reckless) denial of benefits….” (Emphasis in original).
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.)
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.)
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.)
