Archive for the 'PA – Federal Pleading Inadequate' Category

NO BAD FAITH WHERE NO BENEFIT IS DENIED (Philadelphia Federal)

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In this property damage case, a policy endorsement placed defined limits on the scope of covered property damage. For example, the insured might have to pay for work covering 400 square feet to accomplish repairs needed to correct a problem, but the endorsement might only cover 200 square feet out of that 400. In this case, the insurer was only willing to pay for a portion of the insured’s overall repair costs, per the endorsement, but the insured wanted coverage for the entire amount. The insured brought breach of contract, bad faith, and unfair trade practices claims, and was now on his second amended complaint. The insurer moved to dismiss.

There is no breach of contract

Judge Kearney agreed that the insurer’s limited payment comported with the endorsement, and there was no breach of contract. He rejected the notion that the underlying policy could be kept in play, while striking off the endorsement on an unconscionability theory. Unconscionability is an affirmative defense and not a cause of action. Thus, the insured could not use this theory as a plaintiff. The court also rejected the insured’s reasonable expectations argument in refusing to rewrite the policy and strike the endorsement.

Although not pleaded in either the original complaint or two subsequent amendments, the insured argued against dismissal on the basis that a key word in the endorsement was ambiguous. Construing that ambiguity for the insured would purportedly allow for broader coverage. The court gave leave for another amendment, with the admonition to the insured and counsel that any amendment asserting this new position had to comply with Rule 11.

There is no actionable bad faith claim when there is no denial of a benefit

On the bad faith claim:

  1. The court could not infer the insurer lacked a reasonable basis to deny benefits, or acted with intent or reckless disregard in doing so. The insured himself alleged that benefits were not denied on the policy with the endorsement, only that the endorsement should be stripped from the policy, which would then allow additional benefits. As the court rejected that position, no benefits were denied under the policy as actually written.

The court noted that leave was given to replead the contract claim on the new ambiguity theory. Judge Kearney extended this possibility to re-pleading the bad faith on an ambiguity theory, if such a claim could be properly pleaded. He reminded the insured, however, that simply re-pleading the breach of contract on the basis of ambiguity “does not automatically equal statutory bad faith.”

  1. The court observed that “Pennsylvania’s bad faith statute does not extend to conduct unrelated to the denial of a claim for benefits.” To quote Judge Kearney at length:

Bad faith claims do not remedy an insurer’s allegedly insufficient performance of its contractual obligation or to indemnify losses. [citing Toy v. Metro. Life Ins. Co., 593 Pa. 20, 928 A.2d 186, 198-200 (Pa. 2007).] Our Court of Appeals has affirmed “legislative intent. . . makes clear that the [bad faith] statute was intended specifically to cover the actions of insurance companies in the denial of benefits.” [citing Wise v. Am. Gen. Life Ins. Co., No. 02-3711, 2005 U.S. Dist. LEXIS 4540, 2005 WL 670697 (E.D. Pa. Mar 22, 2005), aff’d, 459 F.3d 443 (3d Cir. 2006).] The General Assembly did not intend bad faith liability to extend to an insurer’s solicitation of customers or to regulate insurance policies generally. [Id.] For example, [the insured] argues [the insurer] acted in bad faith when it bargained with [the insured] for his insurance plan. We cannot recognize a bad faith claim for actions unrelated to the handling or denial of benefits. [The insured] also fails to plead a single fact evidencing delay or unreasonable treatment of his claim other than a disagreement over whether the Endorsement should govern. We cannot locate a fact suggesting a frivolous or unfounded refusal to pay the insurance proceeds. [The insured] does not plead a lack of good faith investigation into the facts or a failure to communicate. Instead, we must disregard conclusory allegations unsupported by facts, including the catch-all “acting unreasonably and unfairly.”

Finally, the court observed that any claim that the carrier interpreted an ambiguous policy term in bad faith would need many more facts than found in plaintiff’s current arguments.

Unfair Trade Practices and Consumer Protection Law (UTPCPL) claim dismissed, and insured admonished as to nature of any future amendment

As to the putative deceptive conduct in including the endorsement, the court found that the complaint failed to allege intent or justifiable reliance. Thus, the catch-all UTPCPL deceptive practices claim failed, lacking these two necessary elements. Moreover, the alleged claim constitutes nonfeasance (failure to pay), rather than misfeasance, and thus fails on this additional ground.

While leave to amend remained on the table, the court admonished the insured that any new UTPCPL claim based on misfeasance would be scrutinized in light of existing judicial admissions indicating the claim is only one for nonfeasance.

Date of Decision: August 9, 2019

Boring v. State Farm Fire & Cas. Co., U. S. District Court Eastern District of Pennsylvania CIVIL ACTION NO. 19-1833, 2019 U.S. Dist. LEXIS 134242 (E.D. Pa. Aug. 9, 2019) (Kearney, J.)

 

NEW JERSEY FEDERAL COURT WOULD ALLOW PA BAD FAITH CLAIM TO PROCEED ON BASIS THAT INSURER KNEW ITS REPRESENTATIVE MISREPRESENTED THE POLICY’S SCOPE PRIOR TO POLICY BEING ISSUED (New Jersey Federal)

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In this case, the insured alleged that promises made in selling a disability policy differed from the terms of the policy itself, to the insured’s detriment. Although a New Jersey federal action, the case involved Pennsylvania law, including the Pennsylvania bad faith statute. The insurer moved to dismiss the bad faith count, and well as claims for breach of the duty of good faith and fair dealing and fraud.

First, the court quickly dismissed the separate claim for breach of good faith and fair dealing as subsumed in the breach of contract claim.

As to the bad faith claim, the insured asserted in his brief the carrier was aware of prior misrepresentations by its sales representative about the scope of coverage. Therefore, the insurer could not in good faith enforce the terms of the policy that limited coverage more narrowly that the sales representative’s promises, which had induced the insured to purchase the policy.

The factual basis of these allegations was that the insurer had been sued before on the same basis, and the sales representative’s deposition had been taken where he admitted his conduct.

This was only included in the insured’s briefing on a motion to dismiss. The complaint itself made no reference to the prior suit or the deposition; nor did the insured plead that the carrier was aware of the sales representative’s misstatement before issuing the policy. Thus, this count was dismissed without prejudice, presumably to replead with these allegations included in an amended complaint.

[Note: There is case law indicating that pre-suit misrepresentations are addressed via Pennsylvania’s Unfair Trade Practices and Consumer Protection Law, whereas statutory bad faith is based on post-policy conduct in the handling and disposition of claims made against the policy. An example can be found here.]

The court refused to dismiss a separate fraud count on the gist of the action theory, finding that the fraudulent inducement preceded the contract; however, again, the facts were not adequately set forth and dismissal was without prejudice.

Date of Decision: August 8, 2019

Javie v. Mass. Cas. Ins. Co., U. S. District Court District of New Jersey Civil Action No. 18-2748, 2019 U.S. Dist. LEXIS 133123 (D.N.J. Aug. 8, 2019) (Vazguez, J.)

AMENDED COMPLAINT STILL FAILS PLAUSIBILITY TEST WITHOUT REQUISITE PREDICATE FACTS (Philadelphia Federal)

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The original bad faith claim in this property damage case was dismissed. A summary of that decision can be found here.

The dismissal was without prejudice, and the insured filed an amended bad faith claim. The insurer moved to dismiss, and obtained another dismissal. Again, however, the dismissal was without prejudice; though any new amendment was limited to  facts learned during discovery, as the sole basis to seek amendment.

Prior to its detailed analysis, the court quoted its earlier admonition to the insureds that “‘[i]f Plaintiffs are unable to allege plausible facts underlying their various claims of bad faith, then the Complaint should not be amended.’”

The court adhered to the following process in reviewing the complaint’s plausiblity: “(1) identifying the elements of the claim, (2) reviewing the complaint to strike conclusory allegations, and then (3) looking at the well-pleaded components of the complaint and evaluating whether all of the elements identified in part one of the inquiry are sufficiently alleged.” In essence, “[a] plaintiff cannot merely say that an insurer acted unfairly, but instead must describe with specificity what was unfair.”

Despite amendment, the complaint still pleaded no facts “with respect to the timing of the investigation, the methods and procedures which Defendant employed during the investigation, and the length of the investigation.” Moreover, “[b]eyond the investigation-related allegations, all of the allegations in the original Complaint are simply restated [in the Amended Complaint], without any additional factual information, in the Amended Complaint.”

In addition to these “repackaged” allegations, there were purportedly 12 new allegations in the amended complaint. As with the first complaint, however, these were merely legal conclusions without “prerequisite factual support”.

By way of example, the insured alleged intentional and unreasonable delays in claim handling, but failed to allege any facts showing “(1) how Defendant’s action were purposeful, (2) what made Defendant’s actions unreasonable, or (3) the extent of Defendant’s ‘delay’ in adjusting their claim.” Similarly, “Plaintiffs also allege that Defendant acted in bad faith by failing to respond to their communications and requests for information. … But Plaintiffs never allege the dates of these communications, the number of communications in question, or the substance of these communications.”

In sum, the “added allegations are simply more of the same; they lack the required factual specificity and rely on impermissible legal conclusions….”

Leave to amend a second time was denied as “futile because Plaintiffs have already had an opportunity to cure the deficiencies of their bad faith claim in the original Complaint and have failed to do so. Given Plaintiffs’ failure to sufficiently amend their bad faith claim, the Court is satisfied that Plaintiffs are not entitled to a third proverbial bite of the apple.”

That being said, the court did allow for future amendment under limited circumstances. If new facts were uncovered during discovery that supported a bad faith claim, only then could the insureds file a motion for leave to amend. Thus, while the court would not permit another amendment at this time, dismissal was still without prejudice.

Date of Decision: August 6, 2019

MBMJ Props., LLC v. Millville Mut. Ins. Co., U. S. District Court Eastern District of Pennsylvania CIVIL ACTION NO. 18-5071, 2019 U.S. Dist. LEXIS 131217, 2019 WL 3562019 (E.D. Pa. Aug. 6, 2019) (Slomsky, J)

BAD FAITH STATUTE OF LIMITATIONS NOT TOLLED, OR RENEWED, BY CHANGE IN THE LAW ON COVERAGE; NO PLAUSIBLE CLAIM PLEADED; BAD FAITH POSSIBLE EVEN IF BENEFIT NOT DUE (Philadelphia Federal)

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This UIM case was stimulated by the Pennsylvania Supreme Court’s recent decision reversing precedent on the household vehicle exclusion. In dismissing the bad faith claim, the court found:

  1. The two-year statute of limitations was not tolled by a change in the law.

  2. The change in the law, which resulted in the insured renewing her demand for coverage, did not re-start the statute of limitations.

  3. Alternatively, the insured failed to plead sufficient facts to set forth a plausible bad faith claim; rather she only made a few conclusory allegations.

The court did have a significant footnote, which addresses the long-standing debate over whether there can be statutory bad faith where no coverage is due. Judge Pappert clearly comes down on the side that bad faith can still exist, noting that “a claim for bad faith pursuant to 42 Pa. C.S. § 8371 is a separate and distinct cause of action and is not contingent on the resolution of the underlying contract claim. … Thus, if bad faith is asserted as to conduct beyond a denial of coverage, the bad faith claim is actionable as to that conduct regardless of whether the contract claim survives.” As we have noted before on this blog, other courts dispute this view.

Date of Decision: July 3, 2019

O’Brien v. GEICO Employees Insurance Co., U. S. District Court Eastern District of Pennsylvania CIVIL ACTION NO. 19-01920, 2019 U.S. Dist. LEXIS 110914 (E.D. Pa. July 3, 2019) (Pappert, J.)

COURT WILL NOT SIMPLY INFER BAD FAITH CONDUCT, WITHOUT FACTUAL DETAIL THAT CAN UNDERPIN A PLAUSIBLE BAD FAITH CLAIM (Philadelphia Federal)

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This is another example of a failure to meet federal plausibility pleading standards when asserting statutory bad faith. The opinion was issued by Judge Michael Baylson. We have summarized nearly 40 of Judge Baylson’s bad faith opinions over the years.

Judge Baylson sets out the basic propositions guiding the outcome of this motion to dismiss the bad faith count.

  1. “Alleging an insurer failed to pay plaintiff for claims covered by an insurance policy, even if the loss-causing incident is uncontested and plaintiff allegedly fulfilled all prior conditions, does not itself state a plausible claim for unreasonableness.” Judge Baylson cites his 2011 Eley opinion, among other cases, in support.

  2. “[M]ere averment that an insurer had no reasonable basis for refusing to reimburse a plaintiff is a conclusory legal statement, not a factual allegation.”

  3. “'[T]he mere fact that [the insurer] denied [the insured’s] request for coverage,’ without factual specifics as to ‘who, what, where, when, and how’ such denial was unreasonable, does not plausibly show reckless indifference.” He cites Judge O’Neill’s 2012 Blasetti decision in support.

  4. “A failure to immediately accede to a demand [under an insurance policy] cannot, without more, amount to bad faith.” Judge Baylson cites to Judge Buckwatler’s Pasqualino decision in support of this proposition.

The case involved a property damage claim for breach of contract and bad faith. Applying the foregoing principles to the complaint’s averments, Judge Baylson reaches the following conclusions:

First, the complaint alleges the insurer possessed no evidence that the losses did not occur and were not substantiated.  However, there are no supporting facts alleged as to the unreasonableness of the insurer’s position. The only allegations are the property damage was covered under the policy, and that the insured complied with the policy by sending some written documentation of the damages and demanding coverage.

Judge Baylson refused to infer unreasonableness from simply pleading a failure to reimburse the alleged damages, “without [the complaint] clarifying what expenses were submitted, when they were rejected, and whether or how [the insurer] responded.”

Second, the complaint wholly failed to address the knowing or reckless disregard element needed to prove statutory bad faith. Simply arguing a carrier’s general knowledge, i.e., the conclusory notion that the carrier must have known its position was unreasonable,  with no supporting facts, is inadequate to meet the second prong of the Terletsky/Rancosky bad faith test.

The complaint was dismissed without prejudice, however, with leave to amend.

Date of Decision: June 10, 2019

Kelley v. State Farm Fire & Casualty Co., U. S. District Court Eastern District of Pennsylvania CIVIL ACTION NO. 19-0626, 2019 U.S. Dist. LEXIS 96904 (E.D. Pa. June 10, 2019) (Baylson, J.)

INSURED CANNOT RELY ON (1) FACTS OUTSIDE THE COMPLAINT OR (2) CONCLUSORY ALLEGATIONS TO DEFEAT MOTION TO DISMISS; AND INSURER OWES NO FIDUCIARY DUTY IN UIM CONTEXT (Philadelphia Federal)

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This UIM case involved a dispute over the available amount of coverage under an auto policy.  The complaint included breach of contract, statutory bad faith, and breach of the duty of good faith and fair dealing claims. The insurer also believed a breach of fiduciary duty claim may have been alleged.  The insurer moved to dismiss all claims.

The insured argued facts outside the complaint in responding to the insurer’s motion to dismiss. These facts may have stated a cause of action for breach of contract had they been properly pleaded, but the court could not consider them in ruling on the motion to dismiss. Thus, the motion to dismiss the contract claim was granted, but without prejudice.

The court also found the insured failed to plead a UIM bad faith claim. As stated, in opposing the motion to dismiss the insured relied on facts not pleaded to argue the carrier improperly refused stacking. Unpleaded facts could not support a bad faith claim, though again, the insured was allowed to amend and presumably assert these factual allegations in a future pleading.

As to the bad faith allegations actually pleaded, these were conclusory and could not make out a plausible bad faith claim.

The conclusory averments included: “[the insurer] committed bad faith by acting with a dishonest purpose and knowingly breaching a duty because of its self-interest …; denying coverage …; collecting premiums and then denying coverage…; and [c]onspiring to create a defense for its own self-interest which its [sic] knows has no factual basis….”

The court further observed there is no fiduciary duty in the UIM context, and dismissed any such claims.

The court finally found the common law bad faith claim to be subsumed in the breach of contract claim, as there is no common law bad faith claim in Pennsylvania outside the contractual duty to act in good faith.

Date of Decision: June 3, 2019

Pommells v. State Farm Insurance, U. S. District Court Eastern District of Pennsylvania CIVIL ACTION No. 18-5143, 2019 U.S. Dist. LEXIS 92435, 2019 WL 2339992 (E.D. Pa. June 3, 2019) (Kelly, 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.)

AN INSURED MUST PLEAD SOME SPECIFIC DETAILS RAISING CONDUCT TO THE LEVEL OF BAD FAITH TO SURVIVE A MOTION TO DISMISS, AND NOT SIMPLY THAT A CLAIM WAS DENIED OR A DEMAND REJECTED (Philadelphia Federal)

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This was the insureds’ second chance at pleading bad faith, after having their original UIM bad faith counterclaim dismissed without prejudice. The earlier post summarizing the first dismissal can be found here.

The second try fared no better. Rather, review of the second amended counterclaim made “clear that any further attempt at amendment would be futile because Defendants cannot plead their bad faith claim with adequate factual support and specificity.”

Once again, the court observed that: “A bad faith claim is ‘fact specific’ and depends upon the insure[r]’s conduct in connection with handling and evaluating a specific claim.” … As the party bringing the bad faith claim under 42 PA. C.S. § 8371, it is [the insured’s] burden to “‘describe who, what, where, when, and how the alleged bad faith conduct occurred.’”

The insureds’ two new paragraphs, set forth below, were deemed conclusory:

  1. Specifically, Insurance Company has taken [the insured’s] testimony and has been provided all of her documentation, which clearly demonstrates that she was covered under the applicable insurance policy and that her damages are far in excess of the UIM coverage amount.

  2. However, despite objective and subjective knowledge that [the insured] was covered under the applicable insurance policy and that her damages are far in excess of the UIM coverage amount, Insurance Company refused to honor their obligations under the insurance agreement for the bad faith purpose of seeking to evade their obligations to the Das family under the insurance contract.

The court observed that these paragraphs lacked “’the dates of any actions’ taken regarding the policy to support their allegation of unreasonable delay, nor have [the insureds] explained, in detail, ‘what was unfair’ about Plaintiff’s interpretation of the policy provisions.”

The court added:

Absent specific details that establish a dishonest purpose, it is not bad faith for an insurer to investigate and protect its interests during litigation. Jung v. Nationwide Mut. Fire Ins. Co., 949 F. Supp. 353, 360 (E.D. Pa.1997) (finding that insurer “had a reasonable basis to investigate and deny the claim.”). Moreover, the failure of an insurance company “to immediately accede to a demand for the policy limit” is not, without specific facts, enough to establish bad faith. Smith, 506 F. App’x at 137. [The insureds’] inclusion of two conclusory paragraphs to the Second Amended Counterclaim does not alter that conclusion.

The inability to plead bad faith also required dismissing the punitive damages claim with prejudice as well.

Date of Decision: May 8, 2019

Amica Mutual Insurance Co. v. Das, U. S. District Court Eastern District of Pennsylvania CIVIL ACTION NO. 18-1613, 2019 U.S. Dist. LEXIS 78320 (E.D. Pa. May 8, 2019) (Jones, II, J.)

COURT STRIKES ALLEGATIONS THAT INFER DUTIES OUTSIDE THE POLICY, BUT PERMITS ALLEGATIONS OF PRESENT OR PAST BENEFIT DENIALS (Middle District)

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Offering a different take on the usual challenge to federal pleadings, the insurer moved to strike portions of this UIM bad faith complaint as immaterial and impertinent, rather than to dismiss the entire complaint.

The complaint pleaded the insurer’s alleged refusal to pay full medical benefits, and the alleged consequences of that refusal vis-à-vis the insured and third parties. The insurer focused its motion on striking four specific paragraphs of the complaint.

The first two paragraphs raised the insurer’s advertisements directed to members of the military. The insured, a long serving Army veteran, alleged that he relied on representations and warranties made in these advertisements, which the insurer breached. The court agreed to strike these two paragraphs as irrelevant to the issue of whether the insurer breached a duty under the policy itself, or violated the bad faith statute. In addition, the court found these warranty averments prejudicial, as they could lead a jury to believe the insurer owed duties outside the policy.

The court, however, refused to strike the other two paragraphs at issue.

One of these paragraphs included an averment that the insurer refused to pay a benefit due, while also mentioning grievances directed at third parties. The alleged refusal to pay the insured was enough to preserve this paragraph, even though the allegations regarding third parties may not be actionable.

As to the final paragraph at issue, the insurer took the position that the injuries at issue did not arise from the accident. The insured argued the ramifications of this erroneous position posed a variety of detriments to him, with simultaneous advantages to the insurer. While the paragraph did have some focus on contingent future conduct, it still alleged the insurer had already refused to pay for medical treatment, and how this refusal might be used by the insurer to its advantage in limiting payments or evidence. The court held: “These averments could bear some possible relation to whether Defendant … breached a duty owed under the Policy or imposed by Pennsylvania’s bad faith statute. See Rancosky v. Wash. Nat’l Ins. Co., 642 Pa. 153, 170 A.3d 364, 365 (Pa. 2017) (finding that evidence of an insurance company’s motive of self-interest or ill-will may be probative of a bad faith claim).”

Date of Decision: May 6, 2018

Bacon v. USAA Casualty Insurance Co., U. S. District Court Middle District of Pennsylvania No. 1:18-cv-01686, 2019 U.S. Dist. LEXIS 76218, 2019 WL 1988214 (M.D. Pa. May 6, 2019) (Kane, J.)

“SWEEPING” CONCLUSORY ALLEGATIONS CANNOT SUPPORT A BAD FAITH CLAIM (Middle District)

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This case involved the issue of whether the insureds resided at a property when a fire loss occurred. The insurer denied coverage, concluding they did not, and that certain misrepresentations were made by the insureds in connection with the fire loss claim. The insureds sued for breach of contract and bad faith.

In their complaint, the insureds asserted “that the property was in fact occupied at the time of the fire as the Plaintiffs were making ongoing and continuous repairs and renovations to the dwelling.” Judge Caputo agreed with the insurer that because “Plaintiffs allege not that they resided at the property, but only that they ‘occupied’ the property at the time of the loss as a result of ‘ongoing and continuous repairs and renovations to the dwelling’ … that Plaintiffs have failed to state a breach of contract claim.”

As to the bad faith claim, Plaintiffs allegations were conclusory and they offered no “factual averments supporting these sweeping allegations of bad faith.” The conclusory, sweeping, allegations included:

“(1) Defendant has ‘undertaken this course of action and unilaterally, without justification, deprived Plaintiffs of their rightful payment for damages to their property [] . . . all in the financial interest of [the insurer] and in disregard of the interest of their insureds . . .’”

“(2) Defendant’s ‘actions constitute a pattern in practice, not only in this claim, but in the handling of other claims in which totally unfair and unethical negotiation and settlement tactics are not only employed but encouraged by Defendant . . .’” and

“(3) Defendant ‘has acted with obvious bad faith and/or reckless disregard to the rights of their insured in failing to pay the Plaintiffs’ claim pursuant to the terms and conditions of the above mentioned homeowners insurance policy.’”

Judge Caputo did give the plaintiffs leave to file an amended complaint as to both the breach of contract and bad faith claims.

Date of Decision: May 2, 2019

Bloxham v. Allstate Insurance Co., U. S. District Court Middle District of Pennsylvania NO. 3:19-CV-0481, 2019 U.S. Dist. LEXIS 74139 (M.D. Pa. May 2, 2019) (Caputo, J.)