Archive for the 'PA – Federal Pleading Inadequate' Category

FAILURE TO PROVIDE UNDERWRITING FILE CANNOT CONSTITUTE BAD FAITH ABSENT MORE SPECIFIC FACTS SUPPORTING IT WAS WITHHELD IN BAD FAITH (Philadelphia Federal)

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Judge Baylson had previously dismissed in this matter, summarized here, but allowed the insured leave to amend.  The insured filed an amended complaint, and the carrier moved again to dismiss the bad faith claim.

The carrier had taken the position that there was no stacking available to the insured. Before suit, the insured asked the carrier for its underwriting file to confirm there were no UIM stacking benefits.  The insurer refused to produce that file absent a court order.

The insured argued his bad faith claims were not premised on UIM coverage disputes, “but rather upon Defendant’s misrepresentation of that coverage and refusal to disclose the underwriting agreement.” The insured alleged the carrier refused to produce the underwriting file “because it contained information that would demonstrate Defendant falsely represented the coverage amount.” This alleged “concealment and misrepresentation by the Defendant constitute[d] an act of bad faith.” Judge Baylson disagreed and dismissed the bad faith claim with prejudice.

A bad faith claim requires plaintiff showing by clear and convincing evidence that a benefit denial was unreasonable, and that the insurer knew it was unreasonable or recklessly disregarded that fact. A bad faith claim cannot meet the plausible pleading standard, however, by simply pleading the insurer denied a coverage request. Rather, an insured-plaintiff must plead “factual specifics as to the ‘who, what, where, when, and how’ of the denial,” to make a cases for reckless indifference.

Judge Baylson found the insured plaintiff here alleged “no factual content indicating that Defendant (1) lacked a reasonable basis to deny coverage or (2) that Defendant knew or recklessly disregarded the lack of reasonable basis. Rather, Plaintiff essentially asks the Court to infer—without providing any supporting facts—that Defendant’s sole motivation in withholding the underwriting file was to deceive Plaintiff.”

In Judge Baylson’s first decision, he had “addressed reasons other than bad faith that might explain why Defendant refused to provide the underwriting document.” Specifically, he observes that “underwriting files often contain an insurer’s evaluation of the risks along with other confidential business information, to be in line with a wide swath of rational and competitive business strategy.” (Internal quotation marks omitted.) The amended complaint fails to allege “any facts that plausibly suggest Defendant had no reasonable basis to deny Plaintiff stacked coverage, nor that Defendant knew or disregarded the lack of any such basis.”

Date of Decision: December 30, 2020

Dietz v. Liberty Mutual Insurance Company, U.S. District Court Eastern District of Pennsylvania No. 20-1239, 2020 WL 7769933 (E.D. Pa. Dec. 30, 2020) (Baylson, J.)

BAD FAITH CLAIMS TIME-BARRED WHEN RAISED 12 YEARS AFTER INSUREDS ON NOTICE OF ALLEGED BAD FAITH (Philadelphia Federal)

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The insureds allege they wanted a joint annuity policy, rather than an individual annuity policy.  The carrier was fully aware of the insureds’ intent and request, but only issued them an individual annuity policy. They first received the annuity policy in 2008, but allege they only learned for the first time in 2020 that it was an individual annuity policy.

The carrier refused to treat the policy as a joint annuity, and the insured brought claims for breach of contract and bad faith, among others. The insurer successfully moved to dismiss the complaint on statute of limitations grounds.

The court found the breach of contract claim time-barred, as well beyond the four-year statute of limitations. The claim could not be salvaged by the discovery rule as the insureds did not act with reasonable diligence in discovering and pursuing their claims.  The information alerting them to the alleged breach had been in front of them for 12 years, but they did not act.

Similarly, the bad faith claims were time-barred.  The statutory bad faith claim has a two-year limitations period, which had long run. Further, any contract based bad faith claim was time-barred for the same reasons as the breach of contract claim.  The court only assumed for the sake of argument that the discovery rule could even apply to bad faith claims, which again failed for lack of reasonable diligence.

The court also observed that the insureds failed to allege bad faith in accord with federal pleading standards, averring nothing more than a breach of contract accompanied by conclusory allegations of bad faith.

Date of Decision: January 7, 2021

Smith v. Pruco Life Insurance Company, U.S. District Court Eastern District of Pennsylvania No. CV 20-04098, 2021 WL 63266 (E.D. Pa. Jan. 7, 2021) (McHugh, J.)

NO SECOND BITE AT THE APPLE IN RECONSIDERING BAD FAITH DISMISSAL; MVFRL TREBLE DAMAGES CLAIM STRICKEN (Philadelphia Federal)

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Eastern District Judge Pappert previously dismissed the insured’s UIM bad faith claim.  A summary of that decision can be found here.

Presently, Judge Pappert denied the insured’s motion for reconsideration. He cited case law making clear that motions for reconsideration are not second bites at the apple, but must show either: “(1) an intervening change in the controlling law; (2) the availability of new evidence that was not available when the court granted the motion … or (3) the need to correct a clear error of law or fact or to prevent manifest injustice.”

None of these factors existed. Thus, while the insured “may disagree with the Court’s determination, nothing in her motion shows that her bad faith claim was dismissed because of a clear error of law or that its dismissal amounts to manifest injustice.”

In his earlier decision, Judge Pappert also dismissed plaintiff’s claims for treble damages under the Motor Vehicle Financial Responsibility Law (MVFRL), on the basis the insured did not allege wanton conduct against the insurer. That dismissal, however, was without prejudice. The insured raised the same claim in its second amended complaint, but Judge Pappert found this amendment “still lacks sufficient allegations of wanton conduct, as she has not alleged ‘any new facts at all.’”

Rather than dismissing the claim under Rule 12(b)(6), consistent with the insurer’s motion Judge Pappert struck the treble damages claim per Rule 12(f).

Date of Decision:  December 18, 2020

Canfield v. Amica Mut. Ins. Co., U.S. District Court Eastern District of Pennsylvania No. CV 20-2794, 2020 WL 7479615 (E.D. Pa. Dec. 18, 2020) (Pappert, J.)

SIMPLE VALUATION DISPUTE CANNOT CREATE BAD FAITH; NO ACTIONABLE BAD FAITH AGAINST CLAIM HANDLER; MIXED RESULT UNDER UTPCPL (Philadelphia Federal)

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The insured brought suit over a $500 valuation dispute.  The carrier valued the insured’s car at $2,500 ($3,000 less at $500 deductible), and repairs were estimated in excess of $3,000. The car being a total loss, the insurer offered $2,500, but the insured wanted $3,000.  This led to a 10 count complaint against the insurer and its claim handler. We only address the two bad faith counts against the insurer and/or the claim handler, and the Unfair Trade Practices and Consumer Protection Law (UTPCPL) claims against the insurer.

No statutory bad faith.

The court dismissed the statutory bad faith claim.  There were simply no allegations of fact that could support a plausible bad faith claim. The complaint itself showed the carrier appropriately investigated the claim, and gave a prompt damage assessment.  Plaintiff did not allege the repair cost estimate was incorrect, or the inspection faulty. There was no allegation that the insurer’s valuation was unreasonable. There was no claim denial, just a dispute over the sum due.

The court found this simply a “normal dispute” that did not amount to bad faith. “An insurer’s failure to honor its insured’s subjective value of his claim does not—without more—give rise to a bad faith claim.” The court, however, did allow leave to amend.

No common law bad faith against the insurer or the claim handler.

The insured brought common law bad faith claims against the insurer and claim handler. The court observed there is no tort common law bad faith cause of action; rather, in Pennsylvania common law bad faith is subsumed in the breach of contract claim. Thus, the common law claim against the insurer was dismissed with prejudice.

As to claim handler, Pennsylvania law (1) does not support a statutory bad faith claim against claim handlers; nor (2) does it recognize a bad faith claim in contract against adjusters (who are clearly not party to any contract). These claims were dismissed with prejudice.

A mixed result under the UTPCPL.

The court also dismissed one UTPCPL claim on the basis that it alleged poor claim handling, not deceptive inducement to enter the insurance contract.  However, the insured also alleged the carrier’s representative originally made false representations causing him to purchase the insurance in the first place.  This was sufficient to state a UTPCPL claim under its catch-all provision.

Date of Decision: December 14, 2020

Ke v. Liberty Mutual Insurance Company, U.S. District Court Eastern District of Pennsylvania No. CV 20-1591, 2020 WL 7353892 (E.D. Pa. Dec. 14, 2020) (Pratter, J.)

BAD FAITH CLAIM DISMISSED FOR FAILURE TO PLEAD SUFFICIENT FACTS (THE FIVE Ws) TO ESTABLISH KNOWLEDGE OR RECKLESS DISREGARD (Philadelphia Federal)

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This is the latest of many 2020 bad faith cases dismissed for failing to allege more than conclusory allegations. It is the second opinion this month finding a bad faith plaintiff failed to plead the necessary scientir element, even if unreasonableness in denying a benefit was alleged sufficiently.

In this UIM breach of contract and bad faith case, the insured alleged “that (1) she provided notice of the loss and her intent to pursue underinsured motorist benefits from [the insurer], (2) she demanded payment and submitted medical records to substantiate that demand, (3) [the insurer] failed to investigate thoroughly and fairly, (4) [the insurer] failed to communicate with [the insured], (5) [the insurer] has refused to pay the demand, and (6) as a result, [the insured] has and continues to suffer loss and damages.”

The insurer moved to dismiss the bad faith claim.

“A Rule 12(b)(6) motion to dismiss tests the sufficiency of a complaint. To provide a defendant with fair notice, a plaintiff must provide ‘more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do.’ Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). The Third Circuit instructs the reviewing court to conduct a two-part analysis. First, any legal conclusions are separated from the well-pleaded factual allegations and disregarded. Fowler v. UPMC Shadyside, 578 F.3d 203, 210-11 (3d Cir. 2009). Second, the court determines whether the facts alleged establish a plausible claim for relief.”

The present complaint “fails to include specific facts regarding [the insurer’s] actions, including those which would support a bad faith claim. District courts in this circuit ‘have routinely dismissed bad faith claims reciting only ‘bare-bones’ conclusory allegations unsupported by facts sufficient to raise the claims to a level of plausibility.’”

In support, Judge Pratter cites Judge Pappert’s Elican decision, Judge Slomsky’s Toner decision, and Judge Buckwalter’s Pasqualino decision.

The insured failed to plead the “Five Ws”, i.e., “the who, what, where, when, why,” “and how [the insurer’s] conduct plausibly constitutes bad faith.” Even where cursory claims might be sufficient to plausibly plead an unreasonable benefit denial, there still have to be sufficient allegations for a court to “plausibly infer that the insurer knew or recklessly disregarded a lack of a reasonable basis to deny benefits.” This split between adequately alleging unreasonableness and knowledge was present in, e.g., Pasqualino.

More recently, just one day before Judge Pratter’s opinion issued in this case, Judge Quiñones Alejandro issued her opinion in White v. Travelers, summarized earlier this week. Just as in Judge Pratter’s opinion and Pasqualino, Judge Quiñones Alejandro found the insured failed to get beyond conclusory allegations in asserting the insurer acted knowingly or recklessly in denying a benefit.

Finally, Judge Pratter cited to the Third Circuit’s Smith opinion, summarized here, reminding parties and the courts that “the mere ‘failure to immediately accede to a demand for the policy limit cannot, without more, amount to bad faith.’”

Judge Pratter did give the insured leave to amend, rather than dismissing the bad faith claim with prejudice.

Date of Decision:  December 8, 2020

Satterfield v. GEICO, U.S. District Court Eastern District of Pennsylvania No. CV 20-1400, 2020 WL 7229763 (E.D. Pa. Dec. 8, 2020) (Pratter, J.)

NO BAD FAITH FOR DENIAL OF FIRST PARTY MEDICAL BENEFITS (Western District)

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In this first party medical benefits case, the insured generally alleged that the carrier breached the policy and failed to pay medical benefits on all the bills submitted. The insured further alleged that the carrier selected a biased doctor to carry out an independent medical peer review.

The court dismissed both the breach of contract and bad faith claims, with leave to amend.

On the breach of contact claim, the Complaint failed to include “the essential terms of that policy including those related to first party benefits.” The insured never averred “why her medical treatments at issue were a result of the … accident and were reasonable and necessary or why [the insurer’s] reliance on an ‘independent medical peer review’ to deny further medical benefits was unreasonable.”

Further, the Complaint did “not sufficiently plead what damages she seeks for [the insurer’s] alleged failure to pay first party benefits. While [the insurer] may have received bills for which payment was denied, the Complaint does not sufficiently specify the scope of services or amount of billing to identify the damages that [the insured] may be seeking in this case. Therefore, without sufficient pleading as to the elements of a breach of contract, [the insured] has not adequately pleaded a breach of contract claim.”

As to the bad faith claim, the complaint only alleged the insurer “failed to complete a prompt and thorough investigation, conducted an unfair and unreasonable investigation, failed to objectively and fairly evaluate her claim, and selected a peer review physician who was biased.” These generic allegations could not meet the Twombly/Iqbal standards. The insured “did not provide any factual support for these legal conclusions,” thus, lacking the specificity to survive the motion to dismiss.

The carrier also moved to dismiss the bad faith claim on the basis that the Motor Vehicle Financial Responsibility Law, 75 Pa.C.S. § 1797, preempts the bad faith statute, 42 Pa.C.S. § 8371.

The court observed Pennsylvania’s Supreme Court has not decided the issue of whether these statutes conflict and when/whether section 1797 preempts section 8371. “However, both the Pennsylvania Superior Court and the Third Circuit have predicted that the specific provisions of § 1797 preempt the general provisions of § 8371.” Pennsylvania’s federal district courts, however, split on the extent of preemption. “While courts agree that § 1797 generally preempts § 8371 in claims for first-party benefits under the MVFRL, ‘[a] robust majority of courts have held that a Section 8371 claim is not preempted when an insurer’s alleged malfeasance goes beyond the scope of Section 1797 or is obviously not amenable to resolution by the procedures set forth in Section 1797(b).’”

The insured did not plead sufficient facts to escape the preemption argument, just as she failed to plead sufficient facts on the breach of contract and bad faith claims.  So again, the claim was dismissed with leave to amend.

Date of Decision: December 7, 2020

Franks v. Nationwide Property & Casualty Insurance Company, U.S. District Court Western District of Pennsylvania No. 2:20-CV-01290-MJH, 2020 WL 7142687 (W.D. Pa. Dec. 7, 2020) (Horan, J.)

INSURED ADEQUATELY PLEADED UNREASONABLE DENIAL/DELAY, BUT NOT KNOWLEDGE OR RECKLESS DISREGARD; UIPA/UCSP NOT BASIS FOR BAD FAITH (Philadelphia Federal)

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The insurer successfully moved to dismiss a UIM bad faith claim. While the plaintiff pleaded sufficient facts to show the insurer’s conduct was unreasonable, plaintiff failed to sufficiently plead that the insurer’s conduct was knowing or reckless.

Factual Background

The complaint alleged that after settling with the tortfeasor, the insured demanded UIM policy limits from her own carrier. The demand was in writing, accompanied by medical documents, and requested a response in 30 days. There was no response in 30 days, and the insured sent another demand on the 32nd day, and again a month after that.  The carrier’s adjuster responded to the third demand, on the day it was sent, that the carrier did not agree with plaintiff’s valuation of her injuries. On that same day, the insured also requested a copy of the policy, which the carrier initially refused to provide, but eventually sent almost six weeks later. The Insured made more requests for documents she alleges were relevant, but received no response.

She pleads she was never provided “with (1) a written explanation for the delay in investigating her UIM claim, (2) any indication of when a decision on the claim might be reached, or (3) any written explanation on the status of her claim.” Instead, over six months after her original demand, the insurer made a written demand to arbitrate the UIM claim.

Thus, the only two communications in the six-month period were to dispute valuation and demand arbitration.

The insured sued for breach of contract and bad faith. The carrier moved to arbitrate the UIM claim, and to dismiss the bad faith claim. The court granted the motion to arbitrate, and stayed the insured’s coverage claim pending arbitration.  It dismissed the bad faith claim.

Alleged Bases for Bad Faith

The insured alleged seven bases for her bad faith claim:

  1. “failing to promptly and reasonably determine the applicability of benefits;”

  2. “failing to pay benefits or settle her UIM claim;”

  3. “unreasonably delaying payment;”

  4. “failing to provide a copy of the … Policy when requested;”

  5. “failing to respond to multiple attempts at communication;”

  6. “unreasonably delaying evaluation of her claim;” and

  7. “violating the Unfair Insurance Practices Act (“UIPA”), 40 P.S. § 1171.1 et seq., and the Unfair Claims Settlement Practice (“UCSP”) Guidelines, 31 Pa. Code § 146.1 et seq., by failing to complete claim investigation within thirty days or, if unreasonable, to provide a written explanation and an expected date of completion every forty-five days thereafter.”

Bad Faith Standards and First Element of Bad Faith

The court observed two factors are needed to prove bad faith, as approved in Rancosky: the insured must show “(1) the insurer did not have a reasonable basis for denying benefits under the policy and (2) that the insurer knew of or recklessly disregarded its lack of a reasonable basis.” Judge Quiñones Alejandro stated that the first element covers a range of insurer conduct, such as “an insurer’s lack of good faith investigation or failure to communicate with the claimant regarding UIM claims[, … or] where the insurer delayed in handling the insured’s claim.”

The insured pleaded enough to support a plausible claim for unreasonable conduct in denying the claim. She “alleged that during the nearly six months between Plaintiff initially filing her UIM claim and [the insurer] making a written arbitration demand, Plaintiff’s counsel attempted to communicate … on at least five separate occasions for any update on the status of Plaintiff’s claim.” The insurer only responded once to dispute valuation and then three months later to demand arbitration.  This was enough to make out a claim for “unreasonable delay to investigate and settle Plaintiff’s claim.”

Second Element of Bad Faith Not Met

Proving knowledge or reckless disregard goes beyond mere negligence or poor judgment. Pleading “the mere existence of the delay itself is insufficient.” “Rather, a court must look to facts from which it can infer the defendant insurer ‘knew it had no reason to deny a claim; if [the] delay is attributable to the need to investigate further or even simple negligence, no bad faith has occurred.’” “In cases involving delay or failure to investigate or communicate, courts have found the length of the delay relevant to an inference of knowledge or reckless disregard.” Judge Quiñones Alejandro cited examples of cases with more than one and two year investigation delays.

She went on to find the insured did not plead a plausible claim of knowing or reckless disregard in denying or delaying payment. “In bad faith cases premised on an insurer’s delay and failure to communicate, courts have generally only inferred plausible knowledge or reckless disregard where the time periods of delay were much longer than six months.” She cites the Superior Court’s Grossi decision (one year delay), and Judge Leeson’s January 2020 Solano-Sanchez decision (two year delay) as other examples.

By contrast, “[h]ere, the time lapse before [the insurer] acted on Plaintiff’s claim by seeking arbitration was roughly six months. Further, nothing in Plaintiff’s complaint attributes this time period to [the insurer’s knowledge or reckless disregard of a reasonable basis for denying (or delaying) the claim, as opposed to ‘mere negligence’ or even an actual need to investigate. Without a longer delay more consistent with the delays established in the aforementioned precedent, or other factual allegations from which this Court could infer that Travelers acted with knowledge or reckless disregard of the unreasonableness of its actions, Plaintiff has not pled facts sufficient to plausibly allege the second element of her bad faith claim. Therefore, Plaintiff’s bad faith claim is dismissed.”

UIPA or UCSP Violations Cannot Form Basis for Bad Faith Claims

In addressing the bad faith claims, the Court observed, “alleged violations of the UIPA or UCSP cannot per se establish bad faith and have not been considered by Third Circuit courts.” Judge Quiñones Alejandro cites the Third Circuit’s decisions in Leach (“holding that ‘insofar as [plaintiff’s] claim for bad faith was based upon an alleged violation of the UIPA, it failed as a matter of law.’”), and Dinner v. U.S. Auto. Ass’n Cas. Ins. Co., 29 F. App’x 823, 827 (3d Cir. 2002) (holding that alleged UIPA or UCSP violations are not relevant in evaluating bad faith claims), as well as the Eastern District decision in Watson (“observing that, since the current bad faith standard was established in Terletsky, ‘courts in the [Third] circuit have … refused to consider UIPA violations as evidence of bad faith.’).”

Date of Decision: December 7, 2020

White v. Travelers Ins. Co., U.S. District Court Eastern District of Pennsylvania No. CV 20-2928, 2020 WL 7181217 (E.D. Pa. Dec. 7, 2020) (Quiñones Alejandro, J.)

BAD FAITH CLAIM DISMISSED FOR CONCLUSORY PLEADINGS; COURT REFUSES TO ALLOW AMENDMENT TO JOIN PARTIES THAT WOULD HAVE DESTROYED DIVERSITY (Western District)

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This UIM case was removed to federal court, and the insured moved to remand this procedurally complex matter.  The carrier opposed remand and moved to dismiss the insureds’ bad faith claims.

Court rejects amended complaint adding new parties that would destroy diversity

The plaintiffs’ initial UIM suit was against non-diverse defendants and the case was removed to federal court. After removal, the plaintiffs filed an Amended Complaint adding non-diverse parties from a separate auto accident. They moved to remand for lack of jurisdiction.  The court refused to allow the joinder and retained jurisdiction, per 28 U.S.C. sec. 1447(e).

The court observed there was no Third Circuit precedent on section 1447(e), and like other district courts in this Circuit, the court followed the Fifth Circuit in applying a four-factor test to scrutinize remand motions under these circumstances. This balance of equities test adds heightened standards for allowing amendment that would destroy diversity. (The factors to be considered include “[1] the extent to which the purpose of the amendment is to defeat federal jurisdiction, [2] whether plaintiff has been dilatory in asking for amendment, [3] whether plaintiff will be significantly injured if amendment is not allowed, and [4] any other factors bearing on the equities.”).

Bad faith claims dismissed for pleading conclusory allegations

Having retained jurisdiction, the court then addressed the insured’s breach of contract and bad faith claims.

The insureds never allege “the amount of liability insurance available to the tortfeasors for the accident, the status of her claim against the insured, and they do not aver whether the liability limits of the tortfeasor’s coverage has been exhausted.” Thus, the insurer argued the UIM claim was not ripe. The insurer also argued the insureds never set out “the nature of [the] injuries, damages, or specific conduct in support of the statutory bad faith claim.”

The court found both the breach of contract and bad faith claims consisted “only of conclusory and boilerplate statements … and therefore, the motion to dismiss these claims will be granted.” It was significant to the court that plaintiffs did not attach the policy. Plaintiffs claimed they could not locate the policy, and as the court allowed amendment it encouraged the parties to work together expeditiously to get plaintiffs a copy of the policy.

More significantly, the plaintiffs did not plead any specific facts about the carrier’s conduct. The “merely alleged legal conclusions, and because the legal conclusions pled in the [amended complaint] are not facts, they are not assumed to be true and do not meet the Twombly/Iqbal standard.”

Date of Decision: October 9, 2020

Pierchalski v. Pryor, U.S. District Court Western District of Pennsylvania No. 2:19-CV-01352-RJC, 2020 WL 5994981 (W.D. Pa. Oct. 9, 2020) (Colville, J.)

(1) NO WANTON CONDUCT UNDER MVFRL INVOKING TREBLE DAMAGES AND SUPER INTEREST; (2) NO STATUTORY BAD FAITH WHERE (i) MVFRL PREEMPTS BAD FAITH STATUTE; (ii) THERE IS ONLY A VALUATION DISPUTE; (iii) INVESTIGATION REASONABLE; (4) BIAS CLAIMS ARE MERELY SUBJECTIVE (Philadelphia Federal)

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Plaintiff was injured in an auto accident and made both PIP claims and underinsured motorist (UIM) claims. She found the carrier’s settlement offers and negotiations wholly inadequate, and brought statutory bad faith claims, and claims for damages under the Motor Vehicle Financial Responsibility Law (MVFRL) seeking treble damages and super interest for the insurer’s allegedly “wanton” conduct concerning her medical benefit claims.

MVFRL Claims

The court found the insured could proceed on her PIP claim under a breach of contract theory. However, the MVFRL claim for treble damages and 12% interest, under 75 Pa. C.S. § 1797(b)(4), was dismissed without prejudice. Judge Pappert held plaintiff had not pleaded “wanton” conduct, a predicate for gaining the extraordinary remedies under this statute.

The insurer also asserted the MVFRL count actually alleged a breach of the duty of good fair dealing, and moreover constituted an improper effort to get relief under the Bad Faith Statute. It asked the court to strike certain averments related to this putative backdoor bad faith claim.

The court rejected this argument: “Although Count II appears to assert a claim under the MVFRL … it also appears to assert a claim for … alleged breach of the implied contractual duty to act in good faith related to her PIP coverage. …  Because [the insured] may pursue a claim for breach of her policy’s PIP coverage obligations and because motions to strike are ‘not favored and usually will be denied unless the allegations have no possible relation to the controversy and may cause prejudice to one of the parties,’ the Court will not strike her allegations regarding the duty of good faith and fair dealing in Count II.”

MVFRL Claims and the Bad Faith Statute

The court then addressed the statutory bad faith claim.

The court first observed that unless the insurer’s “conduct falls outside of the scope of § 1797 of the MVFRL, 75 Pa. C.S. § 1797, and involves a bad faith abuse of the process challenging more than just the insurer’s denial of first party benefits, the MVFRL preempts any statutory bad faith claim concerning … PIP benefits.” The court made clear, “To the extent that the gravamen of [the] bad faith claim is the denial of first party medical benefits and nothing more, [the insurer’s] alleged conduct is within the scope of § 1797 of the MVFRL and therefore [she] is precluded from bringing such a claim.”

However, “[s]ection 8371 bad faith claims remain cognizable when the basis of a benefits denial does not relate to the reasonableness and necessity of treatment, or when an insurer’s conduct is obviously not amenable to resolution by the procedures set forth in Section 1797(b).”

Dispute Over Valuation not Bad Faith

The insured alleged the insurer delayed her claim and denied its value. The court found these allegations did not equate to allegations that the insurer actually deny the UIM or PIP. Rather, there was a dispute over valuation.

Analyzing the matter as a valuation dispute, Judge Pappert found the insured did not allege “facts sufficient to show [the insurer’s] valuation is unreasonable.” The insured’s subjective beliefs as to her claim’s value “is not indicative of bad faith because … subjective belief as to the value of the claim may reasonably, and permissibly, differ.”

Rather, “[t]o state a bad faith claim, [an insured] must do more than call [the insurer’s] offers low-ball.” These kind of conclusory and subjective allegations “suggest nothing more than a normal dispute between an insured and insurer.”

Low but Reasonable Offers Not Bad Faith

Bad faith does not exist “merely because an insurer makes a low but reasonable estimate of an insured’s damages.” Nor does a refusal “to immediately accede to a demand for the policy limit … without more, amount to bad faith.”

Insurer had Reasonable Basis to Deny Claim/No Adequate Claim of Bias

Next, Judge Pappert rejected the argument that the insured adequately pleaded the insurer lacked a reasonable basis to deny the claim’s value.  The insurer requested medical records and had an IME performed. It assessed the insured’s injuries based on that information.

The court did not give weight to conclusory allegations the doctor performing the IME was “a biased IME doctor” and “well-known as [someone] who provides so-called Independent Medical Examinations exclusively for and apparently to the liking of insurance companies….”  Further, that the plaintiff’s own doctor said she needed surgery did not, by itself, support a bad faith claim. The insurer was not unreasonable in relying  on the IME doctor’s assessment that the symptoms requiring surgery were unrelated to the accident at issue.

“In the absence of any supporting facts from which it might be inferred that [the] investigation was biased or unreasonable, this type of disagreement in an insurance case is not unusual, and cannot, without more, amount to bad faith.”

The court, however, permitted plaintiff to amend the statutory bad faith claim “to the extent it is not preempted by the MVFRL and to the extent she is able to allege facts stating a plausible claim for relief.”

Date of Decision: October 2, 2020

Canfield v. Amica Mutual Insurance Co., U.S. District Court Eastern District of Pennsylvania No. CV 20-2794, 2020 WL 5878261 (E.D. Pa. Oct. 2, 2020) (Pappert, J.)

PLAUSIBLE BAD FAITH WHERE INSURER’S POSITION RESULTS IN ILLUSORY COVERAGE; NO BAD FAITH WHERE NO COVERAGE DUE (Western District)

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This case centers on a dispute between the insureds and their homeowners carrier over whether the carrier had agreed to policy limit increases based on a multi-million dollar renovation.  The court details a series of alleged telephone communications between the insureds and the carrier, which the insureds claim committed the carrier to the policy limit increases.  This all occurred before the fire loss at issue.

In addition, the policy included a provision for “Home Protection Coverage”. This provision provides for a 25% coverage extension on existing policy limits.  “Essentially, the Home Protector Coverage’s purpose is to provide extended coverage in the event a homeowner’s losses exceed the policy’s coverage limits.”  The insureds also they did everything necessary for the Home Protection Coverage to be in place at the time of their fire loss.

The carrier asserted to the contrary that there was both no evidence properly documenting an increase in policy limits, or that the insureds met the requirements needed to receive the Home Protection Coverage. The insurer rejected claims for the higher limits and the Home Protection Coverage, and the insureds sued for breach of contract, statutory bad faith, promissory estoppel, and violation of the Unfair Trade Practices and Consumer Protection Law (UTPCPL).

Breach of Contract Claims Partially Survive

The court dismissed the breach of contract claim for extended policy limits, without prejudice. There was no plausible claim that a contract existed as such or through the reasonable expectations doctrine.

However, the court found the breach of contract claim for the “Home Protection Coverage” stated a plausible claim.  The court held that to find otherwise would make the relevant policy language illusory.

BAD FAITH

The court set forth various principles on statutory bad faith, though incorrectly stating that the insured must demonstrate some motive of self-interest or ill will.

Plausible Bad Faith Claim Stated for Pursuing Argument that would make Coverage Illusory

The court found the insureds stated a plausible bad faith claim as to the denial of Home Protection Coverage. The insureds alleged they paid their premiums, gave notice of renovations, and timely submitted their coverage claims. “Plaintiffs thus assert that Defendant ‘unreasonably denied the benefits’ and ‘had knowledge of their lack of reasonable basis for denying benefits.’”

More specifically, at the pleading stage, the Court had already “rejected carrier’s interpretation of the Home Protector Coverage … and thus cannot accept Defendant’s argument that its basis for denial of Home Protector Coverage was reasonable because Plaintiffs ‘could not show that their property was fully insured for replacement cost at policy inception.’ …. Such an interpretation would construct an illusory promise of coverage, which the Court has already determined it should not entertain.”

Failure to State Plausible Bad Faith Claim where no Coverage is Due

As to the bad faith claims concerning extending the policy limits, the Complaint did not set out a plausible claim.  As stated above, the court ruled the insureds failed to plead a plausible claim for breach of contract on extending policy limits through the various telephone communications or failing to reschedule an inspection. “As such, the Court agrees with Defendant that in ‘the absence of insurance coverage, there can be no bad faith by the insurer as a matter of law.’” As with the contract claim, dismissal was without prejudice.

Promissory Estoppel and UTPCPL

The court rejected that promissory estoppel could create or increase insurance coverage.  It allowed the claim to proceed, but solely as to amending allegations that could go to the breach of contract claims.

The court agreed that the UTPCPL could not create liability for claims handling. It was not clear to the court, however, whether the alleged deceptive conduct occurred at times other than during claims handling.

The court then carries out a fairly detailed analysis of significant UTPCPL concepts such as malfeasance vs. nonfeasance, pleading intent, pleading with particularity, and whether the gist of the action doctrine might apply.

The court concludes, “while Plaintiffs’ averments of deceptive conduct are not categorically barred by the UTPCPL to the extent set out above, Plaintiffs have not pled their claim with the level of particularity required by Pennsylvania law. Accordingly, the Court grants Defendant’s Motion to Dismiss … without prejudice and with leave to amend.”

Date of Decision: September 24, 2020

Luketich, v. USAA Casualty Insurance Company, U.S. District Court for the Western District of Pennsylvania No. 2:20-CV-00315, 2020 WL 5669017 (W.D. Pa. Sept. 24, 2020) (Hornak, J.)