Archive for the 'PA – Federal Pleading Inadequate' Category

NO BAD FAITH WHERE (1) NO COVERAGE DUE, (2) ALLEGED BAD FAITH COMMUNICATIONS WITH CLIENT WERE EITHER IMMATERIAL OR ACCURATE, AND (3) ANY OMISSIONS IN THOSE COMMUNICATIONS ONLY AMOUNTED TO NEGLIGENCE AT MOST, NOT BAD FAITH (Western District)

Print Friendly, PDF & Email

The insured brings this breach of contract and bad faith case based on the insurer’s denying virtually all of her water damage claim, and its allegedly improper claim handling in communications to the insured.  Western District Magistrate Judge Dodge grants the insurer’s motion to dismiss, but with leave to file an amended complaint.

First, the court dismissed the breach of contract claim.  Magistrate Judge Dodge found there was no coverage for the claims pleaded because the damages specifically alleged, when compared to the clear policy language, were not insured losses. There was, however, enough ambiguity in the plaintiff’s allegation that she suffered “resulting damages”, to allow the insured to amend if she could identify any other forms of damages that might be covered under the policy.

As to the bad faith claim, Magistrate Judge Dodge first observed that her contract ruling explained how the coverage denial was proper.  Further, “[t]he bad faith claim does not refer to any circumstances other than [plaintiff’s] contention that [the insurer] failed to communicate all of the policy language to her in one of its letters.” This was of no moment. The policy exclusion language omitted in the letter was irrelevant because the insurer did not rely on the omitted exclusion in denying coverage.

The insured alleged that the insurer also omitted a distinct important policy provision in correspondence to the insured. This was belied, however, by the correspondence itself. The purportedly omitted provision actually was included in the letter. Moreover, even if the omission occurred, this amounted at most to negligence, mistake, or poor judgment, none of which makes out an actionable bad faith claim.

Thus, the motion to dismiss the bad faith claim was granted, but without prejudice.

Date of Decision:  March 19, 2021

Blanton v. State Farm Fire & Casualty Co., U.S. District Court Western District of Pennsylvania Civil Action No. 20-1534, 2021 WL 1060661 (W.D. Pa. Mar. 19, 2021) (Dodge, M.J.)

Our thanks to the insurer’s counsel, Mark A. Martini, of Robb Leonard Mulvihill LLP, for bringing this case to our attention.

JUDGE BAYLSON DISMISSES STATUTORY BAD FAITH CLAIM ONLY SUPPORTED BY CONCLUSORY ALLEGATIONS (Philadelphia Federal)

Print Friendly, PDF & Email

In this case, like many others in the recent past, the UIM bad faith claims are dismissed with leave to amend.

The tortfeasor’s carrier payed the injured insured its $15,000 policy.  The insured had $100,000 in UIM coverage from her own carrier.  In seeking UIM coverage, the insured provided her carrier with “documentation of her losses including medical bills and other economic losses totaling more than $34,263.47.” In bringing breach of contract and bad faith claims, she alleges her carrier refused to make any “bona-fide good faith offers of settlement to the Plaintiff that contemplate those substantiated and verified losses and to the contrary, has made no offer for purposes of resolving Plaintiff’s Underinsured Motorist’s Claim.”

The insurer moved to dismiss the statutory bad faith claim on the basis the insured only pleaded conclusory allegations. In response, the insured argued her complaint included allegations “that (1) she promptly provided Defendant with proof of the amount of her damages, (2) Defendant has refused to make a settlement offer, (3) Plaintiff provided additional medical documentation at Defendant’s request, and that (4) Defendant has had “ample time to properly evaluate Plaintiff’s claim.” As he has in other cases, Eastern District Judge Baylson dismissed the bad faith claim, without prejudice.

Judge Baylson cited his prior opinions in Eley (2011) and Kelly (2019) in holding the instant allegations merely conclusory, lacking in the kind of factual detail that could support a plausible bad faith claim. He finds the insured did not provide “any explanation of how Defendant responded to her claim, or what facts, beyond its failure to pay her claim, indicate bad faith. The fact that she provided Defendant with supporting documents regarding her claim does not alone indicate bad faith. Plaintiff has not provided any information regarding Defendant’s response to her claim. She has simply stated that she considers any response on its part to be unsatisfactory.”

In granting the motion to dismiss without prejudice, Judge Baylson observed that the insurer only sought dismissal of the insured’s statutory bad faith claim. Thus, this dismissal did not affect any other portions of the complaint.

Date of Decision:  January 15, 2021

Baxley v. State Farm Mutual Automobile Insurance Company, U.S. District Court Eastern District of Pennsylvania No. CV 20-5512, 2021 WL 149256 (E.D. Pa. Jan. 15, 2021) (Baylson, J.)

Note: It is only the beginning of the fourth full week in January, but this is our fifth UIM case posted to date this year.

NO PLAUSIBLE BAD FAITH CLAIM WHERE THERE IS SIMPLY A VALUATION DISPUTE OR REFUSAL TO IMMEDIATELY PAY POLICY LIMIT DEMAND (Middle District)

Print Friendly, PDF & Email

The insured failed to plead a plausible claim in this UM bad faith case.

The 18-year old insured was rear-ended by an uninsured motorist, and suffered a long list of injuries. She had $100,000 in UM coverage.  The carrier offered $11,300 to settle her claims, and rejected a policy limit demand.  The insured brought breach of contract and statutory bad faith claims, and the insurer moved to dismiss the bad faith claim.

In determining whether a plaintiff states a plausible bad faith claim, a court must separate conclusory allegations from factual allegations, because conclusory allegations are not entitled to an assumption of truth for Rule 12(b)(6) purposes.

Here, the complaint alleges at least 16 bases for bad faith (listed below). Magistrate Judge Schwab found, however, the complaint “contains mostly conclusory statements that are not supported by factual allegations.” Thus, “[a]lthough long, [the insured’s] list of how the defendant allegedly acted in bad faith contains conclusions, rather than facts.”

Magistrate Judge Schwab cites a number of cases finding these sorts of allegations to be conclusory, including Middle District Judge Caputo’s 2019 Peters decision, 2017 Meyers decision, and 2012 Sypeck decision, Middle District Judge Rambo’s 2018 Rickell decision, Middle District Judge Caldwell’s 2010 Muth decision, as well as the Third Circuit’s frequently cited 2012 Smith decision.

Next, in looking at the factual allegations, the insured merely alleges she was diagnosed with certain injuries, went through physical therapy, gave the insurer notice of her claim, and forwarded various records for the insurer’s review. The insured’s counsel spoke with the insurer’s claims department, and made the carrier aware the insured was 18 at the time of the accident, continued to suffer from visual impairment and post-traumatic headaches, among other injuries, as a result of the head trauma she suffered, and that the insurer offered $11,300 to settle.

“These factual allegations, however, are not enough to state a bad faith claim upon which relief can be granted.”

A disagreement over a claim’s value, without the facts needed to show bad faith, cannot alone create bad faith. Here, the insured did not allege “facts to support an inference that the defendant did not have a reasonable basis for its settlement offer or that the defendant knew or recklessly disregarded any lack of a reasonable basis for such an offer.” Citing the Third Circuit’s Smith decision (above), Judge Caputo’s 2019 Clarke decision and 2019 Moran decision, Eastern District Judge Baylson’s June 2020 Dietz decision, Middle District Judge Kane’s 2019 Rosenthal decision, and the 2009 Superior Court Johnson decision, Magistrate Judge Schwab observes that low but reasonable settlement offers do not constitute bad faith, and that a “low-ball” offer, standing alone, cannot make out a bad faith claim.

Nor can refusing immediately to pay a policy limit demand by itself constitute bad faith. “Indeed, courts have consistently held that a dispute or discrepancy in the valuation of a claim between the insurer and the insured is not alone indicative of bad faith.” The insured simply did not plead facts “from which it can plausibly be inferred that the defendant’s offer was unreasonable and made in bad faith, rather than made as part of the ordinary course of negotiations between insurers and insureds.” (internal quotation marks omitted)

Magistrate Judge Schwab dismissed the bad faith claim, but with leave to amend. This allowed for a second amended complaint to be filed “if appropriate, to state a bad faith claim upon which relief can be granted.”

Durdach v. LM General Insurance Company, U.S. District Court Middle District of Pennsylvania No. 3:20-CV-00926, 2021 WL 84174 (M.D. Pa. Jan. 11, 2021) (Schwab, M.J.)

The litany of conclusory allegations referenced above, include:

  1. unreasonably delay[ing] the processing of a valid claim;

  2. kn[owingly] or recklessly disregard[ing] the fact that the delay was unreasonable;

  3. failing to objectively and fairly evaluate Plaintiff’s claim;

  4. engaging in dilatory and abusive claims handling;

  5. failing to adopt or implement reasonable standards in evaluating Plaintiff’s claim;

  6. acting unreasonably and unfairly in response to Plaintiff’s claim;

  7. not attempting in good faith to effectuate a fair, prompt, and equitable settlement of Plaintiff’s claim in which the Defendant’s liability under the policy had become reasonably clear;

  8. subordinating the interests of its insured and those entitled under its insured’s coverage to its own financial monetary interests;

  9. failing to promptly offer reasonable payment to the Plaintiff;

  10. failing to reasonably and adequately investigate Plaintiff’s claim; k. failing to reasonably and adequately evaluate or review the medical documentation in Defendant’s possession;

  11. violating the fiduciary duty owed to the Plaintiff;

  12. acting unreasonably and unfairly by withholding underinsured motorist benefits justly due and owing to the Plaintiff;

  13. failing to make an honest, intelligent, and objective settlement offer;

  14. causing Plaintiff to expend money on the presentation of her claim; and

  15. failing to make a reasonable settlement offer despite knowing the severity of a visual injury and post-traumatic headaches in an 18-year old.

[The insured] also alleges that the defendant failed to act in good faith and “engaged in wanton and reckless conduct….”

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

Print Friendly, PDF & Email

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)

Print Friendly, PDF & Email

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)

Print Friendly, PDF & Email

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)

Print Friendly, PDF & Email

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)

Print Friendly, PDF & Email

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)

Print Friendly, PDF & Email

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)

Print Friendly, PDF & Email

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.)