Archive for the 'PA – Federal Pleading Inadequate' Category

COURT WOULD NOT REMAND BAD FAITH CASE EVEN THOUGH INSURED PLEADED CLAIM WAS WORTH LESS THAN $75,000; BAD FAITH CLAIM DISMISSED FOR MAKING BOILERPLATE ALLEGATIONS (Philadelphia Federal)

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This property damage bad faith case was removed to federal court, and plaintiff wanted a remand.

Judge Jones observed that once the amount in controversy is challenged, the removing defendant has the burden to prove by a preponderance of the evidence that the case value exceeds $75,000, the jurisdictional minimum.  In a bad faith case, the court can consider punitive damages and potential attorney’s fees in making this calculation.

The property damage claim was in excess of $65,200, and it would appear that with punitive damages and attorney’s fees the bad faith claim would easily exceed the $75,000 minimum.  However, plaintiff apparently pleaded in his ad damnum clause that the damages exceeded $50,000 (avoiding arbitration), but were not in excess of $75,000 (attempting to avoid removal).  Judge Jones found this language in the ad damnum clause did not prevent removal.

Specifically, after discussing prior case law and pleading standards under Pennsylvania’s Rules of Civil Procedure, Judge Jones (who sat for many years as a Court of Common Pleas judge) found that the insured’s “attempt to artificially cap the amount in controversy ‘as less than $75,000.00’ through an ad damnum clause is inconsistent with Pennsylvania’s pleading rules.”  The opinion cites numerous cases where the punitive damage and attorney fees claims pushed an actual damage claim otherwise below the $75,000 minimum over the jurisdictional threshold.

Judge Jones next addressed the insurer’s motion to dismiss the bad faith claim. The insurer argued that the bad faith count failed to set forth a single fact, relying solely on boilerplate generic allegations. The court agreed, observing “[t]he allegations in Plaintiff’s Complaint purporting to state a claim for bad faith are in fact identical to the allegations from a prior complaint filed by Plaintiff’s counsel in another case, which this Court found to be insufficient to state a claim in … Clapps v. State Farm Ins. Cos….” The court did grant leave to file an amended complaint.
Date of Decision: July 10, 2020

Thach v. State Farm Fire & Casualty Co., U.S. District Court Eastern District of Pennsylvania CIVIL ACTION NO. 19-5050, 2020 U.S. Dist. LEXIS 121758 (E.D. Pa. July 10, 2020) (Jones II, J.)

SIMPLY DENYING CLAIM OR REFUSING TO PRODUCE UNDERWRITING FILE NOT BAD FAITH; UIPA VIOLATIONS MUST BE A REGULAR BUSINESS PRACTICE TO BE CONSIDERED AS EVIDENCE (Philadelphia Federal)

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This UIM bad faith opinion includes instructive points on factual allegations that only create possible, but not plausible, claims and on the use of alleged Unfair Insurance Practices Act (UIPA) violations as evidence. The opinion also includes the more common observations admonishing against conclusory pleading.

The bad faith claims in this case concern alleged misrepresentations of UIM coverage in connection with stacking, a refusal to provide the underwriting file, and a claim that the insurer forced the insured to file suit just to obtain documents. The court dismissed the bad faith claims, but with leave to amend.

ADEQUATE PLEADING STANDARDS

As with many other cases issuing out of the Eastern District this year, the court made clear that conclusory allegations are given no regard in supporting a bad faith pleading. Like many of those courts, Judge Baylson cited the Third Circuit’s Smith opinion on this point, as well as his own opinions in Eley and Robbins.

There were three factual allegations that went beyond mere conclusory pleading, though still not adequate to state a claim because they only made bad faith possible, not plausible.

Refusal to Pay Not Enough

  1. “Defendant denied Plaintiff’s claim for UIM stacking of benefits for five vehicles….” As to this allegation, Judge Baylson found that “a plaintiff cannot base a bad faith claim on the defendant’s refusal to pay. A disagreement over the amount of a UIM claim is not unusual, and the existence of such disagreement cannot by itself state a viable bad faith claim.” He relied on Johnson v. Progressive Ins. Co., for the proposition that “[t]he underlying facts involve nothing more than a normal dispute between an insured and insurer over the value of an UIM claim. The scenario under consideration occurs routinely in the processing of an insurance claim.”

Refusal to Turn Over Underwriting File

  1. “Defendant refused to provide the underwriting file upon request….” Judge Baylson found the insurer’s alleged “refusal to provide the underwriting document is comparable to the allegation of parallel conduct in Twombly, which ‘gets the complaint close to stating a claim, but without some further factual enhancement it stops short of the line between possibility and plausibility of entitlement to relief.’” He added that “[i]n insurance coverage disputes, underwriting files often contain an insurer’s evaluation of the risks presented on an insurance application, along with other confidential business information. Although a showing of Defendant’s refusal to disclose the underwriting file may be consistent with bad faith, it is also as much in line with ‘a wide swath of rational and competitive business strategy.’”

Don’t Make the Court Speculate that an Alleged Fact Might Possibly be Bad Faith

       3. “Defendant required Plaintiff to file a lawsuit in order to obtain the documents that will confirm the coverage.” Although not addressed separately, this allegation fell under the general concept the court will not infer bad faith because a possibility of bad faith exists. Rather, the factual allegations must stand by themselves as a plausible basis for a bad faith claim. Plausibility means the court does not have to speculate on what the allegation might imply.

UIPA Violations Must Show the Actions at Issue Occurred on a Regular Basis as a General Business Practice

The insured argued that he should be allowed to use UIPA violations as evidence of bad faith. The carrier countered that UIPA violations might only be evidence of bad faith “when the actions in question were a general business practice,” and the insured did not make any allegations to this effect. Judge Baylson found the complaint was devoid of specific factual allegations concerning putative UIPA violations.

Judge Baylson stated that “31 Pa. Code § 146.1 (1978) provides that such violations ‘will be deemed to constitute unfair claims settlement practices’ if they occur with “a frequency that indicates a general business practice.’” Judge Baylson relied on his 2017 Jack decision, to support his conclusion that the insured “pleaded no factual allegations showing that Defendant’s actions occur on a regular basis that constitutes a general business practice.”

Date of Decision: June 22, 2020

Dietz v. Liberty Mutual Insurance Co., U.S. District Court Eastern District of Pennsylvania No. 2:20-cv-1239-MMB, 2020 U.S. Dist. LEXIS 108559 (E.D. Pa. June 22, 2020) (Baylson, J.)

NO UM BAD FAITH CLAIM PLEADED; FIDUCIARY DUTY ALLEGATIONS STRICKEN FROM COMPLAINT (Middle District)

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As in the two Eastern District cases summarized earlier this week, Middle District Judge Jennifer P. Wilson dismissed a bad faith claim with leave to amend. Judge Wilson also struck fiduciary duty allegations from the complaint in this uninsured motorist case.

The complaint fails to allege bad faith

The insured alleged the insurer was “supplied with documentation sufficient to fully and fairly evaluate the uninsured motorist claim, but [the insurer] failed to do so.” Judge Wilson found the insured failed to plead specific facts as to what might qualify as bad faith conduct. Plaintiff simply alleges the bad faith elements, and “does not lay out ‘any facts that describe who, what, where, when, and how the alleged bad faith conduct occurred.’” Judge Wilson cited Western District Judge Bissoon’s Mondron opinion to support her conclusion, though she did allow plaintiff leave to amend.

No fiduciary duty in UM/UIM context

The insurer also successfully moved to strike allegations that it owed a fiduciary duty.

The court observed that the insured’s breach of contract claim was based on the UM policy benefits. In Pennsylvania, there is no fiduciary duty arising out of insurance contracts that goes beyond the duty of good faith and fair dealing “until an insurer asserts a stated right under the policy to handle all claims asserted against the insured. … These are not the circumstances in an uninsured motorist claim.”

Rather, the Pennsylvania Supreme Court makes clear in the UM/UIM context “an insurance company’s duty to its insured is one of good faith and fair dealing. It goes without saying that this duty does not allow an insurer to protect its own interests at the expense of its insured’s interests. Nor does it require an insurer to sacrifice its own interests by blindly paying each and every claim submitted by an insured in order to avoid a bad faith lawsuit.”

Thus, plaintiff’s allegations of a fiduciary duty were “not pertinent to her breach of contract claim, which only requires an insurer to act in good faith and fair dealing towards the insured.” As allowing the fiduciary duty allegations would only confuse the actual issues in the case, the motion to strike those allegations was granted.

Date of Decision: June 17, 2020

Miller v. State Farm Mutual Automobile Insurance Co., U.S. District Court Middle District of Pennsylvania Civil No. 1:20-CV-00367, 2020 U.S. Dist. LEXIS 105766 (M.D. Pa. June 17, 2020) (Wilson, J.)

TWO BAD FAITH CLAIMS DISMISSED FOR EITHER MAKING CONCLUSORY ALLEGATIONS OR ALLEGING FACTS THAT DO NOT CONSTITUTE BAD FAITH (Philadelphia Federal)

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In these two Philadelphia federal opinions issued last week, bad faith claims were dismissed without prejudice. In one case, this was based on a set of pleadings that has been repeatedly held conclusory in nature. In the other, after stripping away the conclusory allegations, the court found that the remaining factual allegations simply did not make out a bad faith case.

There have been at least 10 prior opinions out of Pennsylvania’s Eastern District this year similarly dismissing bad faith claims for inadequate pleading.

  1. Lopez v. Selective Insurance Co. of South Carolina (Judge Schiller, Eastern District)

In Lopez v. Selective Insurance, Judge Schiller found the complaint set out only conclusory allegations, and that these allegations “did not logically follow from any facts alleged in the Complaint.” These included the following 13 separate allegations, all of which failed:

“[S]ending correspondence falsely representing that Plaintiff’s loss caused by a peril insured against under the Policy was not entitled to benefits due and owing under the policy . . . failing to complete a prompt and thorough investigation of Plaintiff’s claim before representing that such claim is not covered under the Policy . . . failing to pay Plaintiff’s covered loss in a prompt and timely manner . . . failing to objectively and fairly evaluate Plaintiff’s claim . . . conducting an unfair and unreasonable investigation of Plaintiff’s claim . . . asserting Policy defenses without a reasonable basis in fact . . . flatly misrepresenting pertinent facts or policy provisions relating to coverages at issue and placing unduly restrictive interpretations on the Policy and/or claim forms . . . failing to keep Plaintiff or their representatives fairly and adequately advised as to the status of the claim . . . unreasonably valuing the loss and failing to fairly negotiate the amount of the loss with Plaintiff or their representatives . . . failing to promptly provide a reasonable factual explanation of the basis for the denial of Plaintiff’s claim . . . unreasonably withholding policy benefits . . . acting unreasonably and unfairly in response to Plaintiff’s claim . . . unnecessarily and unreasonably compelling Plaintiff to institute this lawsuit to obtain policy benefits for a covered loss, that Defendant should have paid promptly and without the necessity of litigation.”

In describing what the complaint lacked, Judge Schiller observed, “[t]he Complaint does not contain any factual allegations that relate to why or how Defendant’s basis for denying the claim was unreasonable. Indeed, the Complaint does not include any facts related to Defendant’s purported basis for denying the claim or Defendant’s actions or omissions in conducting an investigation. Plaintiff’s Complaint does not describe the cause or extent of the alleged loss, the provisions of the insurance policy at issue, the date on which Plaintiff made Defendant aware of the loss, or the date on which Defendant initially denied the claim. Plaintiff’s conclusory allegations are not supported by specific facts sufficient to state a plausible claim for relief. Courts consistently hold that bare-bones allegations of bad faith such as these, without more, are insufficient to survive a motion to dismiss.”

As with a number of other recent opinions, including his own opinion in Park v. Evanston, Judge Schiller relies on the Third Circuit’s Smith decision, as well as Judge Leeson’s McDonough decision, and Judge Gardner’s Atiyeh decision.

Plaintiffs relied on the 1009 Clinton Properties opinion, but consistent with a number of other recent decisions, Judge Schiller found Clinton Properties to be an “outlier” and rejected the insureds’ argument. Clinton Properties has similarly been deemed an outlier by Judge Marston in her Cappuccio decision, Judge Darnell Jones in Clapps, and Judge Leeson in Shetayh. These cases rejected very similar allegations in each instance.

Date of Decision: June 17, 2020

Lopez v. Selective Insurance Co., U.S. District Court Eastern District of Pennsylvania CIVIL ACTION No. 20-1260, 2020 U.S. Dist. LEXIS 105733 (E.D. Pa. June 17, 2020) (Schiller, J.)

  1. Graves v. USAA General Indemnity Co. (Judge Gallagher, Eastern District)

The insureds brought UIM breach of contract and bad faith claims. The court dismissed for failing to plead anything other than conclusory allegations or facts that could not constitute bad faith.

After stripping away the conclusory allegations, the court found the following factual allegations, even assuming their truth, failed “to support a claim that Defendant adjusted the UIM claim in bad faith.”

“1) Plaintiff was operating a motor vehicle which was insured under a USAA insurance contract and which provided for UIM benefits; 2) the accident was caused by the third party; 3) Plaintiff suffered severe injuries as a result of the accident; 4) Plaintiff submitted a claim for UIM benefits; 5) Plaintiff complied with the policy’s requirement to obtain Defendant’s consent to settle her claim against the third party; 6) Plaintiff forwarded her medical documentation to Defendant; and 7) Defendant has not paid the UIM claim.”

Graves v. USAA General Indemnity Co., U.S. District Court Eastern District of Pennsylvania Civil No. 2:20-cv-00786-JMG, 2020 U.S. Dist. LEXIS 105123 (June 16, 2020) (Gallagher, J.)

EASTERN DISTRICT JUDGE MARSTON GIVES OVERVIEW ON HOW TO PLEAD STATUTORY BAD FAITH IN FEDERAL COURT (Philadelphia Federal)

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Courts in this Circuit regularly dismiss bad faith claims when the complaint is devoid of specific factual allegations of bad faith conduct and is merely comprised of bare-bones, conclusory allegations.

This property damage coverage and bad faith complaint included one of these regularly dismissed bad faith claims.

Judge Marston cited numerous Eastern District cases where the court found bad faith claims inadequately pleaded, including Shallow (2020, Judge Pappert), Clapps (2020, Judge Darnell Jones), Shetayh (2020, Judge Leeson), MBMJ Properties (2019, Judge Slomsky), Myers (2017, Judge Surrick), Toner (2017, Judge Slomsky), Soldrich (2015, Judge Leeson), and the 2012 Third Circuit decision in Smith. The pleading flaws in these cases all fundamentally involve a failure to explain or describe with any details what the insurer actually did, e.g., in purportedly failing to investigate, causing unreasonable delays, failing to negotiate or offer a reasonable settlement, etc.

The complaint in the present case alleged the following conduct constituted bad faith:

  1. by sending correspondence falsely representing that Plaintiffs’ loss caused by a peril insured against under the Policy was not entitled to benefits due and owing under the Policy;

  2. in failing to complete a prompt and thorough investigation of Plaintiffs’ claim before representing that such claim is not covered under the Policy;

  3. in failing to pay Plaintiffs’ covered loss in a prompt and timely manner;

  4. in failing to objectively and fairly evaluate Plaintiffs’ claim;

  5. in conducting an unfair and unreasonable investigation [*3]  of Plaintiffs’ claim;

  6. in asserting Policy defenses without a reasonable basis in fact;

  7. in flatly misrepresenting pertinent facts or policy provisions relating to coverages at issue and placing unduly restrictive interpretations on the Policy and/or claim forms;

  8. in failing to keep Plaintiff or their representatives fairly and adequately advised as to the status of the claim;

  9. in unreasonably valuing the loss and failing to fairly negotiate the amount of the loss with Plaintiff or their representatives;

  10. in failing to promptly provide a reasonable factual explanation of the basis for the denial of Plaintiff’s claim;

  11. in unreasonably withholding policy benefits;

  12. in acting unreasonably and unfairly in response to Plaintiffs’ claim;

  13. in unnecessarily and unreasonably compelling Plaintiff to institute this lawsuit to obtain policy benefits for a covered loss, that Defendant should have paid promptly and without the necessity of litigation.

Judge Marston found these allegations were virtually identical to the allegations in MBMJ, where Judge Slomsky found the bad faith claims entirely conclusory. For example, MBMJ highlighted that while pleading a failure to promptly and thoroughly investigate, there were no allegations of any underlying facts supporting those general averments of bad faith. “For instance, the plaintiffs did not plead ‘the timing of the alleged investigation in relation to when Plaintiffs submitted their claim’ or ‘the length of the investigation from start to finish.’”

Judge Marston added, “[l]ikewise, in Clapps v. State Farm Insurance Cos., the plaintiff pled identical bad faith allegations as those the [the insureds] raise here. … The [Clapps] court concluded that ‘Plaintiff’s bad faith allegations [were] nothing more than conclusory statements devoid of any factual detail.’”

In the 1009 Clinton Properties case, relied on by the insureds, the court had found similar allegations to those plead here sufficient under the circumstances of that case to withstand a motion to dismiss. Judge Marston, however, agreed with the observation in Shetayh and Clapps that 1009 Clinton properties was an outlier.

After observing that the insureds in this case failed to plead any facts concerning dates, length of time to denial, or details of other interactions, communications negotiations and alleged misrepresentations, Judge Marston concludes: “As we repeatedly noted above, the … bad faith allegations are identical to those in numerous other cases. The [insureds] cannot “simply parrot” the same allegations pled in 1009 Clinton Properties, Clapps, Shetayh, and MBMJ Properties and expect this Court to find that they alleged enough factual content to render their bad faith claim plausible. Indeed, doing so would turn federal pleading standards on their head.” (Court’s emphasis)

That being said, Judge Marston did grant leave to amend the bad faith claim, quoting Shetayh to the effect that the amendment must be “consistent with this Memorandum and ‘must specifically include facts to address who, what, where, when, and how the alleged bad faith conduct occurred.’”

Date of Decision: May 8, 2020

Cappuccio v. State Farm Fire & Casualty Insurance Co., U.S. District Court Eastern District of Pennsylvania CIVIL ACTION NO. 19-3025-KSM, 2020 U.S. Dist. LEXIS 81751 (E.D. Pa. May 8, 2020) (Marston, J.)

 

NO BAD FAITH WHERE NO BENEFITS DENIED; NO PRIVATE ACTION UNDER UIPA OR UCSP REGULATIONS; NO DECEPTIVE CONDUCT IN NOTICE OF NEW ENDORSEMENT (Philadelphia Federal)

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In this case, the court makes clear that “Bad faith claims cover a range of conduct relating to the improper denial of benefits under the applicable contract.” The court quotes the Pennsylvania Supreme Court’s decision in Toy v. Metropolitan Life Ins. Co., 593 Pa. 20, 928 A.2d 186, 199 (Pa. 2007), to highlight the point that statutory bad faith claims must relate to a denial of benefits: “’In other words, the term [bad faith] captured those actions an insurer took when called upon to perform its contractual obligations of defense and indemnification or payment of a loss that failed to satisfy the duty of good faith and fair dealing implied in the parties’ insurance contract.’”

This first party property damage case centered on a policy endorsement changing the scope of coverage for access work done to repair leakage.

In 2015, the insureds had a homeowners policy with the carrier. In August 2015, while the policy was in effect, the carrier provided the insureds with notice of a new endorsement that would take effect on September 27, 2015. The notice stated that the new endorsement would potentially reduce coverage, and that “[a]lthough not intended to change coverage, this change could potentially reduce or eliminate coverage depending on how it is interpreted and, in that regard, should be viewed as either an actual or potential reduction in or elimination of coverage.”

The insureds renewed their homeowners policies in the ensuing years, apparently without ever questioning this endorsement. The property damage at issue occurred in September 2018, when the insured homeowners had their plumber do certain repair work to fix a leak, including access work to get to damaged plumbing. The insureds allege that the carrier improperly refused to pay the full bill for the access work, while the carrier relied on the 2015 endorsement in justifying its lower than hoped for payment.

The homeowners brought individual and class action counts, seeking declaratory relief, as well as claims for breach of contract, violations of the Unfair Trade Practices and Consumer Protection Law (UTPCPL), the Unfair Insurance Practices Act (UIPA), Pennsylvania’s Unfair Claims Settlement Practices regulations (UCSP), and for statutory bad faith. The insurer moved to dismiss all claims.

Declaratory judgment and contract claims dismissed without prejudice

The insureds argued the 2015 endorsement was unconscionable and should be rendered void; but even if enforceable, it still required greater payment than the carrier made for the cost of the access work. The court, however, dismissed the declaratory judgment claim and breach of contract claim on these grounds, but without prejudice if plaintiffs could plead additional facts to support these claims.

Bad faith claim dismissed without prejudice

The essence of the insureds’ bad faith claims is that the notice accompanying the 2015 endorsement promised greater coverage, but gave less coverage. The court found this could not state a bad faith claim because these claims did not involve the denial of a benefit. “Section 8371 encompasses a variety of insurer conduct, but such conduct must be related to the denial of benefits.” Though “’the alleged bad faith need not be limited to the literal act of denying a claim, the essence of a bad faith claim must be the unreasonable and intentional (or reckless) denial of benefits.’”

In this case the “Plaintiffs’ allegations do not relate to the denial of coverage of the access bill, they relate to the Endorsement notice’s language and how Defendant engaged in alleged misrepresentation because of the purportedly confusing notice.” A “claim that the drafting of policy language was in bad faith is not actionable under Pennsylvania law….” In making this point, the court relied on Mitch’s Auto Service Center, Inc. v. State Automobile Mutual Insurance Co. As stated above, it relied on Toy v. Metropolitan Life for the fundamental point that statutory bad faith claims must include the denial of a benefit.

The court also specifically observed the complaint was “devoid of any facts indicating Defendant lacked a reasonable basis for denying benefits under the policy.” Likewise, there were no plausible allegations that the insurer “knew or recklessly disregarded its lack of reasonable basis.” The insureds argued that the 2015 notice language could be the basis of a bad faith claim. The court failed to see, however, “how that notice, provided to Plaintiffs three years prior to the water damage here, shows that Defendant knew or recklessly disregarded its alleged lack of reasonable basis in denying Plaintiffs’ entire costs for the plumber’s access bill.”

Still, the court dismissed without prejudice if the insureds could replead a plausible bad faith claim.

UIPA and UCSP regulations claims dismissed with prejudice

The insureds conceded that there is no private cause of action under Pennsylvania’s UIPA, 40 P.S. § 1171.1, or UCSPR, 31 Pa. Code §§ 146.1. The court cited Leach v. Northwestern Mut. Ins. Co., 262 F. App’x 455 (3d Cir. 2008), Swan Caterers, Inc. v. Nationwide Mut. Fire Ins. Co., No. 12-0024, 2012 U.S. Dist. LEXIS 162305, 2012 WL 5508371 (E.D. Pa. Nov. 13, 2012) and Connolly v. ReliaStar Life Ins. Co., No. 03-5444, 2006 U.S. Dist. LEXIS 83440, 2006 WL 3355184 (E.D. Pa. Nov. 13, 2006) for the proposition that there is no private cause of action under the UIPA or UCSP regulations, and the statute and regulations can only be enforced by the insurance commissioner.

UTPCPL claim dismissed without prejudice

The court dismissed the UTPCPL claim without prejudice, finding the 2015 notice did not constitute a deceptive act, because “the notice’s language explicitly states that the policyholder should treat the change as a reduction in coverage.” The court further found justifiable reliance was not pleaded, as there were no allegations that the insureds relied on any alleged misconduct causing them to purchase the policy.

Dates of Decision: March 27, 2020 (Report and Recommendation) and April 22, 2020 (District Court Order)

Velazquez v. State Farm Fire & Casualty Co., U.S. District Court Eastern District of Pennsylvania CIVIL ACTION NO. 19-cv-3128, 2020 U.S. Dist. LEXIS 55854 (E.D. Pa. Mar. 27, 2020) (Sitarski, M.J.) (Report and Recommendation), approved and adopted by the District Court (April 22, 2020) (Quiñones Alejandro, J.)

 

EASTERN DISTRICT DISMISSES ANOTHER BAD FAITH CLAIM FOR INADEQUATE PLEADING (Philadelphia Federal)

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Continuing a line of recent Eastern District decisions, the court dismissed the UIM plaintiff’s bad faith claim as inadequately pleaded, with leave to amend.

The complaint failed to provide sufficient factual allegations to support a bad faith claim. Rather, it includes “conclusory remarks in which the Court cannot deduce bad faith.” Thus, “[i]n construing the complaint in a light most favorable to [the insured], the Court cannot determine specific factual allegations from these paragraphs.” The complaint was dismissed with leave to amend. However, any amended bad faith claim “must describe, with specifics, how [the insurer] acted in bad faith.”

The court relied upon the Third Circuit’s 2012 Smith decision in reaching its conclusion, as well as Judge Buckwalter’s 2015 Pasqualino decision, and Judge Baylson’s 2015 Allen decision.

Date of Decision: April 7, 2020

Champ v. USAA Casualty Insurance Co., U. S. District Court Eastern District of Pennsylvania No. 5:20-cv-01238, 2020 U.S. Dist. LEXIS 60790 (E.D. Pa. April 7, 2020) (Leeson, J.)

 

THREADBARE BAD FAITH CLAIM DISMISSED WITH LEAVE TO AMEND (Philadelphia Federal)

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The court dismissed a UIM bad faith count, with leave to amend.

The complaint alleges plaintiff suffered injuries when a drunk driver ran a red light, but the drunk had only $15,000 in coverage. The plaintiff alleges he was a permissive use of the vehicle he was driving, and sought $100,000 in UIM policy limits coverage under the owner’s policy.

Plaintiff’s complaint alleges that the insurer “failed to ‘reasonably investigate’ the claim, failed to ‘objectively and reasonably evaluate’ it, and refused to ‘promptly offer payment of the reasonable and fair value’ of the claim.” The court found this pleading inadequate, stating “These threadbare, conclusory allegations do not provide a sufficient basis to state a plausible claim for relief. The Complaint must establish more than mere ‘recitals of the elements of a cause of action, legal conclusions, and conclusory statements.’” Thus, “[a]bsent additional facts regarding [the] insurance claim and the accompanying investigation, negotiations, or communications that took place, the Court cannot infer bad faith on [the insurer’s] part.”

Judge Pappert gave leave to amend the bad faith count “consistent with this Memorandum and to the extent [the insured] can allege facts sufficient to state a plausible claim for relief.”

The court cited Judge Surrick’s Mattia decision on threadbare pleading, but could have likewise looked at the numerous decisions coming out of Pennsylvania’s federal courts this year alone, e.g., Judge Slomsky’s January 21, 2020 Velazquez decision, Judge Wolson’s February 21, 2020 Diaz decision, Judge Schiller’s March 4, 2020 Park decision, Judge Leeson’s March 6, 2020 Shetayh decision, Judge Pratter’s March 16, 2020 Ridpath decision, and Judge Darnell Jones’ March 19, 2020 Clapps decision. On the other end, Judge Leeson found a bad faith claim adequately pleaded in his January 24, 2020 Solano-Sanchez opinion.

Date of Decision: March 30, 2020

Shallow v. State Farm Mutual Automobile Insurance Co., U.S. District Court Eastern District of Pennsylvania CIVIL ACTION NO. 20-01336, 2020 U.S. Dist. LEXIS 54584 (E.D. Pa. Mar. 30, 2020) (Pappert, J.)

MARCH 2020 HAS BEEN A TIME TO ADMONISH PLAINTIFFS ABOUT BARE-BONES BAD FAITH PLEADINGS IN THE EASTERN DISTRICT (Philadelphia Federal)

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In line with other recent case law from the Eastern District, two more Eastern District judges recently dismissed bad faith claims for failure to plead adequate facts beyond bare-bone allegations.

In Ridpath v. Progressive, Judge Pratter dismissed the insured’s bad faith claim because it rested “entirely on conclusory and bare-bones allegations.” Leave to file an amended complaint was given, provided the insured could rectify the deficient pleadings.

The complaint merely alleged, with no additional facts, that the insurer failed to negotiate the claim, failed to properly investigate and evaluate the claim, and failed to request a defense medical examination. The court looked to Judge Slomsky’s Kiessling and Toner decisions as guidance for the dismissal, as well as Judge Gardiner’s Atiyeh decision, Judge Leeson’s Krantz decision, Judge Caputo’s Sypeck decision, and Judge Baylson’s Eley decision.

Date of Decision: March 16, 2020

Ridpath v. Progressive Advanced Automobile Insurance Co., U.S. District Court Eastern District of Pennsylvania CIVIL ACTION NO. 19-5871, 2020 U.S. Dist. LEXIS 44796 (E.D.Pa. Mar. 16, 2020) (Pratter, J.)

Three days later, Eastern District Judge Darnell Jones dismissed a bad faith claim for failing to meet pleading standards.  In that case, the insurer cited 10 other cases dismissing insurance bad faith claims.

Judge Jones cited to Judge Leeson’s Soldrich opinion for the proposition that when alleging unreasonable delay, specific facts must be alleged concerning the length of any allegedly unreasonable delay between notification and response. Judge Jones also cited to the Mozzo, Atiyeh, Blasetti and Eley cases as examples of conclusory bare-bones allegations with no factual support.  Like the complaints in those cases, the instant complaint was lacking.

For example, the insured only made bare bones allegations that the insurer “failed to complete a prompt and thorough investigation of Plaintiff’s claim” and “fail[ed] to promptly provide a reasonable factual explanation of the basis for the denial of Plaintiff’s claim,” without alleging facts relating to the alleged delay, e.g., the length of time between the date of notice of the insured’s claim and the date the insurer responded.

The insured did not attempt to distinguish the insurer’s authorities. Rather, she relied upon a single case, 1009 Clinton Properties v. State Farm (discussed at length in this post), to argue her position. More than that, her complaint used the exact language found in the Clinton Properties complaint, verbatim. 

Judge Jones stated, “While the court in [Clinton Properties] deemed those allegations sufficient, it surely did not intend to create a rule whereby all future plaintiffs could simply parrot the exact same allegations in order to survive a motion to dismiss.” Judge Jones then cited the basic pleading standards set out in Twombly and its progeny, and dismissed the bad faith claim without prejudice to amend that claim if the insured so chooses.

Date of Decision: March 19, 2020

Clapps v. State Farm Insurance Cos., U.S. District Court Eastern District of Pennsylvania Civil Action No. 19-3745, 2020 U.S. Dist. LEXIS 47800 (E.D. Pa. Mar. 19, 2020) (Jones, II, J.)

For those wanting to research further examples of federal pleading standards case law, here are this Blog’s category links to adequate and inadequate pleading cases.

 

TWO EASTERN DISTRICT CASES ON INADEQUATE PLEADINGS - (1) BARE-BONES CLAIM WITH NO FACTUAL SUPPORT DISMISSED EVEN THOUGH CONTRACT CLAIM PROCEEDS; (2) COMPLAINT DEVOID OF FACTUAL SPECIFICITY CANNOT STAND

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Case 1

In Park v. Evanston Insurance Company, the insureds successfully pleaded a breach of contract claim, but not a bad faith claim.

The insured alleged the nature of the loss, putative damages, and the policy covered the loss. The court agreed these allegations withstood the insurer’s motion to dismiss the breach of contract claim. Though not detailed in the opinion, the court obviously concluded that the facts as pleaded would fall within the policy’s coverage terms.

On the bad faith claim, however, no plausible claim was pleaded.  The court dismissed the claim without prejudice, giving leave to amend if possible.

The flawed complaint asserted that the insurer had no reasonable and sufficient basis to deny coverage, but did “not contain any factual allegations that relate to why Defendants’ alleged acts or omissions were unreasonable.” The court cited a number of decisions for the proposition that “bare-bones allegations of bad faith such as these, without more, are insufficient to survive a motion to dismiss.” These include the Third Circuit’s Smith decision, and the Eastern District decisions in McDonough and Atiyeh.

Date of Decision: March 4, 2020

Park v. Evanston Ins. Co., U.S. District Court Eastern District of Pennsylvania CIVIL ACTION No. 19-4753, 2020 U.S. Dist. LEXIS 37778 (E.D. Pa. Mar. 4, 2020) (Schiller, J.)

Case 2

In Shetayh v. State Farm Fire & Casualty Company, the insureds alleged the insurer fraudulently denied coverage, falsely alleging a property was used for business purposes. They sued for breach of contract and bad faith.

The insureds alleged that the insurer knew the business purpose allegation “was false, fraudulent and misleading and made solely for the purpose of denying coverage and preventing Plaintiffs from obtaining the benefits owed under their policy of insurance.” The insureds remaining bad faith averments were generic in nature, e.g., the insurer was unreasonable in withholding benefits, conducted an unfair investigation, failed to keep the insureds adequately advised, etc.

As the insurer stated in moving to dismiss the bad faith count, “these generic averments … could fit any category of insurance claim….” In response, the insureds simply repeated the allegation that the insurer’s agent knew his statement about business purposes was false, as adequately underpinning the entire bad faith claim.

The court agreed with the insurer.

Bad faith plaintiffs “must plead specific facts as evidence of bad faith and cannot rely on conclusory statements.” Judge Leeson cited the Third Circuit’s Smith decision, just as Judge Schiller did in Park. Judge Leeson found the complaint “devoid of factual specificity”, relying solely on conclusory allegations. Thus, the complaint could not survive a motion to dismiss.

As in Park, dismissal was without prejudice and with leave to amend. The court made clear, however, that “any amended complaint must specifically include facts to address who, what, where, when, and how the alleged bad faith conduct occurred.”

Among other cases, Judge Leeson relied on the following decisions in reaching his conclusion: MBMJ (which had virtually identical paragraphs in the bad faith count); Rosenberg; Fasano; and Alidjani.

Date of Decision: March 6, 2020

Shetayh v. State Farm Fire & Casualty Co., U.S. District Court Eastern District of Pennsylvania No. 5:20-cv-00693, 2020 U.S. Dist. LEXIS 39036 (E.D. Pa. Mar. 6, 2020) (Leeson, J.)