Archive for the 'PA – Federal Pleading Inadequate' Category

CONCLUSORY PLEADINGS INSUFFICIENT TO STATE BAD FAITH CLAIM; MERE REFUSAL TO PAY SUM DEMANDED IS NOT BAD FAITH PER SE (Philadelphia Federal)

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In this UIM case, the tortfeasor’s insurer settled for $15,000, and the injured insured demanded the $300,000 UIM policy limits from his own carrier. The insurer did not accede to that demand, and the husband and wife insureds sued for breach of contract and bad faith. Judge Schiller dismissed the bad faith claim with leave to amend, if a plausible claim could be pleaded.

Plaintiff failed to allege sufficient facts to state a plausible claim. The insureds’ conclusory allegations included “failing to evaluate Plaintiff’s claim objectively and fairly; failing to complete a prompt and thorough investigation of Plaintiff’s claim… [and] unreasonably withholding policy benefits[.]” There are, however, no specific facts pleaded supporting these conclusions. “Courts consistently hold that bare-bones allegations of bad faith such as these, without more, are insufficient to survive a motion to dismiss. Indeed, conclusory allegations that an insurer ‘unreasonably withheld the payment of [UIM] benefits under the policy…failed to engage in good faith negotiations… [and] failed to perform an adequate investigation’ are insufficient to state a claim for bad faith.”

Similarly, the complaint alleges the insurer “failed to conduct a fair and reasonable investigation into his claim but does not plead any facts related to that investigation.” The court further found the insured could not state a claim on the basis that the insurer “did not pay [the insured’s] claims even when he provided the same information that led [the tortfeasor’s insurer] to tender the limits of its policy.” The court observes that “the failure to immediately accede to a demand for the policy limit cannot, without more, amount to bad faith.” [Though the court does not so state, there appears to be no explanation in the complaint why providing information leading to a $15,000 payment automatically requires an additional $300,000 payment.]

The court provided the insureds “may file an amended complaint to add a bad faith claim, but only if they can plausibly do so.” (Emphasis in original)

Date of Decision: October 4, 2019

Doyle v. Liberty Mutual Ins., U. S. District Court Eastern District of Pennsylvania No. 19-3460, 2019 U.S. Dist. LEXIS 172581, 2019 WL 4917123 (E.D. Pa. Oct. 4, 2019) (Schiller, J.)

(1) NOT ACCEDING TO INSURED’S DEMAND IS NOT BAD FAITH PER SE (2) THERE IS NO FIDUCIARY DUTY IN UIM CONTEXT AND (3) COMPENSATORY DAMAGES NOT AVAILABLE UNDER BAD FAITH STATUTE (Western District)

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In this UIM bad faith case, the court dismissed the bad faith count with leave to amend, struck all allegations referencing fiduciary duty, and dismissed the claim for compensatory damages under the Bad Faith Statute, 42 Pa.C.S. § 8371.

The insured was injured in a motor vehicle accident. The tortfeasor’s carrier paid his $25,000 policy limits. The insured sought additional recovery under the UIM provisions of his own policy.

The insured provided various medical records, economic reports, and other documents to the carrier, and ultimately demanded $250,000 in UIM policy limits. The insured’s carrier did not meet this demand, and the insured sued for breach of contract and bad faith, as well as loss of consortium for his wife.

The insurer moved to dismiss the bad faith count for failure to state a claim. It also moved to strike all averments concerning fiduciary duty, and to dismiss any claim for compensatory damages under the Bad Faith Statute.

The insured fails to plead a plausible bad faith claim

In reviewing the complaint, the court observed that while the list of 15 allegations in the bad faith count was long, it only pleaded “essentially conclusory acts and omissions,” which are insufficient to make out a plausible bad faith cause of action. These flawed allegations included:

a) “failing to objectively and fairly evaluate Plaintiffs’ claim”; b) “failing to objectively and fairly reevaluate Plaintiffs’ claim based on new information”; c) “engaging in dilatory and abusive claims handling”; d) “failing to adopt or implement reasonable standards in evaluating Plaintiffs’ claim”; e) “acting unreasonably and unfairly in response to Plaintiffs’ claim”; f) “not attempting in good faith to effectuate a fair, prompt, and equitable settlement of Plaintiffs’ claim in which the Defendant’s liability under the policy had become reasonably clear”; g) “subordinating the interests of its insured and those entitled under its insureds’ coverage to its own financial monetary interests”; h) “failing to promptly offer reasonable payment to the Plaintiffs”; i) “failing reasonably and adequately to investigate Plaintiffs’ claim”; j) “failing reasonably and adequately to evaluate or review the medical documentation in Defendant’s possession”; k) “violating the fiduciary duty owed to the Plaintiffs”; l) “acting unreasonably and unfairly by withholding underinsured motorist benefits justly due and owing to the Plaintiffs”; m) “failing to make an honest, intelligent, and objective settlement offer”; n) “causing Plaintiffs to expend money on the presentation of their claim”; and o) “causing the plaintiffs to bear the stress and anxiety associated with litigation.”

Beyond these conclusory allegations, the bad faith count was “devoid of facts explaining ‘who, what, where, when, and how’ Defendant failed to handle Plaintiffs’ UIM claim in good faith.”

The court did scour the complaint for facts. However, those facts did “not detail which of Defendant’s acts or omissions constitute bad faith, separately or in conjunction with others.” All those facts amounted to was that the insured was (1) injured in a motor vehicle accident, (2) the tortfeasor’s liability limit did not cover all of the insured’s injury claims, (3) the insured submitted his claim to his UIM carrier, and (4) the claim made has not been paid.

“While such facts might be sufficient to plead a claim for breach of contract, they are insufficient to support a claim of bad faith under the Pennsylvania statute. Simply put, requiring the Court to infer bad faith through Defendant’s ‘failure to immediately accede to a demand [under an insurance policy] cannot, without more, amount to bad faith.’”

Plaintiff’s citation to documents in his pleadings did not cure this problem. These documents simply show there may be some merit to the UIM claim, but do not show the “where, when and how” of a bad faith claim. These documents do not show how the denial was unreasonable or that that the allegedly unreasonable denial was knowing or reckless.

Again, the complaint simply amounted to an argument that bad faith should be inferred from the carrier’s refusing the insured’s demand. This is not enough.

There is no fiduciary duty in the UIM context

The court also struck all references in the complaint to breaches of fiduciary duty. The court rejected the notion that an insurer bears a fiduciary duty to the insured in all circumstances. Rather, while there may be a fiduciary duty in the context of third party claims against the insured, there is no such duty in first party claims, such as UIM claims.

Compensatory damages cannot be recovered under the Bad Faith Statute

Pennsylvania’s Bad Faith Statute only allows for recovery of punitive damages, interest, attorney’s fees, and costs. It essentially provides for additional remedies other than compensatory damages, which must be recovered under other theories, principally breach of contract.

Date of Decision: September 9, 2019

Ream v. Nationwide Property & Casualty Insurance Co., NAIC, U.S. District Court Western District of Pennsylvania No. 2:19-cv-00768, 2019 U.S. Dist. LEXIS 152870, 2019 WL 4254059 (W.D. Pa. Sept. 9, 2019) (Hornak, J.)

FACTS MAKING OUT A POSSIBLE BAD FAITH CLAIM DID NOT SET OUT A PLAUSIBLE BAD FAITH CLAIM ABSENT SPECULATION (Middle District)

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Judge Caputo dismissed a UIM based bad faith count, but with leave to amend the complaint.

  1. He found these averments to be conclusory:

Failing objectively and fairly to evaluate Plaintiff’s claim;

Failing objectively and fairly to reevaluate Plaintiff’s claim based on new information;

Failing reasonably and adequately to investigate Plaintiff’s claim; and

Failing reasonably and adequately to evaluate or review the medical documentation in Defendant’s possession.

  1. He found these averments “regarding how Defendant handled the claim after receipt [to be] conclusory without additional factual support that would inform the court why Defendants actions are unreasonable”:

Engaging in dilatory and abusive claims handling;

Acting unreasonable and unfairly in response to Plaintiff’s claim;

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

Failing to promptly offer reasonable payments to the Plaintiff;

Acting unreasonably and unfairly by withholding underinsured motorist benefits justly due and owing to the Plaintiff; and

Failing to make an honest, intelligent, and objective settlement offer.

  1. He stated that the following averment was conclusory, circular, and proved nothing:

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.

  1. He found the allegations that Defendant failed to adopt “reasonable standards” and subordinated “the interestsof its insured” to their own financial monetary interest to be conclusory in the absence of supporting facts.

Judge Caputo has previously described the method of stripping away conclusory allegations to determine a bad faith claim’s plausibility under federal pleading standards. A summary of his analysis can be found here.

Following the method of stripping away conclusory allegations in determining plausibility, Judge Caputo found here that the complaint simply alleged the following facts: an accident, the tortfeasor’s willingness to pay policy limits, the insurer’s agreement to that payment, the insured’s written demand for UIM benefits supported by a medical report, and the insurer’s failing to settle or resolve the UIM claim. These facts alone did not support the elements of a bad faith claim, i.e., unreasonable denial of benefits with a knowing or reckless disregard that the basis to deny benefits was unreasonable.

The court found that “[w]hile such assertions perhaps suggest that a bad faith claim is possible, they do not allow for any non-speculative inference that a finding of bad faith is plausible.”

Judge Caputo did permit the insured to amend the complaint, with the reminder that if the insured “elects to do so, the amended complaint must set forth facts, not merely conclusory statements, to support a bad faith claim.”

Date of Decision: August 14, 2019

Peters v. Geico Advantage Insurance Co., U. S. District Court Middle District of Pennsylvania NO. 19-CV-1119, 2019 U.S. Dist. LEXIS 137087 (M.D. Pa. Aug. 14, 2019) (Caputo, J.)

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

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

There is no breach of contract

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

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

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

On the bad faith claim:

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

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

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

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

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

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

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

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

Date of Decision: August 9, 2019

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

 

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

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

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

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

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

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

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

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

Date of Decision: August 8, 2019

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

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

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

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

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

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

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

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

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

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

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

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

Date of Decision: August 6, 2019

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

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

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

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

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

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

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

Date of Decision: July 3, 2019

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

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

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

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

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

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

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

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

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

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

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

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

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

Date of Decision: June 10, 2019

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

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

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

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

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

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

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

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

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

Date of Decision: June 3, 2019

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

TWO MIDDLE DISTRICT CASES ON PLEADING BAD FAITH, AT BOTH ENDS OF THE ADEQUACY SPECTRUM: (1) BAD FAITH CLAIM DISMISSED WITHOUT PREJUDICE FOR FAILURE TO ALLEGE KNOWING OR RECKLESS DISREGARD OF UNREASONABLE CLAIM DENIAL; (2) INSURED SUCCESSFULLY AMENDS COMPLAINT TO SURVIVE SECOND MOTION TO DISMISS

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These two recent Middle District of Pennsylvania cases provide guidance at either end of the spectrum on pleading statutory bad faith.

CASE 1: BOTH ELEMENTS OF BAD FAITH MUST BE PLEADED

This case involved a coverage dispute and bad faith claims. The insured municipality sought repayment for a $1,000,000 settlement over a death arising out of an automobile accident involving one of the city’s police officers. The underlying suit included federal constitutional claims.

There were two $1,000,000 policies at issue: an auto policy and a law enforcement policy. The insurer paid $500,000 under the auto policy, but refused payment under the law enforcement policy per an auto exclusion.

The court agreed the law enforcement policy did not provide coverage. However, it rejected an argument that the auto policy payment was limited under a state statute capping tort liability at $500,000. The court found that the cap did not apply to federal civil rights claims. Thus, coverage for the remaining $500,000 was potentially due.

The court, however, dismissed the bad faith claim without prejudice, stating:

Defendants argue that the City’s insurance bad faith claim must fail because, although the City alleged that [the insurers] lacked a reasonable basis for denying benefits under the policies, the City did not allege that [the insurers] “knew or recklessly disregarded [the] lack of reasonable basis [when] denying the … claim[s],” as required by law. This Court agrees with [the insurers], and will dismiss the City’s insurance bad faith claim. That dismissal, however, will be without prejudice, and the City may amend its complaint to satisfy the identified deficiency.

Date of Decision: May 16, 2019

City of Williamsport v. CNA Insurance. Cos., U. S. District Court Middle of Pennsylvania No. 4:19-CV-00170, 2019 U.S. Dist. LEXIS 82667 (M.D. Pa. May 16, 2019) (Brann, J.)

CASE 2: HOW TO DO IT THE SECOND TIME AROUND (PLEADING THE WHO, WHAT, WHERE, WHEN, AND HOW)

This case provides an example of an insured sufficiently amending a defectively pleaded first complaint, to survive a motion to dismiss the amended complaint.

The original complaint was dismissed without prejudice for conclusory pleading, even though it included 29 bad faith averments. The summary of the court’s first dismissal can be found here.

In addressing a motion to dismiss the amended complaint, the court restated principles from its prior decision. Unlike the first complaint, however, the court found the following allegations went beyond conclusory pleading:

In the complaint presently before the Court, [the insured’s] bad faith count, Count II, lists 20 allegations of bad faith. … The Court finds that each of these subparagraphs describe who, what, where, when, and how the bad faith alleged in each subpart of ¶73 occurred. … Further, the Court finds that the amended complaint adequately alleges that [the insurer] acted in bad faith, and sufficiently articulates the factual basis of the bad faith claim. Each subparagraph details the factual basis for the bad faith claim. These averments are sufficient to allow this claim to go forward, and the complaint satisfactorily pleads both elements of a bad faith claim, that the insurer did not have a reasonable basis for denying benefits under the policy, and that the insurer knew or recklessly disregarded its lack of reasonable basis in denying the insured’s claim.

Date of Decision: May 23, 2019

Sowinski v. New Jersey Manufacturers Insurance Co., U. S. District Court Middle District of Pennsylvania CIVIL ACTION NO. 3:17-CV-02352, 2019 U.S. Dist. LEXIS 87140 (M.D. Pa. May 23, 2019) (Mehalchick, M.J.)