Archive for the 'PA – Limitations Period' Category


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The insurer denied auto theft coverage based on an exclusion.  The insured sued for breach of contract and bad faith, and also alleged breach of a fiduciary duty. The carrier moved to dismiss the breach of contract and bad faith claims, and to strike the fiduciary duty language.

The court dismissed the breach of contract claim for failing to bring action within the time period required under the policy.

The court, however, allowed the insured’s bad faith claim to proceed.  The bad faith claim was based on an unreasonable investigation theory.  The court stated:

“On the existing record at this early stage of the litigation, [the insured] states a plausible claim for coverage and, while he will have to prove his bad faith claim by ‘clear and convincing evidence,’ … the allegations in the Complaint that [the insurer] failed to investigate his claim and knowingly set the date of loss outside the policy period “may … show bad faith.’ … Because [the] well-pleaded assertions of unreasonable claims processing and investigation adequately state a plausible bad faith claim under Section 8371, dismissal is not warranted and the Motion to Dismiss Count II of the Complaint is denied.”

The court did strike the allegation that the carrier’s breach of fiduciary duty constituted bad faith, observing:

In Keefe v. Prudential Prop. & Cas. Ins. Co., 203 F.3d 218, 227–28 (3d Cir. 2000), the United States Court of Appeals for the Third Circuit held that an insurer’s fiduciary obligations to an insured are limited to claims handling and resolution of third-party claims against an insured. “Under Pennsylvania law, a fiduciary duty higher than the duty of good faith and fair dealing does not arise out of an insurance contract until an insurer asserts a stated right under the policy to handle all claims asserted against the insured.” … Keefe has been applied to the cancellation of a life insurance policy and to policyholders’ uninsured and underinsured motorist claims where, like the present claim, the insurer has not asserted a right to resolve third-party claims against the insured. … Accordingly, given [the insured’s] failure to respond to the Motion to Strike, and the weight of precedential authority limiting an insurer’s fiduciary obligations to the resolution of third-party claims against an insured, the Motion to Strike is granted.

Date of Decision:  May 11, 2021

Peltz v. State Farm Mutual Automobile Insurance Company, U.S. District Court Western District of Pennsylvania No. 21-0005, 2021 WL 1893125 (W.D. Pa. May 11, 2021) (Kelly, M.J.)


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

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

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

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

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

Date of Decision: January 7, 2021

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


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In this UIM action, with a history reaching back over a decade, the court applied the statute of limitations to dismiss plaintiff’s section 8371 claim, and rejected plaintiff’s attempts to assert the discovery rule.

Bad Faith Statute of Limitations Standards

  1. Section 8371 claims are subject to a two-year statute of limitations.

  2. “The statute of limitations starts to run when the plaintiff’s ‘right to institute and maintain the suit arises; lack of knowledge, mistake, or understanding do not toll the running of the statute of limitations.’”

  3. Thus, a “claim accrues when a plaintiff is harmed and not when the precise amount or extent of damages is determined.”

  4. “A bad faith claim, in particular, accrues when the insurer definitively denies coverage.”

  5. “Thus, where an insurer clearly and unequivocally puts an insured on notice that he or she will not be covered under a particular policy for a particular occurrence, the statute of limitations begins to run and the insured cannot avoid the limitations period by asserting that a continuing refusal to cover was a separate act of bad faith.”

  6. In addition, “[r]epeated or continuing denials of coverage do not constitute separate acts of bad faith giving rise to a new statutory period.”

Statute of Limitations Bars the Bad Faith Claim

In this case, the plaintiff first challenged the carrier’s coverage decision in 2004. There was a petition to compel arbitration and transfer in 2004. “Thereafter, Plaintiff took no action until November 15, 2011, when she filed the Second Petition to Appoint Arbitrator and Compel Arbitration in the Philadelphia Court of Common Pleas.” Another motion to transfer was filed, and plaintiff appealed, with the Superior Court affirming in January 2014.

“Just prior to that January ruling, Defendant filed the Third Petition to Appoint Arbitrator. Arbitration was ordered and the arbitration panel decided in favor of Defendant on November 3, 2014. The trial court then entered a judgment in Defendant’s favor on December 10, 2014.”

“In light of these facts, the December 10, 2014 entry of judgment, affirming the arbitration award, clearly put Plaintiff on notice that she would not obtain her requested coverage under the policies issued by Defendant. Accordingly, her bad faith claim accrued on that date. … Plaintiff’s failure to file her federal complaint until more than five years later violates the statute of limitations and requires dismissal of the claim as time barred.”

Discovery Rule Does not Save the Case

Plaintiff argued her claim should be saved by the discovery rule.

  1. The discovery rule only tolls the “limitations period until ‘the plaintiff knows or reasonably should know (1) that he has been injured, and (2) that his injury has been caused by another party’s conduct.’”

  2. On the other hand, “once a plaintiff possesses the salient facts concerning the occurrence of his injury and who or what caused it, he has the ability to investigate and pursue his claim.”

  3. Further, “it is the duty of the party asserting a cause of action to use all reasonable diligence to properly inform himself of the facts and circumstances upon which the right of recovery is based and to initiate suit within the prescribed period.”

The insured attempted to argue there was a fraud that occurred while she was in Utah, and she only learned of the fraud upon returning to Pennsylvania to participate in a sham arbitration proceeding.  She was pro se and claimed lack of notice.

The court rejected the discovery rule’s application. “First, other than a general allegation that Plaintiff was in Utah during the pendency of the Third Petition to Appoint Arbitrator, Plaintiff fails to provide any basis for her failure to exercise a modicum of diligence with respect to her ongoing insurance claim. Moreover, even giving Plaintiff the benefit of the doubt that she could not have discovered the entry judgment against her in 2014, it is undisputable that Plaintiff had notice of that judgment when her attorney filed, on her behalf, a Petition to Strike, Set Aside and Open Judgment, Award, and all Actions of the Arbitrators on December 6, 2016. Yet, Plaintiff waited more than three years thereafter to initiate this action in federal court.”

Thus, the court rejected the discovery rule argument and dismissed the claim.

Date of Decision: November 23, 2020

McAteer v. State Farm Insurance Company, U.S. District Court Eastern District of Pennsylvania No. CV 20-101, 2020 WL 6870604 (E.D. Pa. Nov. 23, 2020) (Goldberg, J.)


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This statutory bad faith opinion issued out of the Western District of Pennsylvania yesterday.

The court finds no coverage based on a one-year suit limitation provision and/or a policy exclusion. Thus, plaintiffs have no bad faith claim based on denial of coverage, as no coverage is due, and that claim is dismissed with prejudice.

The court expressly finds, however, that there are other forms of statutory bad faith cognizable under 42 Pa.C.S. § 8371, beyond coverage denials.  It identifies a commonly recognized exception that if the contract claim fails for a technical reason, like exceeding a limitation period, the bad faith claim can still proceed.  The court goes beyond this kind of technical exception to recognize further that poor claims handling may be actionable independently, e.g., knowing or recklessly inadequate investigation, even when no benefit is due under the policy.

On this distinct bad faith investigation claim, plaintiffs only plead (1) conclusory allegations, along with (2) a single fact that cannot constitute bad faith standing alone. Thus, the court dismisses the bad faith investigation claim, but without prejudice. Plaintiffs have leave to file an amended complaint on their investigation bad faith claim, even though no coverage is due under the policy.

[Note: As those following this blog know, we have addressed the scope of cognizable claims under section 8371, and raised the question as to whether cognizable claims under section 8371 are limited to cases where first party benefits due have been denied, or where a defense and/or indemnification due have been refused on third party claims.  Our analysis always begins with the 2007 Supreme Court decision in Toy v. Metropolitan Life Insurance Company.  See, e.g., this post, and this article. The present opinion relies, in part, on the Third Circuit’s unpublished decision in Gallatin Fuels. As discussed in the linked article, Gallatin Fuels does not address Toy. We are also attaching a portion of a brief recently filed in a Philadelphia federal court, from attorney Lee Applebaum, as part of a motion that has now become moot.]

Date of Decision:  August 26, 2020

Palek v. State Farm Fire and Casualty Co., U.S. District Court Western District of Pennsylvania No. 20-170 (W.D. Pa. Aug. 26, 2020) (Flowers Conti, J.)

Our thanks to Attorney Daniel Cummins of the excellent Tort Talk Blog for bringing this case to our attention.


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The essence of the insured’s case is the insurer settled claims against the insured without the insured’s knowledge or permission, and without adequate investigation.  The insurer paid $995,000 out of a $1 Million policy to the person injured in the insured’s ambulance. The insured asserts the carrier overpaid to settle, resulting in $200,000 in damages from increased premiums.

The complaint did not include any reference to statutory bad faith, 42 Pa.C.S. § 8371. Thus, the court found that the sole “bad faith” claim at issue was a breach of the contractual duty of good faith and fair dealing.

The insurer moved to dismiss based on section 8371’s two-year statute of limitations. Since this is a contract based bad faith claim, however, the statute of limitations is four years, and that argument was rejected.

As to the merits, the carrier asserts the policy language expressly provides it can settle any claim or suit as it considers appropriate. Thus, it has complete authority to settle within policy limits at any amount.  The insured argues this is “absurd,” but offers no authority to support its position.

The court ruled for the insurer, observing: “Pennsylvania law disfavors bad faith claims where a policy grants the insurer discretion to settle and where such settlement is within policy limits. However, ‘in limited circumstances,’ ‘a claim for bad faith may … be asserted against the insurance company notwithstanding a ‘deems expedient’ provision … if such settlement was contrary to the intent and expectation of the parties.’” Here, the court found the “settle when appropriate” language to be the equivalent of a deems expedient provision.

The court cited two precedents where a deems expedient provision undermined the possibility of a bad faith claim. In the first, there was no evidence the parties did not freely negotiate policy terms. As to the second, the Third Circuit interpreted “’deems expedient’ clauses broadly—so broadly as to allow insurers to settle claims subject to such clauses ‘for nuisance value of the claim’ or even where a ‘suit … presents no valid claim against the defendants.’”

In the present case, the insured does not contend the deems expedient clause was not freely negotiated. Moreover, even if the insurer could have done more to investigate the underlying claim, “the ‘deems expedient’ clause in its policy afforded [the insurer] the option of settling … simply because it preferred settlement over further investigation of his claim.”

Thus, the bad faith claim was dismissed with prejudice.

Date of Decision: July 22, 2020

Healthfleet Ambulance, Inc. v. Markel Insurance Co., U.S. District Court Eastern District of Pennsylvania CIVIL ACTION NO. 20-2250, 2020 U.S. Dist. LEXIS 129185 (E.D. Pa. July 22, 2020) (Beetlestone, J.)


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This case involved breach of contract and bad faith claims against the insurer based on its decision not to cover the alleged theft of jewelry. The insurer engaged an investigation firm to look into the theft. The individual investigator assigned to the claim raised questions about either the ownership of the jewelry, or whether it was actually stolen in a burglary.

The insurer was granted judgment on the pleadings as to the breach of insurance contract claim. The policy had a one-year limitations period for brining suit, and the insured failed to file her action within one year.

Even though there was no coverage due because of the contractual limitations period, however, the court denied summary judgment on the bad faith claim. The insurer argued that the insured’s “deposition testimony shows that she cannot meet her burden of establishing bad faith.” The court found this argument premature.

The case had been removed to federal court and immediately placed in the arbitration track. There were no formal discovery requests from any party. The court found that the “litigation that has ensued does not preclude full and fair discovery on fact-driven claims that remain on the bad-faith count.” Thus, summary judgment was premature, and the motion was dismissed without prejudice. Judge Rufe added a requirement that the parties had to report jointly regarding to the court on what discovery was being pursued, if any, heading into the arbitration.

[Note: The insurer apparently did not attempt to argue that if the contract claim was dismissed, then the bad faith claim necessarily failed. There is some case law holding if the contract claim is dismissed on the basis of a contractual limitations period, the bad faith claim can still proceed. See, e.g., Doylestown Electrical Supply Co. v. Maryland Casualty Ins. Co., 942 F. Supp. 1018 (E.D. Pa. 1996) and March v. Paradise Mutual Ins. Co., 646 A.2d 1254 (Pa. Super. 1994), appeal denied, 540 Pa. 613, 656 A.2d 118 (1995).]

Finally, the insured attempted to amend the complaint to add claims against the insurer’s claim adjustor, the company it hired to investigate the claim and the individual investigator. The court found these claims meritless and would not allow amendment.

An individual adjustor working for an insurer is not an insurer. Thus, the individual adjustor was not subject to (i) a breach of contract claim because he was not a party to the contract; or (ii) the bad faith claim because Pennsylvania’s bad faith statute only applies to insurers. The same reasoning applied to the investigators.

Date of Decision: April 30, 2020

Holden v. Homesite Insurance Co., U.S. District Court Eastern District of Pennsylvania CIVIL ACTION NO. 19-2167, 2020 U.S. Dist. LEXIS 75904 (E.D. Pa. April 30, 2020) (Rufe, J.)



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The insurer denied coverage on November 3, 2015. The insured sued for breach of contract and bad faith on September 20, 2019. The insurer moved to dismiss the contract claim based on a contractual two-year limitation period, and the bad faith claim under the controlling two-year statute of limitations. The relevant facts were evident on the face of the complaint. Therefore, the court could decide the issues on a motion to dismiss.

As to the contract claim, because the “policy had a 2-year suit limitation, there is no merit to plaintiff’s contention that Pennsylvania’s 4-year statute of limitations for contract claims under 42 Pa.C.S.A. §5501 should control in this case.” The insured nowhere alleged the insurer “led her to believe the two-year limitations period would not be enforced or that [the insurer] committed any actions that induced her to file her complaint after the two year deadline.” The contract claim was dismissed with prejudice.

As to the bad faith claim, “since ‘Plaintiff’s claim of bad faith is … based on Defendant’s denial of benefits to Plaintiff under the Policy, [the] Court can therefore consider the [November 3, 2015 denial of coverage letter] attached by Defendant to its Motion to Dismiss.” The court would not let the plaintiff escape the timing issue by simply leaving out the denial date and not attaching a document on which it relied in its complaint in pleading its case, where the defendant then attaches to its motion.

Further, the court found “[no] doubt that the two year statute of limitations for a bad faith suit begins to run when insured first learned that the insurance company was denying coverage.” Thus, the statutory bad faith claim was time barred.

[Note on statute of limitations triggers and the scope of the bad faith statute. The court observes that the two year bad faith statute of limitations begins to run at the time coverage is denied, and cites case law for this proposition, also phrased as when claims for benefits are denied. As noted previously on this blog, there are cases holding that the bad faith statute applies not only to coverage denial, but distinctly to various claims handling misconduct. Under this theory, the statute of limitations cannot begin to run at the time coverage is denied, because, e.g., no coverage may be due and bad faith is based solely on egregious claims handling failures. Does this mean that the statute of limitations case law makes clear that statutory bad faith must be based on a benefit denial, see one example here, and these bad faith claims handling cases are wrongly decided; or that there are other triggers for the two-year statute beginning to run wholly independent of a coverage denial?

The governing case on the statutory bad faith statute of limitations is the Pennsylvania Supreme Court’s decision in Ash v. Continental Ins. Co., 932 A.2d 877 (Pa. 2007). In Ash, a clear majority of Pennsylvania’s Supreme Court followed Chief Justice Cappy’s Toy v. Metropolitan Life Ins. Co. opinion. The Ash majority states: “The bad faith insurance statute, on the other hand, is concerned with “the duty of good faith and fair dealing in the parties’ contract and the manner by which an insurer discharge[s] its obligation of defense and indemnification in the third party claim context or its obligation to pay for a loss in the first party claim context.” See Toy v. Metropolitan Life Ins. Co., 928 A.2d 186, 199 (Pa. 2007). It applies only in limited circumstances–i.e., where the insured first has filed ‘an action arising under an insurance policy’ against his insurer, see 42 Pa.C.S. § 8371–and it only permits a narrow class of plaintiffs to pursue the bad faith claim against a narrow class of defendants.” An article discussing Toy and Ash can be found here.]

The insured attempted to claim there was somehow a common law bad faith claim, subject to the four-year contract statute of limitations. Aside from the fact that the complaint alleged statutory bad faith, common law bad faith is solely contract based in Pennsylvania, and merges with the breach of contract claim. Thus, it would be subject to the same two-year contractual limitations period.

Finally, the court stated that in any event, common law bad faith did not apply to first party property damage claims, as were at issue in this case. The court relied on Judge Munley’s 2009 Bukofski decision on this point.

Date of Decision: February 13, 2020

Mazzoni v. Travelers Home & Mutual Insurance Co., U.S. District Court Middle District of Pennsylvania CIVIL ACTION NO. 3:19-2169, 2020 U.S. Dist. LEXIS 25513 (M.D. Pa. Feb. 13, 2020) (Mannion, J.)


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In this case, the alleged bad faith conduct at issue occurred in 2011. The statutory bad faith suit was filed in 2019. The Third Circuit affirmed the trial court’s finding that the two-year bad faith statute of limitations barred the suit.

The Third Circuit rejected both a discovery rule argument, and an argument that there was a continuing breach that restarted the statute of limitations.

As to the first argument, the court upheld the finding that the insured and counsel witnessed the 2011 conduct at issue. The court quoted the principle: “’Where, however, reasonable minds would not differ in finding that a party knew or should have known on the exercise of reasonable diligence of his injury and its cause, the court determines that the discovery rule does not apply as a matter of law.’” Thus, the discovery rule did not toll the statute of limitations in this case.

On the second argument, the appellate court stated: “As to a continuing breach, in Pennsylvania, the statute of limitations runs when the first denial occurs, but continuing or subsequent denials do not newly trigger the statute of limitations.” (Emphasis in original) Thus, the statute ran in 2013.

Date of Decision: January 24, 2020

Feingold v. Brooks, U. S. Court of Appeals for the Third Circuit No. 19-1495, 2020 U.S. App. LEXIS 2279 (3d Cir. Jan. 24, 2020) (Jordan, Rendell, Scirica, JJ.)


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Through an unusual set of circumstances, the insureds’ electricity service at a vacation home was terminated by third parties, unbeknownst to the insureds. This led to the heating system’s not functioning, which in turn led to frozen pipes bursting, and significant water damage to their home. Their insurer denied coverage under a policy provision that required the insureds to take reasonable care in maintaining heat while the property was unoccupied, or in shutting down the water system.

The insureds brought claims for breach of contract, negligence, and bad faith. The negligence claim was dismissed under the gist of the action doctrine, as the claim was based on the breach of an insurance contract and any duties arose out of that contract. The breach of contract claim was dismissed as being initiated after the one-year contract period for bringing suit, expressly required in the insurance policy.

The court analyzed the bad faith came under both the common law and Pennsylvania’s Bad Faith Statute, 42 Pa.C.S. § 8371. One difference between the two claims is that common law bad faith permits recovery of compensatory and consequential damages, while statutory bad faith is limited to interest, punitive damages, legal fees and costs.

In this case, the common law bad faith claim was time barred, being subject to the same analysis as the breach of contract claim.

The statutory bad faith claim was based upon an allegedly unreasonable failure to investigate the facts as to the history of the termination of the insureds’ electric service as the cause of the loss. The insureds argued that the adjuster’s single day visit to “the property was insufficient to ascertain the information necessary to determine the cause of the damage, particularly in light of the adjuster’s failure to contact [other relevant parties] to determine what events led to the transfer and termination of electric service at the [insureds’] Pennsylvania vacation home.” The court, however, granted the insurer summary judgment on this issue.

While the “adjuster may not have pursued an investigation into the ultimate cause of the property damage to the extent the [insureds] desired, a single, one-day visit to the home was sufficient for the adjuster to ascertain that the property was vacant for an extended period of time, that electric service to the home had been shut off for a period of months resulting in a failure to maintain heat inside the home over an extended period of time, and that the cause of property damage was a freeze out. This information, together with that gathered by claims handlers—including, in particular, the [insureds’] failure to note over the course of several months that they were no longer being billed for electric service—was sufficient … to reasonably determine that the [insureds] had failed to use reasonable care to maintain heat in the home while it was vacant for several months of winter weather. Stated another way, we find that, based on the evidence adduced by the parties on summary judgment, viewed in the light most favorable to the plaintiffs, no reasonable jury could find that [the insurer’s] investigation was inadequate or that its denial of coverage was frivolous or unfounded.

Date of Decision: September 27, 2019

Pager v. Metro. Edison, U. S. District Court Middle District of Pennsylvania CIVIL ACTION NO. 3:17-cv-00934, 2019 U.S. Dist. LEXIS 166052 (M.D. Pa. Sept. 27, 2019) (Saporito, M.J.)


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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.)