Archive for the 'PA – Limitations Period' Category

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.)

BAD FAITH CLAIM BROUGHT MORE THAN TWO YEARS AFTER NOTICE OF DENIAL DISMISSED ON STATUTE OF LIMITATIONS GROUNDS (Philadelphia Federal)

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A property loss coverage claim was dismissed under the policy’s two-year suit limitation provision, requiring that any suit be brought within two years of the date of loss. In dismissing this breach of contract claim, the court reiterated the Third Circuit’s holding that an insurer does not have to show prejudice in enforcing a suit limitation provision.

The insured also brought a statutory bad faith claim, and a breach of the covenant of good faith and fair dealing count. The insurer moved to dismiss the bad faith claim on statute of limitations grounds, arguing that the policy benefit was denied more than two years prior to suit. (It is well established that the bad faith limitations period is two years).

The insurer relied on a notice of denial, attached to its answer, in moving to dismiss. The insured asserted because this document was not attached to the complaint, it could not be considered on a motion to dismiss. Under the circumstances of this case, the court disagreed.

The court observed that courts handling motions to dismiss “may consider an undisputedly authentic document that a defendant attaches as an exhibit to a motion to dismiss if the plaintiff’s claims are based on the document.” Absent this exception, plaintiffs with legally deficient claims could simply omit attaching a document to avoid dismissal of claims that should be dismissed.

The court found the denial referenced in the complaint to be based on this notice of denial  document, and so considered it on the motion to dismiss.  The notice of denial was issued over two years before suit. Thus, the bad faith claim was independently time barred, and was dismissed on that basis.

[Note: This court ruled two weeks earlier that a bad faith claim could proceed even when the underlying breach of contract was dismissed because of a suit limitations provision, i.e., the bad faith claim could proceed even though no coverage was due. A link summarizing that opinion, and the viability of bad faith claims when no coverage is due, can be found here.]

Finally, the court dismissed the breach of the covenant of good faith and fair dealing as being subsumed within the breach of contract claim.

Date of Decision: May 23, 2019

Mail Quip, Inc. v. Allstate Insurance Co., U. S. District Court Eastern District of Pennsylvania CIVIL ACTION No. 19-223, 2019 U.S. Dist. LEXIS 87923 (E.D. Pa. May 23, 2019) (Kenney, J.)

BAD FAITH CLAIM CAN PROCEED AFTER COVERAGE CLAIM DISMISSED AS UNTIMELY; PRO SE PLEADING ADEQUATE TO AVOID DISMISSAL (Philadelphia Federal)

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As we have discussed on this Blog for many years, case law is divided on whether statutory bad faith can exist if no coverage is due. We addressed this in some detail within this October 2018 post, summarizing a federal case where the court stated that Pennsylvania law allows for statutory bad faith even in the absence of any coverage obligation. In that October 2018 post, we additionally noted the presence of case law that would allow a bad faith claim to proceed where coverage is not due for procedural reasons, e.g., an otherwise covered claim is barred by a contractual limitations period. By contrast, this even more recent post summarizes an opinion, from the same federal court, finding there can be no bad faith if no coverage is due.

Linked here is a detailed article addressing whether Pennsylvania’s bad faith statute only addresses bad faith coverage denials and refusals to defend, and does not provide relief for poor claims handling or the like when these underlying benefits are not due. Under this view, poor claims handling or communications failures are evidence of statutory bad faith in denying benefits, but such conduct is not actionable (cognizable) statutory bad faith in itself.

BAD FAITH CLAIM CAN PROCEED EVEN IF COVERAGE NOT DUE UNDER CONTRACTUAL LIMITATIONS PROVISION

In the present case, arising out of the very same federal court as the aforementioned cases, the insured’s breach of contract claim was dismissed as time-barred by the policy’s suit limitation clause. The court, however, permitted the bad faith action to proceed. Specifically, the court stated: “Because Plaintiff asserts bad faith as to conduct beyond [the carrier’s] denial of coverage, the Court must consider the sufficiency of Plaintiff’s bad faith claim even though Plaintiff’s breach of contract claim is time-barred.”

The court quoted from footnote 3 of the 2017 Dagit case: “It is well established that a claim for bad faith brought against an insurer 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.”

[Note: Dagit relies on cases such as Doylestown Electric Supply Co. v. Maryland Casualty Insurance Co., 942 F. Supp. 1018 (E.D. Pa. 1996), March v. Paradise Mutual Insurance Co., 646 A.2d 1254 (Pa. Super. Ct. 1994), and the Third Circuit’s unpublished opinion in Gallatin Fuels, Inc. v. Westchester Fire Ins. Co., 244 F. App’x 424 (3d Cir. 2007). As in the present case, Doylestown Electrical and March involved contractual suit limitations provisions barring coverage, and not lack of coverage under substantive policy provisions. Gallatin Fuels addressed the extraordinary situation where the policy was not in effect at the relevant time, but the court held the bad faith statute still applied because the insurer believed it had a policy in effect and acted poorly while holding that belief. These cases are addressed in the article linked here and above.]

INSURED ADEQUATELY PLEADS BAD FAITH

After finding the bad faith claim could proceed, the court still had to address the complaint’s adequacy. It found the bad faith claim adequately pleaded, stating:

[The insurer] argues that [the insured] does not provide any facts to support his allegation that [the insurer] acted in bad faith by denying him coverage under the insurance policy for the damage sustained to his home by the snowstorm. … To the contrary, [the insured] sets forth a myriad of facts to support his claim. For example, [the insured] alleges he was given contradictory information by [the insurer’s] agents as to the coverage of his policy and how he could collect under his policy and subsequently appeal [the insurer’s] denial of that coverage, which he relied upon to his detriment. … [The insured] also alleges that he was instructed to file multiple claims, which caused him to pay multiple deductibles and which ultimately discredited his claim. … In holding [the insured’s] Second Amended Complaint to a “less stringent standard,” as required of the Court in light of [his] pro se representation, the Court finds that [the insured] sufficiently alleged a claim for bad faith and Defendant’s Motion to Dismiss is denied as to this claim.

Date of Decision: May 10, 2019

Nguyen v. Allstate Insurance Co., U. S. District Court Eastern District of Pennsylvania CIVIL ACTION NO. 18-5019, 2019 U.S. Dist. LEXIS 79822 (E.D. Pa. May 10, 2019) (Kenney, J.)

BAD FAITH CLAIM TIME BARRED WHEN WRIT OF SUMMONS WAS NOT PROPERLY SERVED (Philadelphia Federal)

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The issue in this case involved a federal court determining the validity of service under Pennsylvania state law governing writs of summons. The court had to rule on whether service was effected before the two year bad faith statute of limitations expired. The court found that proper service was not made, but permitted the pro se plaintiff to file an amended complaint in which “she will need to show either that she properly served, or made good faith efforts to serve” the insurer.

Date of Decision: March 22, 2019

Shearer v. Allstate Insurance Co., U.S. District Court Eastern District of Pennsylvania CIVIL ACTION No. 18-3277, 2019 U.S. Dist. LEXIS 47770, 2019 WL 1317635 (E.D. Pa. Mar. 22, 2019) (Pratter, J.)

NO NEW BAD FAITH ACTS ALLEGED THAT COULD RE-START THE STATUTE OF LIMITATIONS PERIOD (Philadelphia Federal)

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This case addresses when a bad faith cause of action accrues, or can be re-started, for statute of limitations purposes.

The bad faith statute of limitations is two years. The claim accrues with the initial coverage denial. Repeated denials of the same claim are merely continuations of an existing harm, and do not constitute new actionable events triggering a new statute of limitations period. Only if the subsequent bad faith act is separate, distinct, and unrelated to the original bad faith denial, can a new limitations period begin to run.

In this case, the alleged bad faith conduct occurred in 2011. The present suit was filed in 2019. The court would not accept bald allegations that events “have taken place and continued over a period of years up to the present day” to re-start the statute of limitations, as no facts were alleged “suggesting a basis for claims within the limitations period.” The complaint was dismissed without leave to amend.

Date of Decision: February 1, 2019

Feingold v. Brooks, U. S. District Court Eastern District of Pennsylvania CIVIL ACTION NO. 19-CV-0291, 2019 U.S. Dist. LEXIS 16606, 2019 WL 415575 (E.D. Pa. Feb. 1, 2019) (Tucker, J.)

OCTOBER 2018 BAD FAITH CASES: INSURANCE FRAUD CLAIMS NOT TIME BARRED SIMPLY BECAUSE INSURER HAD BEGUN INVESTIGATION OVER TWO YEARS BEFORE FILING SUIT, WHERE ALLEGED FRAUD WAS COMPLEX AND CONCEALED (Philadelphia Federal)

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The insurer brought claims under Pennsylvania’s Insurance Fraud Act, 18 Pa.C.S. § 4117, and common law fraud, among others, seeking to recover allegedly fraudulent payments to medical providers.

The medical providers argued on summary judgment that the statutory fraud claims were time barred. They made extensive arguments concerning a variety of fact patterns to support its claim that the insurer was on notice of the fraud prior to the statute of limitations running, and there should be no tolling. The court analyzed each set of facts closely, but concluded that even though the insurer had been investigating a potential fraud, there was an argument that it did not know there was an actual fraud, and thus tolling might be permitted.

Thus, the court found that “whether the two-year statute of limitations period for Plaintiffs’ statutory insurance fraud claim should be tolled is genuinely disputed. Here, a reasonable factfinder could find that despite Plaintiffs’ reasonable diligence in discovering their injury, they did not discover the alleged fraud until … after reviewing hundreds of Defendants’ records with the assistance of an expert medical reviewer and counsel.” Ordinarily, factual issues about notice and the plaintiff’s diligence are jury questions, and such genuine issues of material fact as to when the statute of limitations runs preclude summary judgment.

The court observed that tolling could be proper if the “Plaintiffs were unable to discover the alleged fraud as a result of the scheme’s complexity and Defendants’ efforts to conceal it.”

On the common law fraud claim, the defendants argued for similar reasons that the insurer could not have justifiably relied on the insureds’ misrepresentations because of its alleged knowledge of the insureds’ fraudulent representations. Again, this made for disputed issues of fact that could not be resolved on summary judgment.

Date of Decision: September 28, 2018

State Farm Mutual Automobile Insurance Co. v. Stavropolskiy, U. S. District Court Eastern District of Pennsylvania CIVIL ACTION NOS. 15-05929 and NO. 16-01374, 2018 U.S. Dist. LEXIS 167425, 2018 WL 4680241 (E.D. Pa. Sept. 28, 2018) (Joyner, J.)

 

JULY 2017 BAD FAITH CASES: STATUTE OF LIMITATIONS NOT TOLLED BY SETTLEMENT NEGOTIATIONS (Philadelphia Common Pleas)

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In this case, the Philadelphia Court of Common Pleas Judge stated that the two year bad faith statute of limitations began to run with the date of loss. Settlement negotiations did not toll the running of the statute of limitations. Under those principles, the claims in this case were time-barred.

Date of Decision: July 3, 2017

Dutton v. American Bankers Insurance Company, September Term 2016, No. 1412, 2017 Phila. Ct. Com. Pl. LEXIS 181 (C.C.P. Phila. July 3, 2017) (Anders, J.)

JULY 2017 BAD FAITH CASES: COURT DECLINES TO CONSIDER MERITS OF ASSIGNED BAD FAITH CLAIM BECAUSE STATUTE OF LIMITATIONS HAD RUN (Western District)

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In 2007, the insured was involved in a motor vehicle accident, injuring another driver. The injured party filed a negligence action against the insured. The insurer sent a 2007 letter declining to defend or indemnify the insured. In 2008, the insurer filed a declaratory judgment action, claiming that it did not have a duty to defend or indemnify the insured. The court entered a consent order that the insurer owed no duty to defend or indemnify.

Around the same time-period, the injured party separately filed her own declaratory judgment against the insurer, arguing that the insurer was obligated to defend and indemnify the insured. This second declaratory judgment action did not assert claims for breach of contract or bad faith, and there was no assignment of such claims by the insured to the injured plaintiff. In February 2009, the injured party was given leave to withdraw this second declaratory judgment action, without prejudice.

The insured passed away in 2015. In 2016, after trial, the court entered judgment in favor of the injured party in the original 2007 negligence action, for a sum in excess of $1 Million. The estate assigned the injured party any and all of its rights, claims, demands, and causes of action against the insurer, including claims for breach of contract and bad faith.

The injured party subsequently filed an action against the insurer. The claims included breach of contract and statutory bad faith claim, as well as a request for declaratory relief. The court granted summary judgment on the assigned breach of contract and bad faith claims, though not as to the injured party’s own declaratory judgment count.

An assignee stands in the assignor shoes. Any causes of action the insured had for breach of contract and bad faith accrued when the insurer conveyed a letter denying any duty to defend and indemnify the 2007 negligence action (or, at the latest, in 2008, when the court entered the consent order). The court stated that any bad faith claim had to be raised no later than 2009 (under the two year statute of limitations governing statutory bad faith claims) or by 2011 for the breach of contract claim.

The court concluded: “In order to advance timely claims for breach of contract/bad faith, under the facts here, [the insured] would had to have filed suit and challenged that coverage denial in the 2008 ‘second’ declaratory judgment suit by seeking an assignment to include the breach of contract/bad faith claims at that time. Instead, [the insured] brought only a declaratory judgment action.”

As the bad faith claim was not filed within two years after the initial denial of coverage, the court found that the claim was time-barred.

Date of Decision: May 22, 2017

Falo v. Travelers Personal Insurance Co., No. 17cv0143, 2017 U.S. Dist. LEXIS 77425 (W.D. Pa. May 22, 2017) (Schwab, J.)

 

MARCH 2017 BAD FAITH CASES: TYING PAYMENT TO RELEASE OF BAD FAITH CLAIMS IS ONLY BAD FAITH IF THAT REQUEST IS PART OF INSURER’S REGULAR PRACTICE; REFUSAL TO EXTEND ONE-YEAR SUIT PERIOD WAS NOT BAD FAITH (Philadelphia Federal)

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The homeowner’s policy at issue provided a one-year period in which to bring suit. Some repair work was identified and paid, but the repairs needed on other sections of the home would go beyond the one-year period. The insured attempted to negotiate an extension or tolling of the one-year period, pending the repairs. As the one-year term was approaching, the insured filed a writ of summons to toll the period and the insurer filed a Rule to File a Complaint.

In response to the insured’s counsel continuing to seek a tolling agreement, the insurer’s “counsel responded that Plaintiff would have to release any bad faith claim … in order for [the insurer] to consider entering into a tolling agreement.” “Plaintiff’s counsel offered to waive any claims of past bad faith in exchange for a tolling agreement which would give Plaintiff an additional year to complete any necessary repairs.” In response, the insurer “sent a status letter reiterating the one-year suit limitation provision and did not respond to Plaintiff’s offer.” Plaintiff then filed a breach of contract and bad faith complaint.

The focus of the bad faith claim was the alleged unreasonable refusal to enter a tolling agreement. However, the pleading did not meet Twombly/Iqbal standards, and was dismissed without prejudice. The most the complaint said was that the insured had a homeowner’s policy, suffered a covered loss for which he received some benefits, and was refused an extension of the one-year suit period. The complaint did not offer any basis from which the court could conclude that the refusal to extend was not made on a reasonable basis.

More interestingly, the court then addressed the issue of the insurer’s tying a release of bad faith claims to its entering a tolling agreement. The insured argued that this violated Pennsylvania’s Unfair Insurance Practices Act (UIPA). The court accepted the Superior Court of Pennsylvania’s view that UIPA violations can be evidence of bad faith.

The regulation at issue “forbids insurers from ‘request[ing] a first-party claimant to sign a release that extends beyond the subject matter that gave rise to the claim payment,’ where it is shown that the insurer makes such requests ‘with a frequency that indicates a general business practice.’” Even though plaintiff alleged that the insurer conditioned its agreement on releasing bad faith claims, he “alleges no facts showing that [the insurer] had a regular practice of forcing insureds to release claims in this way….” Thus, the court could not “consider the potential violation of the regulation as a factor swaying against dismissal.”

Date of Decision: March 3, 2017

Jack v. State Farm Fire & Cas. Co., No. 16-5771, 2017 U.S. Dist. LEXIS 30136 (E.D. Pa. Mar. 3, 2017) (Baylson, J.)

DECEMBER 2016 BAD FAITH CASES: VIOLATION OF UNFAIR CLAIMS SETTLEMENT PRACTICES REGULATIONS ALONE CANNOT FORM THE BASIS OF A BAD FAITH CLAIM (Philadelphia Federal)

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In this homeowners’ case, the insured alleged breach of contract and bad faith. On the contract claim, the court focused on the contractual limitations period for bringing suit. The insured argued, among other things, that the insurer had a duty under the Unfair Claims Settlement Practices Regulations (UCSPR) to give notice of the suit limitation period, and failure to do so tolled that period. The court rejected this argument as a basis to toll the contract claim, as well as a basis for the bad faith claims.

As to the bad faith claim, the court further observed that a violation of the UCSPR standing alone does not establish clear and convincing evidence of bad faith. The court also rejected an argument concerning negotiations over a boiler’s repair or replacement as the basis for a bad faith claim.

Date of Decision: November 9, 2016

Pecko v. Allstate Ins. Co., No. 16-1988, 2016 U.S. Dist. LEXIS 155355 (E.D. Pa. Nov. 9, 2016) (Pratter, J.)