Archive for the 'PA – MVFRL' Category


Print Friendly, PDF & Email

In this UIM bad faith case, the insureds demanded UIM policy limits which the insurer did not pay. The insureds took their case to trial, and the jury verdict far exceeded policy limits. The insureds pursued a claim for bad faith, arguing among other things that the jury verdict could be used as evidence of bad faith.

The court disagreed. Bad faith can only be determined based on the insurer’s conduct in evaluating the claim when it was submitted and on “the information available to the insurer during the claims processing”. The jury verdict was rendered after the insurer had done its claim evaluation. Thus, the jury verdict was not relevant to bad faith.

The central legal issue in the case was whether the insureds had executed some version of an enforceable UIM policy limit sign down, below their liability coverage. The court’s detailed analysis revealed that the insured’s application, which would otherwise have effected an enforceable sign down, was ineffective because it made that decision contingent on another required form that was only signed over one month later. The accident at issue occurred during the interim. The court found that there was no effective sign down, and the UIM limits defaulted to the liability limits, a difference between $300,000 and $750,000.

The insureds claimed that asking them to sign the second document constituted bad faith. The insurer consistently took the position that the second document was not necessary to succeed on the sign down argument; rather, the application controlled and the second document was basically redundant.

Magistrate Judge Rice disagreed with the carrier’s position on the application as stated above, but still found no bad faith:

“Nor does the failure to have [the insured] sign the UIM coverage selection form until [one month after the application] constitute bad faith. [The insurer] consistently maintained that the … application established the UIM policy limit, and the [insureds] had access to all relevant documents at all times. My post-trial disagreement with that determination fails to establish … bad faith.”

Date of Decision: February 18, 2020

Gibson v. State Farm Fire & Cas. Co., U.S. District Court Eastern District of Pennsylvania CIVIL ACTION No. 18-4919, 2020 U.S. Dist. LEXIS 27531 (E.D. Pa. Feb. 18, 2020) (Rice, M.J.)


Print Friendly, PDF & Email

This UIM case involved a claim for full policy limits, amounting to $45,000. The insured alleged serious permanent injuries.

Over two years passed from the time the insured gave notice until the time of suit, with the claim neither paid nor denied. The insured filed suit for declaratory judgment, breach of contract, and bad faith. The insurer moved to dismiss the bad faith claim and attorney’s fee claim, and the court denied the motion.

Bad Faith Claim Based on Delay Adequately Pleaded

The court recognized at least two sources of statutory bad faith: (1) failure to pay and (2) delay in making payment. As to the first, “[w]here a claim of bad faith is based on a refusal to pay benefits under a policy, ‘the plaintiff must show that the defendant did not have a reasonable basis for denying benefits under the policy and that defendant knew or recklessly disregarded its lack of reasonable basis in denying the claim.’” As to the second, “[t]o sufficiently plead bad faith by way of delay, ‘a plaintiff must allege that a defendant had no reasonable basis for the delay in coverage, and that the defendant delayed coverage with knowing or reckless disregard for the unreasonableness of its action.’”

The court found bad faith delay pleaded, based on the following factual allegations:

  1. The insurer “was put on notice of [the] underinsured motorist benefits claim in March 2017.”

  2. “In January 2018, [the insurer] waived its subrogation rights and consented to … settlement with the third-party insurance carrier.”

  3. “On March 30, 2018, [the insurer] advised [the insured] that her claim for underinsured motorist benefits was being evaluated.”

  4. “From April to July 2018, the parties communicated regarding scheduling an EUO, which took place on July 9, 2018.” As pleaded, it was the insurer that sought an EUO in July, and the insured asked to move it up.

  5. “On July 26, 2018, [the insurer] advised [the insured] that it would likely require her to undergo an IME, however, [the insurer] never moved forward with the IME.”

  6. “Between August 2018 and February 2019, [the insured] provided medical records to [the insurer], both unsolicited and at their request.”

  7. “Between February and June 2019, [the insurer] did not notify [the insured] as to the status of her claim, and at the time of the filing of the instant Complaint in September 2019, [the insurer] had neither paid [the] claim, nor denied it.”

The court summarized how these factual allegations made out a bad faith claim. The insured repeatedly tried to have her claim evaluated. She complied with requests for information, provided unsolicited information, and inquired as to the claim status. However, “despite having over two years to conduct its investigation, [the insurer] has unreasonably and without justification failed to approve or deny her claim.” Based on these factual allegations, there appears no reasonable basis to delay the claim evaluation, which the court equated with a failure to evaluate. The knowing/reckless bad faith element was met because the insured had given notice to the insurer through her inquiries and providing information that the claim had not been paid or rejected.

The court cited the Ridolfi, Kelly, and Smerdon cases concerning a delay-based bad faith analysis.

Clear and Convincing Evidence Standard Held Irrelevant at Pleading Stage

The court rejected the argument that the factual pleadings had to be measured against the clear and convincing evidence standard at the motion to dismiss stage. The court stated this standard is relevant, e.g., to trial, but not at the pleading stage. Rather, pleadings are governed by the plausibility standard. Thus, the insured “need not ‘establish’ anything at this early point in the proceedings, let alone ‘by clear and convincing evidence.’” “Whether sufficient facts will be discovered for [the insured] to survive a motion for summary judgment is unknown and may be addressed at a later date.”

Attorney’s Fees Possible under Bad Faith Statute or MVFRL

Finally, the court refused to dismiss the attorney’s fee claim based on both the bad faith statute, and the possibility that attorney’s fees might be permitted under section 1716 of the Motor Vehicle Financial Responsibility Law.

Date of Decision: January 24, 2020

Solano-Sanchez v. State Farm Mutual Auto Insurance Co., U. S. District Court Eastern District of Pennsylvania No. No. 5:19-cv-04016, 2020 U.S. Dist. LEXIS 11784 (E.D. Pa. Jan. 24, 2020) (Leeson, Jr., J.)


Print Friendly, PDF & Email

On July 1, 2019, Judge Munley issued two opinions in this UIM bad faith case: (1) finding removal proper; and (2) finding the insured pleaded a plausible bad faith case.

Removal was proper where potential punitive damages could take the case above the $75,000 jurisdictional minimum

Judge Munley ruled that the case would remain in federal court, after removal from state court. The insured allegedly suffered severe personal injuries, and the carrier refused to pay the $25,000 UIM policy limits. The state court complaint sought damages in excess of $50,000, punitive damages, interest, counsel fees and costs.

The court recognized that actual damages were limited to $25,000, and the punitive damage and attorney’s fees claims would have to exceed $50,000 to meet the $75,000 jurisdictional minimum. Judge Munley found that “[a] punitive damages award which is double the amount of the policy limit is reasonable and possible in such a case.” As remand is only proper when it appears to “a legal certainty that the plaintiff cannot recover, or was never entitled to recover, the jurisdictional amount [$75,000],” he denied the motion to remand.

The insured pleads a plausible bad faith claim where delays and refusal to pay the sum demanded are not mere disagreements over valuation

Judge Munley observed the insured alleged a severe injury, with damages beyond the tortfeasor’s coverage limits. The insured’s UIM coverage was $25,000, which the defendant carrier refused to pay. Judge Munley concluded the case, as pleaded, was not merely a disagreement over claim valuation, but made out a plausible bad faith claim.

The following averments were sufficient to survive the insurer’s motion to dismiss:

  1. “The amended complaint avers that defendant failed to effectuate a prompt fair and equitable settlement of plaintiff’s claim and compelled her to seek legal redress and commence litigation to recover the benefits to which she was entitled.”

  2. “Further, defendant ignored and discounted the severity of plaintiff’s injuries.”

  3. “Also, defendant did not promptly evaluate the claim, but rather engaged in dilatory and abusive claims handling by delaying the valuation of plaintiff’s claim and failing to pay the claim.”

  4. “The amended complaint also suggests that defendant failed to timely investigate or to make a reasonable settlement offer.”

  5. “Defendant further delayed by asking for authorization to receive medical records which were already in its possession.”

The court also refused to dismiss an attorney’s fee demand under the breach of contract count, as such fees might prove permissible under the Motor Vehicle Financial Responsibility Act (MVFRL).

Dates of Decision: July 1, 2019

Pivtchev v. State Farm Mutual Auto Insurance Co., U. S. District Court Middle District of Pennsylvania No. 3:19cv150, 2019 U.S. Dist. LEXIS 109378 (M.D. Pa. July 1, 2019) (Munley, J.)

Pivtchev v. State Farm Mutual Auto Insurance Co., U. S. District Court Middle District of Pennsylvania No. 3:19cv150, 2019 U.S. Dist. LEXIS 109377 (M.D. Pa. July 1, 2019) (Munley, J.)


Print Friendly, PDF & Email

The magistrate judge recommended dismissing the alleged section 8371 bad faith claims, but further recommended allowing the insured to amend her claim to plead abuse of the PRO process.

All of the bad faith claims actually pleaded involved denial of first party medical benefits under an auto policy. The MVFRL preempted these claims, and the section 8371 bad faith action was dismissed. The court observed, however, that challenges “to the PRO process itself or to the insurer’s abuse of the PRO process” are not preempted, and can constitute independent section 8371 bad faith.

Though not in the complaint, the brief opposing dismissal included allegations that might push the insurer’s conduct beyond the MVFRL’s parameters, and into the abuse of process realm. Thus, the magistrate judge recommended allowing leave to amend the section 8371 action instead of dismissal with prejudice, and the district judge adopted this recommendation.

Date of Decision: November 19, 2018 (Report and Recommendation), December 13, 2018 (Order Adopting Report and Recommendation)

Barnard v. Liberty Mut. Ins. Corp., U.S. District Court Middle District of Pennsylvania Civil No. 3:18-CV-01218, 2018 U.S. Dist. LEXIS 197852 (M.D. Pa. Nov. 19, 2018) (Carlson, M.J.) (Report and Recommendation), adopted by District Court (Mariani, J.)


Print Friendly, PDF & Email

Medical providers brought bad faith claims under Pennsylvania’s Motor Vehicle Financial Responsibility Law (MVFRL), alleging they were among a targeted set of medical providers whose claims for services were pre-ordained for denial. As set forth in yesterday’s post, the same insurers had brought claims against these same providers for insurance fraud.

The providers argued the insurers violated the “MVFRL by unreasonably and in bad faith denying all Defendants’ treatment claims submitted after the start of Plaintiffs’ … fraud action, without ‘any consideration of the actual treatment provided or injuries suffered by the patients.’”

“Under §1797 of the MVFRL, treble damages are available if the claiming party can prove ‘1) they submitted bills for reasonable and necessary treatment, 2) Plaintiffs did not challenge the bills before a Peer Review Organization (“PRO”), and 3) Plaintiffs’ conduct was ‘wanton’. … ‘Wanton and bad faith may be equated, because intentionally doing an unreasonable act (acting wantonly) is the equivalent of knowingly ignoring a lack of a reasonable belief for a denial (acting in bad faith).’”

The court ruled that the providers’ arguments that all of their claims were funneled to one adjuster was insufficient to show wanton or bad faith conduct. The court further found that the insurers had a reasonable basis to deny the claims; and that the conclusory allegation the insurance fraud assertions were a ruse to fend off legitimate claims was insufficient to make out a case for bad faith.

Rather, the court found the insurers “met their burden in showing there is no genuine dispute that they stopped payment to Defendants for post-litigation bills out of a ‘bona fide belief that Defendants’ bills were fraudulent,’ after ‘observing non-credible patterns in Defendants’ records’ indicating to Plaintiffs that the records had been falsified in order to induce payment.” Summary judgment was granted on this issue, as “[t]he record establishes beyond genuine dispute that Plaintiffs had a basis for denying Defendants’ claims submitted after the commencement of this litigation, when Plaintiffs were on alert that Defendants’ claims could be fraudulent.”

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.)


Print Friendly, PDF & Email

This is a UIM case where bad faith was not pleaded. The insured and insurer did not reach an agreement on UIM benefits, and the insured commenced an action for breach of contract and generic violations of the Motor Vehicle Financial Responsibility Law (MVFRL).

The insurer argued, the allegations of improper claim handling should be stricken from the complaint, because improper claim handling is not relevant to an action that does not plead bad faith. The court disagreed. It found that improper claim handling could be relevant to a contract claim, even in the absence of bad faith, because the decision making during the claim handling could go to the reasoning behind denying the contract claim.

Next, the insurer argued the court should dismiss or order a more definite statement of insured’s unidentified statutory violations because insured failed to allege a bad faith violation or identify the provision of the MVFRL that insurer allegedly violated. The court dismissed this statutory count because the insured failed to plead an alleged statutory violation with any detail, and the facts pleaded did not set forth any wrongdoing.

Date of Decision: August 8, 2018

Swientisky v. American States Insurance Co., U. S. District Court Middle District of Pennsylvania, NO. 3:18-CV-1159, 2018 U.S. Dist. LEXIS 133352 (M.D. Pa. Aug. 8, 2018) (Caputo, J.)


Print Friendly, PDF & Email

This opinion gives a detailed overview on the issue of when, and if, the Motor Vehicle Financial Responsibility Law, 75 Pa.C.S. § 1797, pre-empts the bad faith statute, 42 Pa.C.S. § 8371. The court follows the majority Schwartz line of cases on pre-emption limits.

Thus, e.g., “Section 1797 does not extend to claims for interpretation of an insurance contract, disputes as to whether the motor vehicle accident caused the insured’s injuries, or claims that the insurer did not invoke or properly follow the peer review process.” Further, a bad faith claim is not at issue “where the peer review process set out in § 1797, namely to determine the propriety of treatment and charges therefore, is not actually followed.” Id. Section 1797 is “narrowly limited to those situations in which a disputed claim is to be submitted to the PRO procedure. . . . If the procedure is followed by an insurer, its liability cannot be greater than as therein set forth.”

Finally, “[w]here an insurer has not complied with Section 1797’s specific provisions, there is no reason to limit the damages recoverable from the insurer to those damages set out in Section 1797. … In those situations, as alleged here, Section 1797 and Section 8371 are not irreconcilable. … Both statutes can be given full effect: Section 1797 is the exclusive remedy when it applies; Section 8371 applies in all other cases.”

The court rejected a Twombly/Iqbal motion to dismiss, finding enough facts had been pleaded to state a plausible claim. The court added, in light of the allegations (if true), “it is reasonable to expect that discovery will reveal evidence that Plaintiff’s case was neither the only instance of abusive insurance practices nor an anomaly.”

Date of Decision: July 25, 2018

Shea v. USAA, U. S. District Court Eastern District of Pennsylvania, CIVIL ACTION NO. 17-4455, 2018 U.S. Dist. LEXIS 124163 (E.D. Pa. July 25, 2018) (Surrick, J.)


Print Friendly, PDF & Email

The insured was involved in a motor vehicle accident. The insured’s policy provided for first party medical benefits up to $50,000, income loss protection benefits up to $5,000, and UIM coverage up to $100,000. The insurer happened to insure both the insured plaintiff and the tortfeasor, on two different policies. The insurer opened a first-party claim file and a third-party claim file.

The insured gave notice of her intent to make a lost-income claim, and forwarded partial information supporting this claim to the insurer. Several months later, the insurer submitted the medical file to a peer review organization (“PRO”) pursuant to the Pennsylvania Motor Vehicle Financial Responsibility law.

Five months later, the insured’s counsel requested that the insurer open a UIM claim under the existing first-party claim. The insurer did so, but also denied coverage for the third-party claim on the basis the insured selected a limited-tort option, which, with some exceptions, restricts the right of a plaintiff to recover noneconomic damages unless the injury is sufficiently serious.

$5,400 in first-party medical benefits were paid to the insured. The insurer continued to request full documentation regarding the lost wage claim. The insurer credited $15,000 toward its policy under the UIM claim.

The insured sued for breach of contract and bad faith in state court, and the action was removed to federal court. The insurer moved for summary judgment on the bad faith claim, arguing that a valid dispute over the value of the insured’s claim does not rise to bad faith. While the insured did not contest the legitimate dispute as to the value of her claim, she argued that the insurer’s means and methods in handling the claim amounted to bad faith.

Specifically, the insured argued (1) that the insurer was not entitled to a $15,000 credit against its own policy; (2) the insurer failed to meet its burden to show that the insured was bound by limited tort; (3) the insurer, in bad faith, attempted to stop the insured’s medical treatment or force the insured to rely on a lack of ongoing treatment; and (4) the insurer’s failure to review its own file is not a sufficient basis to claim it did not have complete documentation for the wage loss claim.

The Court rejected all of the insured’s arguments. First, the Court stated “Pennsylvania courts have . . . held that UIM awards are properly reduced by the full amount of the tortfeasor’s policy limits . . . .” Thus, the $15,000 credit was proper. Second, the Court found that full tort insurance was waived under the policy terms, because the insured’s electronic signature on the policy sufficed to show that the waiver was knowing and intelligent. Third, the insurer sending its claim file to a PRO is consistent with industry practice and in no way “amounts to bad faith.”

The Court rejected the final argument as well. While the insurer did have wage loss information regarding the insured’s part-time job, it did not have this information regarding the insured’s full-time position.

The Court granted the insurer’s motion for summary judgment, and dismissed the bad faith claim with prejudice.

Date of Decision: December 11, 2017

Jallad v. Progressive Advanced Ins. Co., Civil Action No. 16-4795, (E.D. Pa. Dec. 11, 2017) (Kelly, Sr. J.)


Print Friendly, PDF & Email

The insurance policy required insureds to submit to independent medical examinations after making a bodily injury claim for medical benefits arising out of auto accidents. The policy stated the insurer did not have to make any payments prior to that exam.

A federal judge in the Eastern District had ruled in 2009 that these kinds of policy terms were enforceable, and were not inconsistent with Pennsylvania’s Motor Vehicle Financial Responsibility Law (MVFRL), relying upon case law from Pennsylvania’s Superior Court. There has been no ruling from Pennsylvania’s Supreme Court on the issue; however, the judge in this 2017 Middle District case came to a different conclusion, finding the provision unenforceable.

The insured claimed that the requirement to have an IME, along with the refusal to pay medical benefits before the IME took place were violations of the bad faith statute. The court disagreed. The language of the policy permitted it, and there was prior case law from a court of co-ordinate jurisdiction finding that language enforceable. The court observed that reasonable but incorrect interpretations of the policy and law do not form the basis for bad faith. This is especially true where the law is in flux.

The court found that the insurer “clearly had a reasonable basis for denying … medical benefits” where the Supreme Court had not decided the issue and another court found that the policy language was enforceable. The court specifically stated it was reasonable for the insurer to have relied on the earlier opinion.

The court also dismissed the insured’s claim for breach of the implied duty of good faith and fair dealing because the implied covenant alleged conflicted with an express term of the policy.

Date of Decision: May 10, 2017

Sayles v. Allstate Ins. Co., No. 3:16-cv-01534, 2017 U.S. Dist. LEXIS 71760 (M.D. Pa. May 10, 2017) (Caputo, J.)


Print Friendly, PDF & Email

In Urena v. Allstate Insurance Company, the court addressed what portions of the undersinsured motorist plaintiff’s statutory Bad Faith claims were pre-empted by Pennsylvania’s Motor Vehicle Financial Responsibility Law (MVFRL).

The basic rule is that “[w]here both the Pennsylvania MVFRL and the Pennsylvania Bad Faith statutes are premised on the same conduct, i.e. an unreasonable denial of first-party benefits, the statutes are irreconcilable and, as the specific provisions of the MVFRL will preempt the general provisions of Pennsylvania bad faith statute.”

On the other hand “where a plaintiff’s claims are premised on conduct beyond the scope of § 1797, such as an insurance company’s alleged abuse of the peer review process, alleged mishandling of the insured’s claims, or unreasonable denial of benefits based on a peer review report, several courts have predicted that the Pennsylvania Supreme Court will find that these claims may proceed pursuant to Pennsylvania’s Bad Faith Statute.”

Relevant to the instant case, “claims of the mishandling of insurance claims and the abuse or misuse of the peer review process fall outside the scope of the protections afforded an insured by the MVFRL because the MVFRL does not provide specific relief for such claims.”

The following claims were pre-empted: failing to pay the first party medical benefits due to the Plaintiff for injuries she sustained in the subject motor vehicle accident; failing to objectively and fairly evaluate Plaintiff’s first party medical benefit claim; refusing to effectuate a prompt and fair resolution of the Plaintiff’s first party medical benefit claim; failing to promptly, objectively and fairly evaluate the Plaintiff’s claim for first party benefits; and failing to investigate the Plaintiff’s claim within a reasonable time limit.

However, taking the allegations in the light most favorable to the plaintiff as the non-moving party, the remaining claims were based on allegations of an abuse or misuse of the peer review process that would permit brining a statutory bad faith claim:

Compelling the institution of this Complaint in order to obtain policy benefits that should have been paid promptly and without the necessity of litigation;

asserting defenses without a reasonable basis in fact;

engaging in dilatory and abusive claims handling; repeatedly delaying and terminating the Plaintiff’s first party medical benefits in order to cause her financial hardship so that the Plaintiff would discontinue her treatment and her claims for first party medical benefits;

terminating Plaintiff’s first party medical benefits for the sole purpose of placing its own financial interest before that of its insured in order to limit its exposure of paying first party medical benefits pursuant to her policy with a $100,000 coverage limit;

deciding to retain a Peer Review Organization for the sole purpose of terminating the first party medical benefits of their insured when Allstate had no reasonable basis to do so and consciously disregarding their lack of reasonable basis to terminate their insured’s first party medical benefits;

violating 40 P.S. § 1171.1 (Unfair Insurance Practices Act) and 40 P.S. § 1171.5 (Unfair Methods of Competition and Unfair or Deceptive Acts or Practices) evidenced by the above actions and/or inactions of Defendant Allstate;

reporting to offer $100,000 in first party medical benefits, when in fact, Allstate had no intention of providing this coverage;

representing that the Plaintiff purchased $100,000 in first party medical benefits, when in fact, said promise was wholly illusory;

charging a premium based upon $100,000 in first party medical benefits, when in fact, Allstate purposely avoided fulfilling its contract with the Plaintiff;

representing that the Plaintiff purchased $100,000 in first party medical benefits, when in fact, Allstate without justification, refused and continues to refuse to pay said benefits;

denying Plaintiff first party medical benefits without a reasonable basis; denying Plaintiff first party medical benefits with the knowledge, or a reckless disregard, that such denial was without a reasonable basis;

violating the policy and covenant of Good Faith and Fair Dealing; retaining the Peer Review Organization to challenge the reasonableness and necessity of the Plaintiff’s medical treatment in order to force the Plaintiff’s healthcare providers to stop treatment necessary for accident related injuries and to assist in the defense and to compromise Plaintiff’s claims for first party medical benefits;

improperly utilizing the Peer Review process to challenge the reasonableness and necessity of Plaintiff’s medical treatment from all of her medical providers when only obtaining a Peer Review of the Plaintiff’s physical therapy treatment in order to protect its own financial interests and cause financial hardship to the Plaintiff so that the Plaintiff would discontinue or compromise her claim for first party medical benefits;

violating 75 Pa. C.S.A. Section 1797(b) by improperly utilizing the Peer Review performed by physical therapists to deny payment of the Plaintiff’s medical treatment from all of her providers;


retaining a Peer Review organization to challenge the reasonableness and necessity of the Plaintiff’s physical therapy treatment and then utilizing the physical therapy Peer Review to deny payment of all of the Plaintiff’s medical treatment from all of her providers in violation of 75 Pa. C.S.A. Section 1797.

Date of Decision:  March 14, 2016

Urena v. Allstate Ins. Co., No. 3:15-CV-570 2016 U.S. Dist. LEXIS 32562 (M.D. Pa. Mar. 14, 2016) (Mariani, J.)