Archive for the 'PA – No coverage duty, no bad faith' Category
The insured argued the carrier’s policy provided coverage for property damage caused by raccoons. Specifically, it asserted the policy’s language covering vandalism and malicious mischief applied, i.e., the raccoons should be treated as vandals having malicious intent in wreaking havoc inside the insured dwelling. This reading was possible because the terms vandalism and malicious mischief were undefined in the policy, and Pennsylvania’s courts had never determined if those terms could apply to animals.
The court rejected these arguments, and the notion that the absence of definition in the policy could open the door to meanings outside of commonly understood usage.
The court analyzed, at significant length, common law, dictionary definitions, and statutes using the terms vandalism or malicious mischief. The court concluded that vandalism could only be the act of human beings. Likewise, animals could not have malicious intent. Rather, malice as used in an insurance contract, or anywhere in the law, is a human quality. As the court observed, “[b]y its very language criminal mischief, like all crimes, requires a human actor. Animals are subject only to the laws of nature, not the Pennsylvania Crimes Code or law governing human conduct.”
The court cited a New Mexico case, involving a bobcat, reaching a similar conclusion. The court quoted the New Mexico judge’s poetic conclusion summarizing his opinion on feline mentation, which the Pennsylvania court found good for raccoons too:
“Alas, it is written in the law
That an animal with the paw
Does not have the mind
To do the damage of this kind.
And so, I’m sorry, the Plaintiff won’t get paid.
That’s how the contract was made.
This policy does not apply
When the bobcat runs awry.”
In sum, there was no coverage. Thus, there could be no bad faith.
[The court did not mention that the original “Vandals” were human beings, most famous for sacking Rome in 455 (hence the term vandalism).
Date of Decision: September 19, 2019
Capital Flip, LLC v. American Modern Select Insurance Co., U. S. District Court Western District of Pennsylvania Civil Action No. 2:19-cv-180, 2019 U.S. Dist. LEXIS 165422, 2019 WL 4536164 (W.D. Pa. Sept. 19, 2019) (Stickman, J.)
The trial court had determined a life insurance policy was not in effect at the time plaintiff’s husband died, and dismissed breach of contract and bad faith claims on summary judgment. The insured appealed, and the Superior Court affirmed.
The Superior Court closely scrutinized the facts and the policy language to determine whether the policy was in effect at the time of death. The panel concluded it was not, and affirmed the trial court’s rejection of plaintiff’s breach of contract claim.
As to bad faith, the court affirmed in short order: “In sum, the trial court properly concluded that the policy was not in effect when the decedent died and that Appellee was entitled to summary judgment on Appellant’s claims of breach of contract. …. For the same reason, we agree with the trial court that Appellant could not establish that Appellee acted in bad faith when denying her claim for death benefits.”
Thus, as there was no policy in effect there could be no bad faith. The Superior Court cited the Supreme Court’s Rancosky decision to support this conclusion.
Date of Decision: September 11, 2019
O’Hara v. Metlife, Superior Court of Pennsylvania No. 3477 EDA 2018, 2019 Pa. Super. Unpub. LEXIS 3456 (Pa. Super. Ct. Sept. 11, 2019) (Nichols, Shogan, Strassburger, JJ.)
This UIM case involved two policies, a garage/auto policy and an umbrella policy. The crux of the issue was the insureds’ position that a UIM exclusion in the umbrella policy should not apply.
The same carrier issued both policies. After an accident in 2010, it paid $1 million under the garage policy, but nothing under the umbrella policy. (There is some discussion about the garage policy no longer providing UIM benefits at the time of the accident, though it appears the carrier did pay $1 million under this garage policy.)
The insured brought claims for negligence, fraud, breach of contract, bad faith and claims under the Unfair Trade Practices and Consumer Protection Law. The contract, bad faith, and UTPCPL claims were dismissed with prejudice on preliminary objections. Summary judgment was granted on the fraud claim, and the insured was non-suited on the negligence claim at trial.
The court found the umbrella policy’s UIM exclusion applied. As no coverage was due under the umbrella policy, there could be no bad faith in denying benefits under the policy. (There could be no UTPCPL claim because the policy was not issued to a consumer for personal, household or family use).
The court also addressed the insured’s claims of bad faith conduct during litigation. The alleged bad faith conduct during litigation consisted of the insurer filing a summary judgment motion to frighten the insured, making ethical claims against the insured’s counsel, acting in a dilatory manner by threatening a Dragonetti action, and slandering the insured’s counsel.
As stated above, the bad faith claims had been dismissed on preliminary objections, and the trial court never addressed these assertions. In upholding the trial court’s dismissal, the Superior Court noted that the summary judgment claim was partially successful, and that the trial court later dismissed all claims against the insurer.
Date of Decision: August 21, 2019
Lewis v. Erie Insurance Exchange, Superior Court of Pennsylvania No. 2115 EDA 2018, 2019 Pa. Super. Unpub. LEXIS 3209 (Pa. Super. Ct. Aug. 21, 2019) (Murray, Nichols, Shogan, JJ.)
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:
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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.”
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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.)
Case 1. No bad faith possible where no coverage or defense due.
In this title insurance case, the Third Circuit affirmed the district court’s grant of summary judgment to the insurer. A summary of the district court’s decision can be found here.
On the bad faith claim, after agreeing there was no coverage obligation and thus no duty to defend, the Third Circuit stated: “Moreover, since the [District] Court correctly concluded that [the insurer] had no duty to defend, there could be no bad faith claim against [the insurer].”
Date of Decision: July 26, 2019
631 N. Broad St. v. Commonwealth Land Title Ins. Co., U. S. Court of Appeals for the Third Circuit No. 18-3094, 2019 U.S. App. LEXIS 22319 (3d Cir July 26, 2019) (Fuentes, McKee, Schwartz, JJ.)
Case 2. After reversing on breach of contract claim, bad faith claim is found actionable based on insurer’s allegedly misrepresenting its contractual duties and failing to reasonably calculate length of its policy obligations, to the insureds’ detriment.
In this case, the Third Circuit reversed the grant of summary judgment to the insurer. A summary of the district court’s opinion can be found here.
The matter involved car rental rights under a policy, in the event the insureds’ vehicle was totaled. The Third Circuit reviewed the facts, and recited the following.
The insureds’ vehicle was totaled. Their policy provided up to 30 days for car rental, unless the carrier reasonably determined alternative transportation could be had earlier. However, in practice, the carrier’s conduct allegedly led the insureds to believe that the carrier could cut off the right to rent a car after only 5 days, in the carrier’s discretion, unless the rental was renewed for ensuing 5-day spans. Fearing they would lose their car rental through the carrier, the insureds entered a two-year car lease prematurely; leasing an inferior car due to the carrier’s pressuring them into thinking their rental would end. This, they claimed, resulted in damages to them both in paying more for the lease, and in obtaining a car that was worth less than their totaled vehicle.
The Third Circuit found this conduct arguably constituted a breach of the policy’s express 30-day provision, both in terms of: (1) the carrier’s internal guidelines to its adjusters in setting 5-day rental periods, and (2) the adjuster’s actual conduct toward the insureds in following the 5-day practice instead of the policy’s 30-day language.
The Third Circuit rejected the district court’s finding that the 5-day notices were merely mistakes and miscommunications rather than a breach, concluding this was a matter for the factfinder. The Third Circuit also concluded discrepancies between the 30-day language in the policy, and the 5-day rule used internally by the carrier, should go to the fact finder.
On the bad faith claim, the Third Circuit stated: “While the District Court focused on the fact that the [the insureds] technically received the full 30 days of coverage of the policy, the appropriate inquiry under §8371 is the “manner in which insurers discharge their duties of good faith and fair dealing during the pendency of an insurance claim, not whether the claim is eventually paid.”
The bad faith claim was based on alleged “misrepresentation of … benefits” in correspondence from the carrier, and in the carrier’s “failing to conduct the analysis needed to determine the amount of time its insureds reasonably required to replace their vehicle without terminating [rental] benefits as required by [the] insurance policy.”
In reversing summary judgment on the bad faith claim, the appellate court found that “[a] reasonable fact finder could conclude on this record that the manner in which the claim was handled evidenced … bad faith. However, that conclusion is not mandated by this evidence and there is therefore a genuine issue of material fact as to [the insurer’s] liability under 42 Pa C.S.A. § 8371.”
Date of Decision: August 2, 2019
Stechert v. Travelers Home and Marine Insurance Co., U. S. Court of Appeals for the Third Circuit No. 18-2305, 2019 U.S. App. LEXIS 23243 (3d Cir. Aug. 2, 2019) (Fuentes, McKee, Roth, JJ.)
In this complicated coverage case, involving damages to a condominium unit through the actions of the insured’s own tenant, the court found no coverage due under the policy language in light of the circumstances. Further, the court ruled that the insured’s purchase of additional coverage for renters, even if otherwise applicable, was invalid because of concealment and mischaracterization in applying for that additional coverage.
Having determined no coverage was due, the court granted summary judgment on the bad faith claim. The court emphasized that a reasonable basis for denying coverage is all that is needed to overcome a bad faith claim. In this case, the carrier had a reasonable basis to deny the insured’s claims, and the “pertinent claims [were] not covered by the Policy.”
Date of Decision: June 11, 2019
Beautyman v. General Insurance Company of America, U. S. District Court Eastern District of Pennsylvania CIVIL ACTION No. 17-5804, 2019 U.S. Dist. LEXIS 97526 (E.D. Pa. June 11, 2019) (Kelly, J.)
There were two bad faith claims arising out of a building’s wall collapse case. The first was over whether any coverage was due in connection with building walls that had not collapsed, for which the insured sought replacement to match restoration of the collapsed wall. The second had to do with whether the carrier owed additional damage payments for claims more directly related to the collapse.
The court determined no coverage was due for the other walls, and granted summary judgment on that coverage issue. Because no coverage was due, the court necessarily found “no basis for a bad faith claim based upon an unreasonable denial of coverage.”
Second, the court observed the parties’ experts disagreed on the scope of damages and amount due concerning the wall collapse. The court granted summary judgment on bad faith on this claim as well, finding insurer reasonably relied on its experts in determining the amount of damages it would pay.
The court stated:
As regards additional payment of damages, [the insured] argues that disagreements between the parties’ experts precludes the entry of summary judgment on the bad faith claim. Courts have held that “an insurer’s reasonable reliance on an engineering expert’s report for a coverage decision does not constitute bad faith.” Hamm v. Allstate Prop. & Cas. Ins. Co., 908 F.Supp.2d 656, 673 (W.D.Pa.2012) (citing El Bor Corp. v. Fireman’s Fund Ins. Co., 787 F.Supp.2d 341, 349 (E.D.Pa.2011) (insurance company’s reliance on engineer’s findings as a basis for denial of coverage provides reasonable grounds to deny benefits)) “Moreover, even if the expert incorrectly assessed the cause of damage, this is not evidence that his conclusions were unreasonable or that Defendant acted unreasonably in relying upon them.” Totty v. Chubb Corp., 455 F.Supp.2d 376, 390 (W.D.Pa.2006) (citing Pirino v. Allstate Ins. Co., No. 3:04CV698, 2005 U.S. Dist. LEXIS 27519, 2005 WL 2709014, at *5 (M.D.Pa. Oct. 21, 2005)).
Here, [the insured] only identifies conflicts amongst the expert’s opinions on causation and damages and not the reasonableness of [the carrier’s] expert opinions. The conflict between experts may preclude summary judgment on other claims, but not for bad faith. Based upon the reasonableness standard in the bad faith statute coupled with the high burden of proof of clear and convincing evidence, the Court concludes that a reasonable juror could not find bad faith in [the insured’s] favor. …
Date of Decision: May 14, 2019
Keyser v. State Farm Fire & Casualty Co., U. S. District Court Western District of Pennsylvania 2:18-CV-00226-MJH, 2019 U.S. Dist. LEXIS 81194 (W.D. Pa. May 14, 2019) (Horan, J.)
Three April 2019 decisions out of Pennsylvania’s Eastern District bring up the ongoing issue of whether alleged Unfair Insurance Practices Act (UIPA) violations may be used in any manner to establish statutory bad faith claims under 42 Pa.C.S. § 8371. We also discussed this issue in a February 2019 post that can be found here.
Case holding UIPA violations may be used to prove bad faith
In the April 3, 2019 Blease decision, the court relied heavily on the UIPA in finding the insured adequately pleaded a statutory bad faith case. That opinion is summarized here.
In particular, the court looked to the UIPA code sections governing 45-day status notices when the claim is not resolved within 30 days. Relying on Pennsylvania Superior Court precedent, the Blease Court stated: “This Court further notes that a plaintiff seeking damages for an insurer’s bad faith conduct under 42 Pa. Cons. Stat. § 8371 may attempt to prove bad faith by demonstrating that the insurer has violated one or more provisions of related Pennsylvania insurance statutes or regulations, even if they do not independently provide for private causes of action.”
It is not wholly clear whether this means a UIPA violation may be used as evidence of a statutory bad faith claim, or whether the violation constitutes definitive proof, in and of itself, to establish at least the first prong of the Terletsky/Rancosky bad faith test (unreasonableness).
Case holding UIPA provides an evidentiary yardstick for bad faith cases
On April 23, 2019, another Eastern District Court issued a detailed opinion granting partial summary judgment to the insured, by holding that the insurer acted in bad faith during a very specific period of time. The court left other issues of bad faith, and other time periods, to the jury.
In Shawnee Tabernacle Church v. GuideOne, the court carried out a close factual analysis showing no dispute of material fact that the claim adjusters acted unreasonably and in bad faith in delaying the claim handling process over a period of many months, where there was no excuse for denying coverage or promptly responding to the insured. Thus, the court stated: “As a matter of law, I find that [the insurer] acted in bad faith when it abandoned the investigation and resolution of Plaintiffs’ claim between June 16, 2015 and October 5, 2015, and then further delayed a determination of coverage until December 11, 2015, despite the fact that it possessed all relevant information about the vacancy provision once the EUOs were complete.”
Following Rancosky, the court observed that the insured need not prove ill-will or self-interest to establish statutory bad faith. Moreover, relying on Pennsylvania Superior Court precedent, the court found that “bad faith may include ‘lack of good faith investigation into fact[s], and failure to communicate with the claimant,’ both of which certainly occurred in this case between June and December. … ‘Similarly, a delay in investigation of a claim may constitute bad faith where it involves [i]nexcusable periods of inactivity, unreasonable assumptions, and inadequate communication.’ Here, [the insurer] has offered no excuse for the inactivity with respect to coverage between June 16 and December 11, and it engaged in little to no communication with Plaintiffs about the coverage issue during the same period.”
Getting to the UIPA, again citing Superior Court precedent, the court found that “[t]he lack of communication is a violation of Section 146.7(c)(1) of Title 31 of the Pennsylvania Code, which requires a report to the insured every 45 days explaining the reasons for delay in resolving a claim. Although such a violation does not establish bad faith per se, it constitutes relevant evidence. But Section 146.7(c)(1) has relevance beyond the obligation to communicate. By specifying the frequency with which a carrier must report to its insured, it provides an objective yardstick recognized by the Pennsylvania Insurance Department as to what constitutes a reasonable interval within which a carrier should be able to address the merits of a claim. From mid-June through mid-December, four full intervals elapsed without resolution or explanation, even as [the insured] faced financial peril. This further supports the conclusion that [the insurer’s] conduct was reckless during this period and constituted bad faith.”
UIPA violations cannot be used as evidence of statutory bad faith
By contrast, also on April 23, 2019, a third Eastern District Judge appears to deny any role for the UIPA in determining a statutory bad faith claim. The decision in Horn v. Minnesota Life Insurance Company can be found here. To quote that decision:
At Count IV, Plaintiff asserts that the handling of her claim under the Policy constituted bad faith, thus, entitling her to damages under 42 Pa. Cons. Stat. § 8371. Plaintiff contends that [the insurer] acted in bad faith by, inter alia, denying her claim, engaging in misleading marketing practices, failing to communicate regularly about its investigation, and acting in a manner prohibited by the Unfair Insurance Practices Act (“UIPA”), 40 Pa. Stat. § 1171.1 et seq. “To prevail on a bad faith claim, the insured must prove two elements: ‘(1) that the insurer did not have a reasonable basis for denying benefits under the policy; and (2) that the insurer knew of or recklessly disregarded its lack of a reasonable basis in denying the claim.'” U.S. Fire Ins. Co. v. Kelman Bottles, 538 F. App’x 175, 182 (3d Cir. 2013) (quoting Nw. Mut. Life Ins. Co. v. Babayan, 430 F.3d 121, 137 (3d Cir. 2005)). The insured must prove these elements by clear and convincing evidence, and “the insured’s burden in opposing a summary judgment motion brought by the insurer is commensurately high.” Babayan, 430 F.3d at 137 (internal quotations omitted). Here, this Court finds that [the insurer] had a reasonable basis for denying benefits; namely, [the insured’s] premium had not been paid, and the grace period described in the Policy had expired at the time of [the insured’s] death. As such, Plaintiff cannot prove the first element of her bad faith claim, and summary judgment is granted with respect to that claim.
Notwithstanding the foregoing, Plaintiff argues that Defendants’ bad faith is evidenced by their alleged violation of the UTPCPL and “insurance regulations” such as the UIPA and the Unfair Claims Settlement Practices regulations (“UCSP”), 31 Pa. Code §§ 146.1-146.10. However, Plaintiff is mistaken as these claims fail as a matter of law. See Leach v. Nw. Mut. Ins. Co., 262 F. App’x 455, 459 (3d Cir. 2008) (holding that “insofar as [plaintiff’s] claim for bad faith was based upon an alleged violation of the UIPA, it failed as a matter of law.”); Dinner v. U.S. Auto. Ass’n Cas. Ins. Co., 29 F. App’x 823, 827 (3d Cir. 2002); (“it is apparent from a comparison of bad faith standard [that the Pennsylvania Superior Court] adopted with the provisions of the UIPA and the UCSP that much of the conduct proscribed by the latter is wholly irrelevant” to the bad faith analysis); Watson v. Nationwide Mut. Ins. Co., 2011 U.S. Dist. LEXIS 118873, 2011 WL 4894073, at *4 (E.D. Pa. Oct. 12, 2011) (observing that, since the current bad faith standard was established in Terletsky, “courts in the [Third] circuit have . . . refused to consider UIPA violations as evidence of bad faith.”). Therefore, summary judgment is granted with respect to Plaintiff’s claim of bad faith.
A link to other UIPA cases summarized on this Blog can be found here.
Copies of these April 2019 opinions can be found here:
Blease v. Geico Casualty Co., U.S. District Court Eastern District of Pennsylvania CIVIL ACTION NO. 18-3893, 2019 U.S. Dist. LEXIS 57145 (E.D. Pa. April 3, 2019) (Jones, II, J.)
Shawnee Tabernacle Church v. GuideOne Insurance, U. S. District Court Middle District of Pennsylvania CIVIL ACTION No. 16-5728, 2019 U.S. Dist. LEXIS 68442 (E.D. Pa. April 23, 2019) (McHugh, J.)
Horn v. Minnesota Life Insurance Co., U. S. District Court Eastern District of Pennsylvania CIVIL ACTION NO. 17-238, 2019 U.S. Dist. LEXIS 69016 (E.D. Pa. April 23, 2019) (Quiñones Alejandro, J.)
The insured leased a rental car, and obtained excess insurance through the rental company. He was injured in a motor vehicle accident and sought UIM coverage under the excess policy. The excess carrier asserted UIM coverage was excluded, and denied coverage. The insured brought breach of contract and bad faith claims.
The court granted the excess insurer summary judgment on all counts. The court agreed the excess policy excluded UIM coverage, and there were no exceptions that could force such coverage on the carrier. The court held that because the policy “specifically excluded coverage for underinsured motorist claims … Plaintiff’s claims for breach of contract and bad faith are unfounded.”
Date of Decision: March 25, 2019
Warrick v. Empire Fire & Marine Insurance Co., U. S. District Court Eastern District of Pennsylvania CIVIL ACTION NO. 18-1952, 2019 U.S. Dist. LEXIS 49716, 2019 WL 1359737 (E.D. Pa. Mar. 25, 2019) (Kenney, J.)
The insured was sued for physically attacking the underlying plaintiff, while hurling racial epithets. The carrier denied a defense on the basis the alleged injuries resulted from an intentional attack, which was not an “occurrence” under the policy. The insured sought a declaratory judgment that a defense was due, and further asserted breach of contract and bad faith. The insurer counterclaimed with its own request for declaratory judgment.
The case went to trial. After the insured put on her case, the trial court granted the insurer a non-suit. On appeal, the Superior Court affirmed, but applied stricter standards than the trial court in doing so.
The Superior Court reiterated the rule that the duty to defend is defined solely by the allegations in the complaint, and courts cannot consider extrinsic evidence outside the complaint. Here, the trial court permitted the insured to put on evidence of mental incapacity to support her position that the conduct was not intentional. The appellate court ruled the trial court erred in permitting or considering this extrinsic evidence when evaluating the duty to defend, which is solely defined by the four corners of the complaint.
In this case, the complaint itself only alleged intentional conduct, without any mitigating circumstances. Thus, the Superior Court concluded the conduct alleged did not constitute an “occurrence”, and there was no duty to defend on the face of the complaint. [Note: This suggests the case could have been decided on Preliminary Objections or Summary Judgment.]
The Superior Court’s Opinion does not separately address the bad faith claim on the merits. It is clear, however, that once the Court determined there was no duty to defend, the bad faith claim simultaneously failed because the necessary predicate of unreasonably denying a benefit owed under the policy did not exist.
Date of Decision: March 26, 2019
Kiely v. Philadelphia Contributionship Insurance Co., Superior Court of Pennsylvania No. 1957 EDA 2018, 2019 Pa. Super. LEXIS 277, 2019 PA Super 90, 2019 WL 1348397 (Pa. Super. Ct. Mar. 26, 2019) (Dubow, Ott, Stevens, JJ.)
