Archive for the 'PA – Standing, Assignment or Outside Scope' Category

BAD FAITH CLAIM CAN ONLY BE ASSERTED BY INSUREDS (Western District)

Print Friendly, PDF & Email

The court determined that plaintiff was not an insured in this title insurance matter. Thus, it was not entitled to any title insurance coverage.

Addressing the plaintiff’s bad faith claim, Western District Judge Stickman found:

A claim for statutory bad faith under 42 Pa. C.S. § 8371 requires that “the insurer has acted in bad faith toward the insured.” As explained above, [plaintiff] was not an “Insured” under the Policy. Because [plaintiff] was not an “Insured” it cannot maintain a bad faith claim against Chicago Title. See Seasor v. Liberty Mut. Ins. Co., 941 F. Supp. 488, 491 (E.D. Pa. 1996) (“[I]n order to bring an action for bad faith against an insurer, one must qualify as an “insured” as that term is defined in the policy.”). Accordingly, summary judgment will be entered in favor of [the insurer].

Tithonus partners II, LP v. Chicago Title Insurance Company, U.S. District Court Western District of Pennsylvania No. 2:20-CV-952, 2021 WL 4711284 (W.D. Pa. Oct. 8, 2021) (Stickman, J.)

 

(1) BAD FAITH CLAIMS AGAINST INDIVIDUAL ADJUSTERS IMPERMISSIBLE; (2) BENEFIT DENIAL NOT BASIS FOR UTPCPL CLAIMS; (3) STATUTORY BAD FAITH CLAIM PROCEEDS BASED ON ALLEGEDLY EXCESSIVE PEER REVIEWS, AND BENEFIT DENIALS; (4) COMMON LAW BAD FAITH SUBSUMED IN CONTRACT CLAIMS (Philadelphia Federal)

Print Friendly, PDF & Email

This case involves claims against a carrier for two distinct auto accidents, as well as against two of its individual claim adjusters.  The insured husband alleged serious injuries in the first incident that were exacerbated in the second.  He alleges he was underpaid on the first loss for medical benefits, and raised a UIM claim on the second loss, claiming the same insurer failed to pay benefits due.

The insureds brought breach of contract claims for UIM and first party medical benefits, common law and statutory bad faith claims on the UIM and first party benefits claims, breaches of the Motor Vehicle Financial Responsibility Law (MVFRL), and Unfair Trade Practices and Consumer Protection Law (UTPCPL) claims.

Plaintiffs also brought UTPCPL claims against the two individuals, as well as common law and statutory bad faith claims, and a breach of contract claim against one of them.

The defendants moved to dismiss the bad faith and UTPCPL claims as to all of them, and all claims against the individual defendants.

ALL CLAIMS AGAINST THE INDIVIDUAL ADJUSTERS FAIL

As to the breach of contract claim against the one insurance adjuster, the court observed that “while insurance adjusters have a duty to their principals and should conduct investigations with propriety, this duty does not create a contractual obligation between the adjuster and the insured.” Thus, only the principal, i.e., the insurer, could have contractual liability.

As to the UTPCPL claims, there were no facts pleaded to support any sort of deceptive or fraudulent conduct. Moreover the failure to pay a benefit is not actionable under the UTPCPL.  Finally, statutory bad faith claims against insurance adjusters are impermissible because an adjuster is not party to the insurance contract. The same reasoning makes common law bad faith claims impermissible.

In sum, as to both adjusters, the court dismissed the claims against these individuals with prejudice. Judge Tucker states they both “worked as claims adjusters … and followed the company’s policies and practices. Plaintiffs fail to plead sufficient facts to allege personal misconduct that established reliance between themselves and the Individual Defendants, despite the lack of a contractual relationship between Plaintiffs and the Individual Defendants, and accordingly, those claims must fail.”

COURT FINDS FRAUDULENT JOINDER AND DENIES MOTION TO REMAND

As it was only the presence of one of the individual adjusters that prevented complete diversity, his dismissal from the case created complete diversity, and plaintiff’s motion to remand was denied. Although courts use the term “fraudulent joinder”, this does not mean what one would typically think of as fraudulent conduct.  Rather, “[j]oinder is fraudulent ‘where there is no reasonable basis in fact or colorable ground supporting the claim against the joined defendant, or no real intention in good faith to prosecute the action against the defendants or seek a joint judgment.’” In this case, the court simply held that there were no viable claims stated against the non-diverse party, i.e., no colorable ground supporting a claim.

STATUTORY BAD FAITH CLAIM STATED AGAINST INSURER

As to the substance of the statutory bad faith claims against the insurer, Judge Tucker found a plausible cause of action stated in the Complaint’s allegations. The Complaint alleges the insurer and one of the adjusters “conducted seven Peer Reviews with respect to … treatment in order to challenge causation and deny benefits … which is at odds with the intended use of the procedure and can factually support a claim of bad faith. Plaintiffs’ bad faith claims survive summary judgment because Defendants administratively closed Plaintiff’s first-collision-benefits-claim, despite acknowledging and having medical support that his initial injuries were exacerbated by the second collision, and then denied benefits under Plaintiffs’ second-collision-benefits-claim.” Thus, she denied the motion to dismiss.

COMMON LAW BAD FAITH CLAIMS DISMISSED

The common law bad faith claims were dismissed, as the court found them subsumed in the breach of contract claims.

Date of Decision:  September 27, 2021

Holohan v. Mid-Century Insurance Company, U.S. District Court Eastern District of Pennsylvania No. CV 20-5903, 2021 WL 4399659 (E.D. Pa. Sept. 27, 2021) (Tucker, J.)

Our thanks to attorney Susan J. French for bringing this case to our attention.

NO STANDING WHERE INSURER DID NOT ISSUE POLICIES; VALUATION DISPUTE IS NOT BAD FAITH (Western District)

Print Friendly, PDF & Email

There were serious issues in this case as to whether the assignee of over 100 claims named the proper defendant/carrier, and whether the assignors even had insurance policies with the defendant carrier, with the exception of one assignment.  The court found that even if the plaintiff/assignee could bring claims, despite dispositive standing issues, no bad faith conduct was established on the record before the court on this summary judgment motion. Thus, the bad faith claims were rejected.

The court found there was at most a dispute over how much the insurer should pay toward certain losses.  Western District Judge Haines states:

Plaintiff’s disagreements with Defendant’s estimates and testimony indicating additional estimates were required and Defendant paid the market labor rate does not show Defendant was acting in bad faith. See Clarke v. Liberty Mut. Ins. Co., … citing Smith v. State Farm Mut. Auto. Ins. Co., … (“Courts have consistently held that a dispute or discrepancy in the valuation of a claim between the insurer and the insured is not alone indicative of bad faith, nor is it sufficient by itself to state a bad faith claim.”); West v. State Farm Ins. Co., … (“A ‘low-ball’ offer alone does not suffice to support a claim for bad faith. ‘[B]ad faith is not present merely because an insurer makes a low but reasonable estimate of an insured’s damages.’ ”); Pfister v. State Farm Fire & Cas. Co., … (discrepancy in parties’ valuation of claim “alone is not evidence of bad faith; Pennsylvania law generally does not treat as bad faith an insurer’s low but reasonable estimate of an insured’s losses”); Williams v. Hartford Cas. Ins. Co., 83 F. Supp. 2d 567, 576 (E.D. Pa. 2000) (“negotiating by offering a figure at the low end of the settlement range does not necessarily constitute bad faith, particularly when the valuation of the injuries and damages of a claim is difficult”). Plaintiff has failed to produce clear and convincing evidence that Defendant acted in bad faith in order to survive summary judgment, and Defendant is entitled to judgment on this claim.

Date of Decision:  September 20, 2021

Professional, Inc. v. Progressive Casualty Insurance Company, U.S. District Court Western District of Pennsylvania No. 3:17-CV-185, 2021 WL 4267497 (W.D. Pa. Sept. 20, 2021) (Haines, J.)

NON-INSURED ASSIGNEE STANDING REQUIRES BOTH STATUS AS AN INJURED PARTY AND AS A JUDGMENT CREDITOR (Philadelphia Federal)

Print Friendly, PDF & Email

Keeping with today’s theme, Eastern District Judge Leeson, like Judge Pratter, dismissed an amended bad faith claim with prejudice, after the insured did not correct pleading deficiencies to set out a plausible claim.  The nature of the bad faith claim here presents a different twist, however, as it involves assignments and standing.  Judge Leeson’s first decision is summarized here.

Aside from an insured, the only parties with standing to bring a statutory bad faith claim are injured parties receiving assignments who are also judgment creditors.  Judge Leeson cites Wolfe v. Allstate Prop. & Cas. Ins. Co., 790 F.3d 487, 491 (3d Cir. 2015) and Feingold v. Palmer & Barr, 831 Fed. App’x 608, 609 n.5 (3d Cir. 2020) to support this dual requirement. These cases in turn rely upon the Pennsylvania Supreme Court’s Allstate v. Wolfe decision, summarized here.

Judge Leeson found the plaintiff in this case is an assignee, but not an injured person.  “[T]he assignment of proceeds, in and of itself, was insufficient to confer standing to bring a bad faith claim. Accordingly, [plaintiff’s] argument that the assignment itself confers standing upon him is unavailing.”

“Moreover, assuming arguendo that [the plaintiff] sufficiently alleges that he is an injured plaintiff, [he] fails to plausibly allege that he is a creditor to any judgment related to the fire. The effort to plead assignment alone creates standing is “unavailing, as the Court in Wolfe did not treat Wolfe’s assignment as sufficient to render him a ‘judgment creditor.’ … [The plaintiff] fails to allege any judicial judgment related to the fire to which he is a creditor. Since [the plaintiff] does not allege that he is both an injured plaintiff and judgment creditor, he lacks standing to bring a bad faith claim ….” [Emphasis added]

Date of Decision:  September 9, 2021

Williams v. State Farm, U.S. District Court Eastern District of Pennsylvania No. 5:21-CV-00058, 2021 WL 4099534  (E.D. Pa. Sept. 9, 2021) (Leeson, J.)

TWO SHORT EASTERN DISTRICT SUMMARIES: TAKING CONTRARY POSITIONS IN SUBROGATION AND UIM CLAIMS NOT BAD FAITH; ESTATE HAS STANDING TO PURSUE BAD FAITH CLAIM (Philadelphia Federal)

Print Friendly, PDF & Email

Here are quick summaries of two recent Pennsylvania Eastern District bad faith cases.

TAKING CONTRARY POSITIONS IN SUBROGATION AND UNINSURED MOTORIST CASES ON INSURED’S CULPABILITY NOT BAD FAITH PER SE

The carrier denied the insured’s uninsured motorist claim on the basis that the insured was at fault.  However, the carrier brought a property damage subrogation action against the other driver, claiming the other driver was solely at fault.

The insured brought breach of contract and bad faith claims on the basis the carrier admitted or conceded via the subrogation action that the other driver was wholly at fault, and could not now argue its insured was at fault. The insured moved for summary judgment on this basis.  Eastern District Judge Younge denied the motion.

Judge Younge rejected the idea that either judicial estoppel or collateral estoppel applied to bind the carrier to its legal assertions in the subrogation action.  Absent their application, he found summary judgment inappropriate as the insured had not met the clear and convincing evidence standard of proof for bad faith.

Finally, Judge Younge rejected the argument that the carrier breached its contract or acted in bad faith by not making a partial payment. “Plaintiff also failed to establish that he is entitled to an advance of proceeds under policy provisions. Under Pennsylvania law, the Court is not aware of any duty on the part of an insurer to make a partial payment on a UIM claim in the absence of a contractual provision requiring a partial payment or an agreement between the parties as to the value of a UIM claim.”

Date of Decision:  June 29, 2021

Marrone v. Geico Insurance Company, U.S. District Court Eastern District of Pennsylvania No. 20-CV-4405-JMY, 2021 WL 2681388 (E.D. Pa. June 29, 2021) (Younge, J.)

ESTATE HAS STANDING TO PURSUE LIFE INSURANCE BAD FAITH CLAIM

In this life insurance bad faith case, Eastern District Judge Surrick held that the estate has standing to bring the bad faith claim, even though the decedent was not a beneficiary.

Date of Decision:  July 6, 2021

Hudson v. Columbia Life Insurance Company, U.S. District Court Eastern District of Pennsylvania No. CV 20-5252, 2021 WL 2823074 (E.D. Pa. July 6, 2021) (Surrick, J.)

ASSIGNEE LACKS STANDING IF NOT THE INJURED PARTY; BAD FAITH BASED ON LACK OF COMMUNICATION POSSIBLE; 9-10 MONTH DELAY ALONE CANNOT CREATE BAD FAITH (Philadelphia Federal)

Print Friendly, PDF & Email

This first party fire loss case sets out some significant legal propositions:

  1. A plaintiff has no standing as a section 8371 assignee unless that plaintiff is both (a) a party injured by the insured and (b) a judgment creditor of the insured. In this case, the plaintiff lacked standing because he did not meet those two requirements.

  2. A bad faith claim can be based on the insurer’s failure to communicate with the insured. As we have repeatedly stated on this blog, see for example this January 2020 post and this August 2020 post, it is questionable whether a failure to communicate, or any other standalone claim handling failure, can be the basis for an independently cognizable bad faith claim; or whether poor claim handling is merely a matter of evidence that can be used to prove bad faith where a benefit actually has been denied.  This post from April 2021 has additional discussion on the issue of whether bad faith can exist if no coverage obligation is due, i.e., it addresses the idea that poor claims handling cannot create a statutory bad faith claim in the absence of any actual denial of benefits.

  1. Delay, standing alone, may not constitute bad faith. The court, as a matter of law, citing earlier case examples, found a 9-10 month claim handling delay in itself could not constitute bad faith. Thus, the court states: “Assuming arguendo that the entirety of this delay was attributable to [the insurer], a period of nine or ten months, without more, is insufficient to establish bad faith.”

Date of Decision:  June 29, 2021

Williams v. State Farm, No. 5:21-CV-00058, 2021 WL 2661615 (E.D. Pa. June 29, 2021) (Leeson, J.)

WESTERN DISTRICT JUDGE WIEGAND ISSUES TWO BAD FAITH OPINIONS: (1) BAD FAITH CLAIM PLAUSIBLE WHERE COVERAGE ISSUES REMAIN OPEN (2) NO BAD FAITH FOR PRE-CONTRACT CONDUCT (Western District)

Print Friendly, PDF & Email

On April 16 and 21, 2021, Western District Judge Wiegand issued bad faith opinions.  In the first case, she allowed the claim to proceed, denying a motion to dismiss. In the second, the conduct at issue did not involve any benefit denial, but only alleged pre-contract deception, which is not subject to Pennsylvania’s bad faith statute, 42 Pa.C.S. § 8371.

CASE 1: BAD FAITH CLAIM STATED

In Maronda Homes, LLC v. Motorists Mutual Insurance Company, Judge Wiegand allowed an additional insured’s statutory bad faith claim to proceed, denying the insurer’s motion to dismiss.

The insurer rejected additional insured coverage, asserting (1) that the additional insured endorsement was not triggered through any alleged conduct of the named insured, and (2) that even if triggered, an exclusion applied. The additional insured raised claims for breach of contract, contractual bad faith, and statutory bad faith. The insurer moved to dismiss all claims.

Judge Wiegand first rejected the insurer’s argument that the complaint did not allege any wrongdoing by the named insured that could trigger coverage under the additional insured endorsement.  She also found factual issues remained open as to whether coverage was excluded because the work was (1) completed or (2) put to its intended use. This could not be decided at the motion to dismiss state.

Judge Wiegand did dismiss the breach of the implied covenant of good faith and fair dealing count. “[U]nder Pennsylvania law, a ‘claim for breach of the implied covenant of good faith and fair dealing is subsumed in a breach of contract claim.’” Thus, “a claim for breach of the implied covenant of good faith and fair dealing ‘separate and distinct from a breach of contract claim’ cannot be maintained because ‘the covenant does nothing more than imply certain obligations into the contract itself.’”

By contrast, Judge Wiegand allowed the statutory bad faith claim to proceed. First, she observed that the policy exclusion at issue remained open and undecided, so the insurer could not argue the coverage denial was per se reasonable based on the policy exclusion language.  She then found the insured’s allegations that the insurer “failed to investigate Plaintiff’s tender of the claims, denied coverage despite cooperatively participating in attempts to settle the Underlying Actions, and rejected settlement offers … within the limits of the Policy … are sufficient at this stage to survive Defendant’s Motion.”

Date of Decision:  April 16, 2021

Maronda Homes, LLC v. Motorists Mutual Insurance Company, U.S. District Court Western District of Pennsylvania No. 2:20-CV-01526-CCW, 2021 WL 1518009 (W.D. Pa. Apr. 16, 2021) (Wiegand, J.)

CASE 2: NO STATUTORY BAD FAITH POSSIBLE FOR PRE-POLICY CONDUCT

The second case involved a first party property damage claim, where a swimming pool popped out of the ground due to subsurface water pressure. A policy exclusion clearly excluded coverage for subsurface water pressure causing damages, but the insureds still pursued the claim.  They alleged that prior to purchasing the policy, the insurer’s agent led them to believe the policy would cover them for damages to in-ground pools “from foreseeable types of harm,” which equated to a promise concerning subsurface water pressure damage being covered.

After the coverage denial, the insureds brought claims to reform the policy to cover “pool popping,” for statutory bad faith, and for violation of the Unfair Trade Practices and Consumer Protection Law (UTPCPL). The insurer successfully moved to dismiss all claims.

First, Judge Wiegand found that the policy could not be reformed based on mutual mistake, unilateral mistake, or fraud.  She further found that this was not a case where the reasonable expectations doctrine would permit reformation of clear policy language.

Second, she dismissed the statutory bad faith claim.  As the Pennsylvania Supreme Court made clear in Toy v. Metropolitan Life, the bad faith statute only applies when the insurer had denied a policy benefit.  Deceptive practices used to induce an insured to enter an unfavorable insurance policy do not fall within the bad faith statute’s ambit.

Finally, because the insureds did not plead justifiable reliance, there could be no UTPCPL claim.

Date of Decision: April 21, 2021

Palek v. State Farm Fire & Casualty Company, U.S. District Court Western District of Pennsylvania No. 2:20-CV-00170-CCW, 2021 WL 1561507 (W.D. Pa. Apr. 21, 2021) (Wiegand, J.)

INSURER HAD STANDING AS ASSIGNEE TO BRING BAD FAITH CLAIM AGAINST ADDITIONAL INSURANCE PROVIDER; BAD FAITH CLAIM ADEQUATELY STATED FOR FAILURE TO PROVIDE FIRST LEVEL OF COVERAGE AND A DEFENSE UNDER ADDITIONAL INSURED ENDORSEMENT (Philadelphia Federal)

Print Friendly, PDF & Email

This case involves a dispute between a defendant’s own insurer and another carrier obligated to provide coverage to defendant as an additional insured.  The issues involved which insurer has the primary coverage/defense obligations, and which was excess.

There were several tenders to the additional insurance provider to assume the defense, which were either ignored or denied.  The defendant’s insurer brought a declaratory judgment action seeking to have the additional insurance provider assume the defense, and to reimburse the defendant’s insurer for attorney’s fees and costs, as well as for the attorney’s fees and costs associated with bringing the declaratory judgment action.

It is also clear from the court’s opinion that a statutory bad faith claim under 42 Pa.C.S. § 8371 was at issue.

There was a motion to dismiss all claims.

There was a duty to defend the additional insured

Among other things, Eastern District Judge Robreno found the underlying complaint adequately alleged facts invoking the additional insurance provider’s duty of defend, when compared to the additional insured endorsement language.  Thus, the additional insurance provider was in error in failing to accept the tenders and assume the defense.

There was standing to bring a statutory bad faith claim as an assignee

The additional insurance provider challenged plaintiff’s standing to bring a section 8371 bad faith claim because it was not the named insured.  Judge Robreno disagreed, citing the Third Circuit’s 2015 Wolfe decision making clear that assignees can bring statutory bad faith claims.

[Note: Earlier in Wolfe, the Third Circuit certified to Pennsylvania’s Supreme Court the fundamental issue of whether bad faith claims can ever be assigned. In the Supreme Court’s own Wolfe decision, assignments were recognized as permissible, but only within limited parameters.  A summary of that case can be found here. The assignment in the present case falls within those acceptable parameters.]

The assignee-insurer pleaded a plausible bad faith claim

Next, Judge Robreno rejected the insurer’s arguments that the complaint was devoid of facts setting out a plausible bad faith claim.

To the contrary, Judge Robreno found the following sufficient:

  1. The complaint alleged the additional insurance provider failed to acknowledge its primary duty to defend, without a reasonable basis, breaching the duty of good faith and fair dealing.

  2. The complaint specifically set out numerous instances where that insurer denied or ignored tender letters.

  3. “Accepting as true all of the allegations in the Complaint and all reasonable inferences that can be drawn therefrom, and based on this record, [the plaintiff] has sufficiently pled that based on the correspondence submitted to [the insurer], [the additional insurance provider] did not adequately investigate, respond, or explain their refusal to defend and potentially indemnify [the insured] in the underlying action.”

The motion to dismiss was denied.

Date of Decision:  March 10, 2021

Liberty Mutual Fire Insurance Co. v. Harleysville Worcester Insurance Co., U.S. District Court Eastern District of Pennsylvania No. CV 20-5093, 2021 WL 909625 (E.D. Pa. Mar. 10, 2021) (Robreno, J.)

BAD FAITH CLAIM CAN ONLY BE ASSIGNED TO UNDERLYING PLAINTIFF AND JUDGMENT CREDITOR (Third Circuit - Pennsylvania Law)

Print Friendly, PDF & Email

In this case, the Third Circuit upheld the principle that a statutory bad faith claim can only be assigned to the underlying injured plaintiff and judgment creditor. As the bad faith plaintiff in this case was neither, the case was dismissed.

Date of Decision: December 24, 2020

Feingold v. Palmer & Barr, U.S. Court of Appeals for the Third Circuit No. 19-2621, 2020 WL 7663209 (3d Cir. Dec. 24, 2020) (Ambro, Matey, Roth, JJ.)

SIMPLE VALUATION DISPUTE CANNOT CREATE BAD FAITH; NO ACTIONABLE BAD FAITH AGAINST CLAIM HANDLER; MIXED RESULT UNDER UTPCPL (Philadelphia Federal)

Print Friendly, PDF & Email

The insured brought suit over a $500 valuation dispute.  The carrier valued the insured’s car at $2,500 ($3,000 less at $500 deductible), and repairs were estimated in excess of $3,000. The car being a total loss, the insurer offered $2,500, but the insured wanted $3,000.  This led to a 10 count complaint against the insurer and its claim handler. We only address the two bad faith counts against the insurer and/or the claim handler, and the Unfair Trade Practices and Consumer Protection Law (UTPCPL) claims against the insurer.

No statutory bad faith.

The court dismissed the statutory bad faith claim.  There were simply no allegations of fact that could support a plausible bad faith claim. The complaint itself showed the carrier appropriately investigated the claim, and gave a prompt damage assessment.  Plaintiff did not allege the repair cost estimate was incorrect, or the inspection faulty. There was no allegation that the insurer’s valuation was unreasonable. There was no claim denial, just a dispute over the sum due.

The court found this simply a “normal dispute” that did not amount to bad faith. “An insurer’s failure to honor its insured’s subjective value of his claim does not—without more—give rise to a bad faith claim.” The court, however, did allow leave to amend.

No common law bad faith against the insurer or the claim handler.

The insured brought common law bad faith claims against the insurer and claim handler. The court observed there is no tort common law bad faith cause of action; rather, in Pennsylvania common law bad faith is subsumed in the breach of contract claim. Thus, the common law claim against the insurer was dismissed with prejudice.

As to claim handler, Pennsylvania law (1) does not support a statutory bad faith claim against claim handlers; nor (2) does it recognize a bad faith claim in contract against adjusters (who are clearly not party to any contract). These claims were dismissed with prejudice.

A mixed result under the UTPCPL.

The court also dismissed one UTPCPL claim on the basis that it alleged poor claim handling, not deceptive inducement to enter the insurance contract.  However, the insured also alleged the carrier’s representative originally made false representations causing him to purchase the insurance in the first place.  This was sufficient to state a UTPCPL claim under its catch-all provision.

Date of Decision: December 14, 2020

Ke v. Liberty Mutual Insurance Company, U.S. District Court Eastern District of Pennsylvania No. CV 20-1591, 2020 WL 7353892 (E.D. Pa. Dec. 14, 2020) (Pratter, J.)