Archive for the 'PA – UIM/UM Cases' Category

(1) FAILURE TO MAKE PARTIAL PAYMENT NOT BAD FAITH; (2) BAD FAITH POSSIBLE WHERE INSURER ALLEGEDLY KNEW CLAIM WAS WORTH MORE THAN ITS OFFER, AND THAT IT FAILED TO RE-EVALUATE THE CLAIM AFTER RECEIVING ADDITIONAL INFORMATION (Western District)

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The insureds’ complaint alleged husband-insured was riding a bicycle when hit by the tortfeasor’s car. The driver’s carrier offered to pay $50,000 towards the injuries, but the complaint alleged this was insufficient in light of the severity of the injuries, and the insureds sought UIM coverage from a set of insurers (though we will treat the claim as against one carrier for purposes of this post). The insureds allege they had $250,000 in UIM coverage, per person, and that both insureds were entitled to coverage.

They also allege they made demand on their UIM carrier. The demand package included information as to liability and damages, and was allegedly provided to a UIM adjuster. The package included the $50,000 offer from the tortfeasor’s carrier. The UIM adjuster made an “initial offer” of $10,000. The complaint alleges the adjuster was aware when making the $10,000 offer that the UIM part of the claim was worth “at least $10,000.00” and that Plaintiffs were unable to respond to this initial offer because Plaintiff [husband] was still receiving medical treatment.”

The complaint alleges that after the initial demand and response, plaintiffs’ counsel provided medical records and lien information addressing the husband’s injuries, condition, treatment and prognosis. Counsel also provided various written and oral demands on the carrier to tender UIM benefits. The demands exceeded $10,000 generally, but at some point did include a request for partial payment of the $10,000. Plaintiffs allege the carrier originally refused to pay the $10,000, but later paid that $10,000 without making any additional offers or payments “despite concluding that the value of the UIM claim exceeded this amount [$10,000].”

The insureds brought breach of contract claims, and a bad faith claim under 42 Pa. C.S.A. § 8371. The complaint also references the Unfair Insurance Practices Act (UIPA), 40 P.S. § 1171.5. The carrier moved to dismiss the bad faith claims as well as any claims based on the UIPA.

Three counts alleged identical language for bad faith claims handling, e.g. the complaint included subparagraphs alleging failure “to evaluate and re-evaluate Plaintiffs’ claim on a timely basis, failing to offer a reasonable payment to Plaintiffs, failing to effectuate an equitable settlement of Plaintiffs’ claim, failing to reasonably investigate Plaintiffs’ claim and engaging in ‘dilatory and abusive’ claims handling.”

In opposing the motion to dismiss the claims, the insureds argued that the “bad faith stems from [the insurer’s] untimely and unreasonable offer … failure to properly investigate the claim; and initially refusing to make the partial payment Plaintiffs requested from the adjustor.” The insureds asserted “that upon receipt and review of the settlement package and documentation provided, Defendants recognized that [husband’s] injuries were far in excess of $60,000 (the $50,000 limits paid by [the driver’s] insurance carrier, plus the $10,000 offered by Defendants).” They also argued bad faith because the carrier initially refused to make the partial $10,000 payment, and, for ultimately offering a minimal sum in an untimely manner while knowing the claim was worth far more than the $10,000 offer.

Refusing to Make Partial Payment Not Bad Faith

The court cited Third Circuit precedent for the proposition that “if Pennsylvania were to recognize a cause of action for bad faith for an insurance company’s refusal to pay unconditionally the undisputed amount of a UIM claim, it would do so only where the evidence demonstrated that two conditions had been met. The first is that the insurance company conducted, or the insured requested but was denied, a separate assessment of some part of her claim (i.e., that there was an undisputed amount). The second is, at least until such a duty is clearly established in law (so that the duty is a known duty), that the insured made a request for partial payment.” Pennsylvania Superior Court case law also required that a bad faith plaintiff plead that both parties agreed that the partial valuation was an undisputed amount.

In this case, the plaintiffs did not plead that the insureds requested an assessment of a part of their claim and were denied that assessment. Nor did they allege that “the parties had undertaken a partial valuation and agreed that the amount of $10,000 was an undisputed amount of benefits owed.” All they allege is the insurer made an initial offer, and the insureds initially declined that offer and later requested it be paid. The court found that an “’initial offer’ indicates that an insurer is willing to negotiate, and does not in itself represent evidence of bad faith,” citing Judge Flowers Conti’s 2013 Katta decision. Thus, “to the extent that Plaintiffs attempt to assert that the failure by Defendants to make a more timely partial payment represents bad faith, any such claim fails as a matter of law.”

The Bad Faith Claim Survived on Factual Allegations that the Insurer Knew the Claim was Worth More than it Offered, and the Insurer Failed to Re-evaluate the Claim after Receiving Additional Information

Taking the factual allegations in the complaint in plaintiffs’ favor, the court would not dismiss the bad faith claims. The insureds alleged that the carrier knew and was aware the claim value exceed $60,000 (the tortfeasor payment plus the $10,000 offer). From the subsequent $10,000 partial payment, the court had to infer on the pleadings that the carrier had concluded the claim was worth more than $10,000, and had therefore “refused to effectuate an equitable settlement.” The court stated that “[w]hile this may or may not ultimately support a bad faith claim, it is sufficient for now to defeat Defendants’ motion to dismiss.”

Further, the complaint alleges that the carrier refused to do additional investigation or re-evaluate the claim even after receiving additional information from counsel about the insured’s injuries. The insurer argued on the motion to dismiss this conduct was reasonable because there was an “understanding” with the insureds that negotiations would be put on hold pending the husband’s medical treatment. The court could not consider this argument, however, as it relied on facts and a defense outside the pleadings. Rather, it could only consider the allegations that there was a lack of good faith investigation into the facts, and the insurer failed to re-evaluate the claim even after receiving new information that merited re-evaluation.

Finally, the insureds confirmed to the court they were not asserting any claims under the UIPA, and that UIPA references in the complaint could be stricken.

Date of Decision: May 4, 2020

Kleinz v. Unitrin Auto & Home Insurance Co., U.S. District Court Western District of Pennsylvania No. 2:19-CV-01426-PLD, 2020 U.S. Dist. LEXIS 78400 (W.D. Pa. May 4, 2020) (Dodge, M.J.)

 

PLAINTIFFS ADEQUATELY PLEAD DELAY, INADEQUATE INVESTIGATION, AND LACK OF COMMUNICATION TO SUPPORT BAD FAITH CLAIM (Philadelphia Federal)

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This is one of the few recent cases finding that a bad faith plaintiff met federal pleading standards, surviving a motion to dismiss.

In this UIM case, the plaintiffs alleged the insured husband suffered serious and permanent bodily injuries, requiring ongoing treatment. The tortfeasor’s carrier paid $250,000, and the insureds sought the full UIM coverage limit, $1,000,000, from the insurer. The insurer’s highest offer was $200,000, only made nearly three years after the original claim. The insureds brought breach of contract and bad faith claims.

The complaint alleged the insureds cooperated with the carrier, providing information over a 32-month period, “with the necessary liquidated and unliquidated damages information from which Defendant could fairly evaluate and make a timely and reasonable offer on the claim.” The insureds estimated their damages in excess of $1,000,000, “based on Plaintiffs’ unchallenged medical records, narrative reports, and vocational loss and medical prognosis reports, which they provided to Defendant.” They further alleged the carrier “failed to timely respond or comply with Plaintiffs’ counsel’s request for Defendant to fairly evaluate the underinsured motorist claim.”

The insureds focused their bad faith arguments on the insurer’s alleged conduct over the 32-month time period. They alleged the carrier failed to properly respond to the claim and/or failed to evaluate the UIM claim; failed to offer a payment or to pay in good faith; and failed to inform the insureds of its evaluation of their claim. The insureds asserted the carrier “did not have a reasonable basis for delaying and/or denying underinsured motorist benefits or a partial tender of such under the policy” for nearly three years. The insureds labeled the refusal to pay policy limits as frivolous and unfounded, adding that the insurer “lacked a legal and factual basis” for its valuation of the claim.

The insurer moved to dismiss for failing to adequately plead a bad faith claim.

The court first focused on delay. Delay is a bad faith factor, but standing alone does not make out an automatic case for bad faith. In evaluating whether delay might constitute bad faith, “’[t]he primary consideration is the degree to which a defendant insurer knew it had no basis to deny the claimant: if delay is attributable to the need to investigate further or even to simple negligence, no bad faith has occurred.’” (Court’s emphasis)

In beginning his analysis, Judge Jones took cognizance of the potential negative impact of a 32-month window between the claim’s submission and the carrier’s first offer, though again, standing alone this could not prove bad faith. However, as pleaded in the complaint, there were additional factual allegations fleshing out the bad faith delay argument. These included the absence of any facts suggesting the husband was at fault, or that there was any question the UIM policy limit was $1,000,000. The insureds further pleaded: (i) the husband suffered multiple injuries with ongoing expenses; (ii) they provided medical records, reports, vocational loss information and medical prognoses over the 32-month period; and (3) their liquidated and unliquidated damage estimates to the insurer exceeded the $1,000,000 policy limit.

As to the carrier’s conduct, the insureds alleged that during the 32-month period the insurer did not seek an independent medical examination, and did not conduct a records review to properly evaluate the claim. The insureds added that the carrier’s motion to dismiss did not include any argument that the “delay was attributable to the need to investigate further or even to simple negligence.”

On these facts, Judge Jones found the plaintiffs set forth a plausible bad faith claim, focusing on a lack of investigation and failure to communicate. He distinguished this pleading from numerous other cases dismissing conclusory bad faith claims. He stated, “[i]n particular, it is wholly plausible that Defendant did not have a reasonable basis for denying Plaintiffs’ monies owed based upon the information Plaintiffs provided Defendant. Additionally, viewing the time lapse in conjunction with the lack of an independent medical evaluation by Defendant, it is plausible that Defendant knew of, or recklessly disregarded, its lack of a reasonable basis for denying Plaintiffs’ benefits of the policy.”

Judge Jones also rejected the argument that this was merely a disagreement over fair valuation. On a motion to dismiss, the court had to assume the truth of the plaintiffs’ factual allegations. The allegations set out a plausible case the insurer made an unreasonably low offer, or no offer, potentially constituting bad faith conduct. Judge Jones looked to Judge Stengel’s 2017 Davis decision to support this finding.

Date of Decision: April 17, 2020

Lowndes v. Travelers Property Casualty Co. of America, U. S. District Court Eastern District of Pennsylvania CIVIL ACTION NO. 19-5823, 2020 U.S. Dist. LEXIS 67620 (E.D. Pa. April 17, 2020) (Jones, II, J.)

 

EASTERN DISTRICT DISMISSES ANOTHER BAD FAITH CLAIM FOR INADEQUATE PLEADING (Philadelphia Federal)

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Continuing a line of recent Eastern District decisions, the court dismissed the UIM plaintiff’s bad faith claim as inadequately pleaded, with leave to amend.

The complaint failed to provide sufficient factual allegations to support a bad faith claim. Rather, it includes “conclusory remarks in which the Court cannot deduce bad faith.” Thus, “[i]n construing the complaint in a light most favorable to [the insured], the Court cannot determine specific factual allegations from these paragraphs.” The complaint was dismissed with leave to amend. However, any amended bad faith claim “must describe, with specifics, how [the insurer] acted in bad faith.”

The court relied upon the Third Circuit’s 2012 Smith decision in reaching its conclusion, as well as Judge Buckwalter’s 2015 Pasqualino decision, and Judge Baylson’s 2015 Allen decision.

Date of Decision: April 7, 2020

Champ v. USAA Casualty Insurance Co., U. S. District Court Eastern District of Pennsylvania No. 5:20-cv-01238, 2020 U.S. Dist. LEXIS 60790 (E.D. Pa. April 7, 2020) (Leeson, J.)

 

NO BAD FAITH POSSIBLE WHERE INSURER HAS ANY REASONABLE BASIS FOR ITS CONDUCT; UIPA AND UCSP REGULATIONS DO NOT CREATE BASIS FOR BAD FAITH CLAIMS (Philadelphia Federal)

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This UIM bad faith claim involved allegations of delayed investigation and settlement payment. The insurer moved for summary judgment, which Eastern District Judge Robreno granted.

The court observed that any reasonable basis to deny coverage defeats a bad faith claim, and consultation with counsel can establish a reasonable basis for the insurer’s actions. Negligence or poor judgment do not make out a bad faith case. Further, “[a]n insurer who investigates legitimate questions of insurance coverage is not acting in bad faith, and no insurer is required ‘to submerge its own interest in order that the insured’s interests may be made paramount.’”

Moreover, although bad faith can be proven through unreasonable delays in paying on a claim, “’a long period of time between demand and settlement does not, on its own, necessarily constitute bad faith.’” For example, if the insurer’s delay is tied to its need for further investigation, this is not bad faith.

Judge Robreno’s opinion sets forth a meticulous recitation of the factual history. The key factual issues were the length of time in reaching a settlement and the investigation into what portion of the insured’s injuries were attributable to the accident at issue vs. a separate auto accident in the preceding year.

In analyzing these facts, the court observed that the insureds’ principal argument was that the insurer took 15 months to make a settlement offer. However, the court found this was “not a per se violation of § 8371, and courts have found no bad faith in cases where insurers took the same length of time to evaluate a claim.” (Emphasis in original)

Drilling down with specific calendar calculations by relevant event, Judge Robreno found the length of time attributable to the insurer’s own delay was around 9 months. This was only half of the nearly 18-month period between the first petition to open a UIM file and filing suit. Further, during its investigation, the insurer had “repeatedly asked … for additional medical documentation, repeatedly communicated with Plaintiffs’ Counsel, and provided updates on the progress of the investigation. In the light most favorable to Plaintiffs, no reasonable jury could find by clear and convincing evidence that Defendant lacked any reasonable basis in its investigation.” (Emphasis in original)

UIPA and UCSP regulations not a basis for bad faith here

In a closing footnote Judge Robreno rejects the insureds’ effort to create a claim from the Unfair Insurance Practices Act (UIPA) or Unfair Claims Settlement Practices (UCSP) regulations.

He states, “While recognizing that they do not provide private causes of action, Plaintiff also cites to the Pennsylvania Unfair Insurance Practices Act, 40 Pa. C.S. § 1171, and the Pennsylvania Unfair Claims Settlement Practices regulations, 31 Pa. Code § 146, which each require prompt and reasonable responses from insurers in response to a claim, as further evidence of Defendant’s bad faith conduct. … However, ‘a violation of the UIPA or UCSP is not a per se violation of the bad faith standard.’ …. Further, both statutes apply to behavior performed with such recurrence as to signify a general business practice. See 31 Pa. Code § 146.1; 40 Pa. C.S. § 1171.5(a)(10). Because Plaintiffs only identify an isolated instance of Defendant’s alleged bad faith conduct in their argument that Defendant violated both statutes, neither is persuasive in showing Defendant lacked any reasonable basis in delaying Plaintiffs’ claim.” (Emphasis in original)

Date of Decision: March 19, 2020

Bernstein v. Geico Casualty Co., U.S. District Court Eastern District of Pennsylvania CIVIL ACTION NO. 19-1899, 2020 U.S. Dist. LEXIS 47798 (E.D. Pa. Mar. 19, 2020) (Robreno, J.)

 

THREADBARE BAD FAITH CLAIM DISMISSED WITH LEAVE TO AMEND (Philadelphia Federal)

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The court dismissed a UIM bad faith count, with leave to amend.

The complaint alleges plaintiff suffered injuries when a drunk driver ran a red light, but the drunk had only $15,000 in coverage. The plaintiff alleges he was a permissive use of the vehicle he was driving, and sought $100,000 in UIM policy limits coverage under the owner’s policy.

Plaintiff’s complaint alleges that the insurer “failed to ‘reasonably investigate’ the claim, failed to ‘objectively and reasonably evaluate’ it, and refused to ‘promptly offer payment of the reasonable and fair value’ of the claim.” The court found this pleading inadequate, stating “These threadbare, conclusory allegations do not provide a sufficient basis to state a plausible claim for relief. The Complaint must establish more than mere ‘recitals of the elements of a cause of action, legal conclusions, and conclusory statements.’” Thus, “[a]bsent additional facts regarding [the] insurance claim and the accompanying investigation, negotiations, or communications that took place, the Court cannot infer bad faith on [the insurer’s] part.”

Judge Pappert gave leave to amend the bad faith count “consistent with this Memorandum and to the extent [the insured] can allege facts sufficient to state a plausible claim for relief.”

The court cited Judge Surrick’s Mattia decision on threadbare pleading, but could have likewise looked at the numerous decisions coming out of Pennsylvania’s federal courts this year alone, e.g., Judge Slomsky’s January 21, 2020 Velazquez decision, Judge Wolson’s February 21, 2020 Diaz decision, Judge Schiller’s March 4, 2020 Park decision, Judge Leeson’s March 6, 2020 Shetayh decision, Judge Pratter’s March 16, 2020 Ridpath decision, and Judge Darnell Jones’ March 19, 2020 Clapps decision. On the other end, Judge Leeson found a bad faith claim adequately pleaded in his January 24, 2020 Solano-Sanchez opinion.

Date of Decision: March 30, 2020

Shallow v. State Farm Mutual Automobile Insurance Co., U.S. District Court Eastern District of Pennsylvania CIVIL ACTION NO. 20-01336, 2020 U.S. Dist. LEXIS 54584 (E.D. Pa. Mar. 30, 2020) (Pappert, J.)

WHETHER DELAY AMOUNTED TO BAD FAITH MUST GO TO JURY (Middle District)

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Middle District Judge Robert Mariani denied the insurer’s summary judgment motion on this UIM bad faith claim.

The court went into a lengthy recitation of the relevant facts, as well as a lengthy summary of statutory bad faith case law in Pennsylvania (though not citing the Rancosky decision). For immediate purposes, we focus solely on the court’s conclusions about whether a delay could amount to reckless indifference.

There was an undisputed delay in opening a file and starting the claim handling process, which the insurer argued amounted to negligence at most. Negligence cannot be the basis for statutory bad faith in Pennsylvania. The insurer cited cases where an internal mix-up in opening a file caused some delay. The court found it could not make a factual determination at this point attributing the delay solely to this level of negligence.

The court cited to facts from which a jury could find recklessness by clear and convincing evidence. The insured’s counsel wrote to the insurer making a claim, but no file was opened and no response was sent to counsel. Counsel sent another letter making a demand and asking for documents. Again, counsel received no response and still no UIM claim file was opened. Only after the insured called directly and asked to speak to an adjuster was a file opened and an adjuster assigned. Between then and the time of suit, the claim log showed no activity concerning the UIM claim. This all occurred over a six month period.

The court found this lack of responsiveness and activity over a six-month period could amount to reckless indifference, and should go to a jury to determine negligence vs. recklessness.

As the bad faith claim was allowed to proceed, the court did not address other allegations concerning alleged bad faith claims handling once the file was being actively adjusted.

Date of Decision: March 11, 2020

Angeli v. Liberty Mutual Insurance Co., U.S. District Court Middle District of Pennsylvania No. 3:18-CV-703, 2020 U.S. Dist. LEXIS 43159 (M.D. Pa. Mar. 11, 2020) (Mariani, J.)

NO BAD FAITH: (1) LOW BUT REASONABLE SETTLEMENT OFFER; (2) FAILURE TO PAY FULL RESERVES NOT BAD FAITH; (3) ADDITIONAL INVESTIGATION WOULD NOT HAVE CHANGED RESULT; (4) INSURED DELAYED CLAIMS HANDLING (Western District)

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In this UIM bad faith case, the court set out a detailed claims handling history. It shows an active claims handler, conflicting expert reports, and what appears to be a genuine dispute over the scope of the insured’s injury. The central discrepancy is between permanent disability vs. no medical record of serious injury.

The court granted summary judgment on bad faith, finding the insured could not meet the clear and convincing evidence standard. It specifically addressed four issues in reaching this conclusion.

  1. Was the Settlement Offer Unreasonably Low?

The insured claimed losses in excess of $2,000,000. The UIM insurer offered $25,000. As the tortfeasor’s carrier paid $100,000, this meant the UIM carrier valued the claim at $125,000.

The court set out the relevant law. Low but reasonable offers are not bad faith, but “low-ball offers which bear no reasonable relationship to an insured’s actual losses can constitute bad faith….” A carrier can reasonably rely on expert opinion when investigating claims. In this context, insurers “can rely on IMEs of qualified health professionals who examine claimants in a usual and customary manner.”

First, the court found the claims handler’s well documented file showed an IME was warranted. Next, the court examined the claims handler’s review of the insured’s economic expert’s report of over a $2,000,000. The court found that multiple medical reports provided the claims handler with a reasonable basis to question the economic expert’s critical assumption of permanent disabled. “Thus, with no other evidence to establish [the insured’s] economic losses other than [the economic expert’s] report that assumes total disability, no reasonable juror could find bad faith by clear and convincing evidence from [the] $25,000 settlement offer to [the insured].”

  1. Reserves

Reserves were set at $55,000. The insured asserted the insurer should have offered the $55,000, rather than $25,000. The court stated that an insurance company must set reserves aside when placed on notice of a possible loss arising under its policy. “However, the failure of a carrier to offer its full settlement authority does not constitute bad faith.” In the present case, “because the Court finds no sufficient evidence of bad faith as to the $25,000 settlement offer, there is likewise no bad faith in [the insurer’s] reserve for this UIM claim.”

  1. Adequacy of Investigation

To prove bad faith investigation, the insured “must show that the outcome of the case would have been different if the insurer had done what the insured wanted done.” The putative investigative failures here would not have changed the result.

Thus, even if the claims handler had reviewed the economic loss reports with her own economic experts, sought medical authorizations, or spoken to treating physicians or the tortfeasor’s lawyer, this additional investigation would not have altered the IME opinions that there was no permanent injury, and that any injuries had resolved. These IMEs provided a reasonable basis to contest value. “Therefore, [the insured] cannot meet his burden to show that a reasonable juror could find by clear and convincing evidence that [the insurer] would have evaluated [the] claim differently had it conducted an earlier or different investigation as argued by plaintiff’s counsel.”

  1. Unnecessary Delay in Investigation

“In order for an insured to recover for bad faith from delay, an insured must demonstrate that ‘the delay is attributable to the defendant, that the defendant had no reasonable basis for the actions it undertook which resulted in the delay, and that the defendant knew or recklessly disregarded the fact that it had no reasonable basis to deny payment.’”

The court first observed that much of the delay in this matter was caused by the insured. There were delays in providing information and producing documents to the insurer. The insured also changed his damage theory during the claims handling process, which led to insurer to require additional evaluations. Thus, “no reasonable juror could conclude by clear and convincing evidence that [the insurer] acted in bad faith in the timeline of its investigation….”

Date of Decision: February 19, 2020

Stewart v. GEICO Insurance, U.S. District Court Western District of Pennsylvania 2:18-CV-00791-MJH, 2020 U.S. Dist. LEXIS 28459 (W.D. Pa. Feb. 19, 2020) (Horan, J.)

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

 

UIM JURY VERDICT NOT RELEVANT TO BAD FAITH CASE BECAUSE IT OCCURRED AFTER THE INSURER HAD COMPLETED ITS CLAIM EVALUATION (Philadelphia Federal)

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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.)

FAILURES TO COMMUNICATE WITH THE INSURED UNDERMINE INSURER’S SUMMARY JUDGMENT EFFORTS; INSURER MUST SHOW ACTUAL DISAGREEMENT OVER VALUE OCCURRED (Western District)

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The court denied the insurer’s motion for summary judgment on plaintiff’s UIM bad faith. Key issues were the insurer’s having failed to adduce evidence explaining the basis for its denial, and not sufficiently adducing facts contrary to the claims handling allegations in the insured’s complaint. The carrier focused on the fact that the insured did not take discovery, but this was not as detrimental to plaintiff’s case as the insurer believed.

The insured received $50,000 from the tortfeasor’s carrier, and had $250,000 in UIM coverage under his own policy. The complaint alleged detailed facts supporting the position that the insured was highly cooperative in producing information, both independently and upon the insurer’s request. Moreover, the insured submitted to an examination under oath and an independent medical examination, and follow up requests after both.

The claim/investigation process went on for eight months, with the insured’s counsel repeatedly making policy limits demands, with no counteroffer. Ultimately, the insurer offered no payment of any kind to the insured.

During the claim/investigation process, the insured filed a writ of summons. The insurer ultimately responded with a rule to file a complaint, and after the complaint was filed it removed the action to federal court. [Note: Among the various legal principles governing bad faith claims the court recites, is “[t]he Third Circuit has also recognized that ‘using litigation in a bad faith effort to evade a duty owed under a policy [is] actionable under [Pennsylvania’s bad faith statute].’” The court did not amplify on that principle in this case.]

The court observed the carrier did not develop a factual record refuting the detailed claims handling history in the complaint. Thus, “[w]hether the undisputed facts in the Complaint are sufficient for Plaintiff to prove by clear and convincing evidence that [the insurer] acted in bad faith is for the jury to determine.” Further, there was no evidence in the record as to how, or if, the insurer provided the basis for its claim denial to the insured. At most, the rule to file a complaint functioned as the notice of denial; but even then, the insurer never gave the insured “any information about the basis for its decision.”

The insurer did include a copy of its medical expert’s reports in moving for summary judgment. These reports concluded that the insured “required no further care, treatment or limitations as a result of his motor vehicle accident.” On the other hand, the court found that the insured had apparently produced his own medical expert report during the litigation, opining that significant medical issues resulted in a “no work” restriction.

The court stated: “It may well be that [the insurer] relied upon the results of the independent medical examination or other valid grounds, but the record does not reflect that [this] report was supplied to Plaintiff or that [the insurer] relied on this report in denying Plaintiff’s claim.”

Generally, the court accepted that there might a been a reasonable basis for evaluating the claim for eight months and then denying it, but that reasoning was not disclosed in the record. The insurer attempted to frame the issue as merely a disagreement over value (apparently $250,000+ on the insured’s end and $0 on the insurer’s end).

However, “to prevail on its motion on the ground that the parties had a legitimate value disagreement, it is [the insurer’s] burden, [1] initially, to point to evidence illustrating not only that there was indeed a disagreement over the value of Plaintiff’s claim (as opposed to an outright denial), but [2] also that [the insurer] communicated that disagreement to Plaintiff, for example, by making a counter-offer. [The insurer] has not done so.”

In sum, “[b]ecause there are genuine issues of material fact regarding Plaintiff’s bad faith claim based upon the current state of the record, [the insurer] is not entitled to judgment as matter of law.”

Date of Decision: February 10, 2020

Baldridge v. Geico Insurance Co., U.S. District Court Western District of Pennsylvania, Civil Action No. 18-1407, 2020 U.S. Dist. LEXIS 22311 (W.D. Pa. Feb. 10, 2020) (Dodge, M.J.)

On April 1, 2020, Magistrate Judge Dodge denied the insurer’s motion for reconsideration. A copy of her opinion can be found here.

INSURED SETS OUT BAD FAITH DELAY CLAIM, AS WELL AS CLAIM FOR ATTORNEY’S FEES (Philadelphia Federal)

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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.)