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

CONCLUSORY PLEADINGS INSUFFICIENT TO STATE BAD FAITH CLAIM; MERE REFUSAL TO PAY SUM DEMANDED IS NOT BAD FAITH PER SE (Philadelphia Federal)

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In this UIM case, the tortfeasor’s insurer settled for $15,000, and the injured insured demanded the $300,000 UIM policy limits from his own carrier. The insurer did not accede to that demand, and the husband and wife insureds sued for breach of contract and bad faith. Judge Schiller dismissed the bad faith claim with leave to amend, if a plausible claim could be pleaded.

Plaintiff failed to allege sufficient facts to state a plausible claim. The insureds’ conclusory allegations included “failing to evaluate Plaintiff’s claim objectively and fairly; failing to complete a prompt and thorough investigation of Plaintiff’s claim… [and] unreasonably withholding policy benefits[.]” There are, however, no specific facts pleaded supporting these conclusions. “Courts consistently hold that bare-bones allegations of bad faith such as these, without more, are insufficient to survive a motion to dismiss. Indeed, conclusory allegations that an insurer ‘unreasonably withheld the payment of [UIM] benefits under the policy…failed to engage in good faith negotiations… [and] failed to perform an adequate investigation’ are insufficient to state a claim for bad faith.”

Similarly, the complaint alleges the insurer “failed to conduct a fair and reasonable investigation into his claim but does not plead any facts related to that investigation.” The court further found the insured could not state a claim on the basis that the insurer “did not pay [the insured’s] claims even when he provided the same information that led [the tortfeasor’s insurer] to tender the limits of its policy.” The court observes that “the failure to immediately accede to a demand for the policy limit cannot, without more, amount to bad faith.” [Though the court does not so state, there appears to be no explanation in the complaint why providing information leading to a $15,000 payment automatically requires an additional $300,000 payment.]

The court provided the insureds “may file an amended complaint to add a bad faith claim, but only if they can plausibly do so.” (Emphasis in original)

Date of Decision: October 4, 2019

Doyle v. Liberty Mutual Ins., U. S. District Court Eastern District of Pennsylvania No. 19-3460, 2019 U.S. Dist. LEXIS 172581, 2019 WL 4917123 (E.D. Pa. Oct. 4, 2019) (Schiller, J.)

BAD FAITH CLAIM MAY PROCEED ON SOME CLAIMS HANDLING ISSUES, BUT OTHERS FAIL TO MAKE OUT A CASE (Western District)

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In this UIM bad faith case, Judge Conner, sitting in the Western District for this matter, closely analyzed the insurer’s investigation and claims handling in allowing the bad faith case to proceed. While agreeing with the carrier on a few distinct bad faith sub-issues, summary judgment was denied on the bad faith and breach of contract claims.

The insured was a tetraplegic prior to being hit by the tortfeasors’ vehicle. She made claims that there were new injuries and an exacerbation of her existing autonomic dysreflexia (AD). The carrier assigned a senior adjuster, and offered $20,000 on a $1 Million policy.

The key underlying fact is that a claims adjuster, with no medical training, was making critical decisions based on medical reports and records, or an absence thereof, without sufficiently consulting with doctors or someone with medical training who had experience with AD. The insured provided medical records and a report from her own doctor, a specialist in spinal cord injuries, setting out the basis of her claims of new injuries and the details of the exacerbated AD. The adjuster did have access to a consulting nurse, but the nurse had no AD experience, and her advice to obtain an IME allegedly was disregarded.

The adjuster never sought a statement under oath or obtained an IME, despite the consulting nurse’s recommendation to obtain an IME. There was a hot dispute of fact over whether the adjuster orally requested an IME from the insured’s attorney. After finally obtaining all medical records, the carrier offered $25,000 on the UIM claim, and the insured subsequently sued for breach of contract and bad faith. After litigation started, the carrier did obtain an IME. The carrier’s IME concluded that any AD symptoms were the result of preexisting injuries, and not the motor vehicle accident at issue.

Judge Conner gave close analysis to each distinct aspect of the insured’s bad faith claim.

  1. There must be a meaningful investigation.

An “insurance company must conduct a meaningful investigation, which may include an in-person interview, examination under oath, medical authorizations, and/or independent medical examinations.” “Both federal and Pennsylvania courts have indicated that failure to timely obtain an IME is probative of bad faith. … Common sense dictates that an IME is particularly insightful when the insured suffers from a rare, complex, and unique preexisting condition.”

Again, this was summary judgment, so the facts were taken in the insured’s favor as non-movant. That said, it is undisputed there was no pre-suit IME, that the insured had a long medical history, and that her expert doctor stated the accident exacerbated the AD. Moreover, the carrier’s own nursing consultant had recommended an IME, which advice was not followed. The court was concerned “that an adjuster with no medical training, tasked with evaluating a unique medical condition for an insured with a unique medical history, ignored a medical professional’s recommendation.” “Whether this decision was made in bad faith is an issue of genuine dispute, but [the insured] has put forth enough clear and convincing evidence that [the carrier’s] decision stemmed from recklessness rather than mere negligence.”

  1. The court rejects a “harmless error” argument.

The carrier argued that even if it improperly failed to take a pre-suit IME, it did so post-suit and its doctor found no claim existed because all symptoms were the result of a pre-existing condition. The court rejected this theory.

“To begin with, the court is unaware of a harmless error doctrine in Pennsylvania’s statutory bad-faith jurisprudence, and [the carrier] does not point to one. This argument also misconceives our inquiry. We must review the process by which [the carrier] made its decisions and determine whether they were supported by a reasonable basis. That process need not be ‘flawless,’ but it must be thorough enough to provide … a ‘reasonable basis’ for declining to settle [the] claim. Whether [the carrier] had a ‘reasonable basis’ during its investigation is in dispute because [it] did not seek a pre-suit IME. This, coupled with [the consulting nurse’s] disregarded recommendation that [the carrier] obtain an IME, is enough clear and convincing evidence to suggest that [the] settlement strategy lacked a reasonable basis. That [the] post-suit report confirms [the carrier’s] pre-suit determination does not change whether [the carrier] acted in bad faith in making that determination.”

  1. The insurer’s selecting a doctor to conduct an IME does not by itself show bias.

The insured asserted that the doctor selected to perform the IME was improperly biased. The court observed, “[b]ias in selecting a physician to conduct an IME may be relevant to bad faith, but a baseless allegation of bias alone will not suffice.” The insured did not bring out any evidence to support her bias claim. This naked assertion was not sufficient: “[I]t is clear that [the carrier] chose a physician who would not be independent but instead would be biased in his opinions regarding the extent of [the] alleged injuries and complaints as well as the cause of same.” That the doctor did “prior work for insurance companies does not alone establish unlawful bias or bad faith, and [the insured] does not cite on-point authority to show otherwise.”

  1. The court rejects the carrier’s argument that chose not to take the IME to avoid acting in bad faith.

In its final point on the IME issue, the court states: “In a last-ditch effort to combat [the insured’s] claim, [the carrier] maintains that an IME is not required because ‘insurers have been sued for bad faith when they require insureds submit to IME’s to obtain benefits.’ (Doc. 91 at 14 (citing Sayles v. Allstate Ins. Co., 260 F. Supp. 3d 427, 432 (M.D. Pa. 2017)). That may be true in a vacuum, but Sayles arose in a different context: there, the insurer demanded that the insured submit to an IME without seeking leave from the court in violation of Pennsylvania law. Sayles, 260 F. Supp. 3d at 432, 434-38. [The carrier] did not demand (or request) an IME here. Thus, Sayles is unhelpful.”

  1. A failure to consider relevant information could support a bad faith claim.

The court found that whether the carrier “adequately considered [the insured’s] complete medical profile is a material issue, and the evidence on this point is in genuine dispute.” The record did include the adjuster’s testimony that she considered the insured’s medical report, but relied more heavily on the actual medical records. The court stated: “At first blush this sounds reasonable. But [the adjuster] is not a medical professional and is not qualified to decide if a treating doctor’s narrative is irrelevant to an insured’s medical condition. No IME was conducted to place these records in context despite the suggestion of [the nursing consultant]—a medical professional. [The adjuster] may not have ignored facts per se, but it is difficult for an adjuster to favor some evidence (medical records) over others (medical reports) without professional expertise or the findings of an IME.” Thus, the insured had put on sufficient evidence to go forward on the argument that the insurer “based its settlement strategy on an incomplete medical picture.”

  1. The insured did not have a case for bad faith delay.

“To show bad-faith delay, the insured must establish ‘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 observed that “[t]he process for resolving an insurance claim can be slow and frustrating … but a long claims-processing period does not constitute bad faith by itself….”

In this case, the insured cause some of the delay, “which leans against a finding of bad faith.” The court further observed the four-month time delay between the insured’s last contact with the carrier and filing suit, and rejected the argument of delays in connection with transmitting records, the timing of the IME report and the IME itself, and the carrier’s filing various motions in the case.

After finding the bad faith case could go forward, the court also denied the carrier’s summary judgment on the breach of contract claims, under the law of the case theory and because there was a dispute of fact over whether the AD exacerbation resulted from accident or pre-existing condition.

September 26, 2019

Baum v. Metro. Prop. & Cas. Ins. Co., U. S. District Court Western District of Pennsylvania CIVIL ACTION NO. 2:16-CV-623, 2019 U.S. Dist. LEXIS 164736 (W.D. Pa. Sept. 26, 2019) (Conner, J.)

(1) NOT ACCEDING TO INSURED’S DEMAND IS NOT BAD FAITH PER SE (2) THERE IS NO FIDUCIARY DUTY IN UIM CONTEXT AND (3) COMPENSATORY DAMAGES NOT AVAILABLE UNDER BAD FAITH STATUTE (Western District)

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In this UIM bad faith case, the court dismissed the bad faith count with leave to amend, struck all allegations referencing fiduciary duty, and dismissed the claim for compensatory damages under the Bad Faith Statute, 42 Pa.C.S. § 8371.

The insured was injured in a motor vehicle accident. The tortfeasor’s carrier paid his $25,000 policy limits. The insured sought additional recovery under the UIM provisions of his own policy.

The insured provided various medical records, economic reports, and other documents to the carrier, and ultimately demanded $250,000 in UIM policy limits. The insured’s carrier did not meet this demand, and the insured sued for breach of contract and bad faith, as well as loss of consortium for his wife.

The insurer moved to dismiss the bad faith count for failure to state a claim. It also moved to strike all averments concerning fiduciary duty, and to dismiss any claim for compensatory damages under the Bad Faith Statute.

The insured fails to plead a plausible bad faith claim

In reviewing the complaint, the court observed that while the list of 15 allegations in the bad faith count was long, it only pleaded “essentially conclusory acts and omissions,” which are insufficient to make out a plausible bad faith cause of action. These flawed allegations included:

a) “failing to objectively and fairly evaluate Plaintiffs’ claim”; b) “failing to objectively and fairly reevaluate Plaintiffs’ claim based on new information”; c) “engaging in dilatory and abusive claims handling”; d) “failing to adopt or implement reasonable standards in evaluating Plaintiffs’ claim”; e) “acting unreasonably and unfairly in response to Plaintiffs’ claim”; f) “not attempting in good faith to effectuate a fair, prompt, and equitable settlement of Plaintiffs’ claim in which the Defendant’s liability under the policy had become reasonably clear”; g) “subordinating the interests of its insured and those entitled under its insureds’ coverage to its own financial monetary interests”; h) “failing to promptly offer reasonable payment to the Plaintiffs”; i) “failing reasonably and adequately to investigate Plaintiffs’ claim”; j) “failing reasonably and adequately to evaluate or review the medical documentation in Defendant’s possession”; k) “violating the fiduciary duty owed to the Plaintiffs”; l) “acting unreasonably and unfairly by withholding underinsured motorist benefits justly due and owing to the Plaintiffs”; m) “failing to make an honest, intelligent, and objective settlement offer”; n) “causing Plaintiffs to expend money on the presentation of their claim”; and o) “causing the plaintiffs to bear the stress and anxiety associated with litigation.”

Beyond these conclusory allegations, the bad faith count was “devoid of facts explaining ‘who, what, where, when, and how’ Defendant failed to handle Plaintiffs’ UIM claim in good faith.”

The court did scour the complaint for facts. However, those facts did “not detail which of Defendant’s acts or omissions constitute bad faith, separately or in conjunction with others.” All those facts amounted to was that the insured was (1) injured in a motor vehicle accident, (2) the tortfeasor’s liability limit did not cover all of the insured’s injury claims, (3) the insured submitted his claim to his UIM carrier, and (4) the claim made has not been paid.

“While such facts might be sufficient to plead a claim for breach of contract, they are insufficient to support a claim of bad faith under the Pennsylvania statute. Simply put, requiring the Court to infer bad faith through Defendant’s ‘failure to immediately accede to a demand [under an insurance policy] cannot, without more, amount to bad faith.’”

Plaintiff’s citation to documents in his pleadings did not cure this problem. These documents simply show there may be some merit to the UIM claim, but do not show the “where, when and how” of a bad faith claim. These documents do not show how the denial was unreasonable or that that the allegedly unreasonable denial was knowing or reckless.

Again, the complaint simply amounted to an argument that bad faith should be inferred from the carrier’s refusing the insured’s demand. This is not enough.

There is no fiduciary duty in the UIM context

The court also struck all references in the complaint to breaches of fiduciary duty. The court rejected the notion that an insurer bears a fiduciary duty to the insured in all circumstances. Rather, while there may be a fiduciary duty in the context of third party claims against the insured, there is no such duty in first party claims, such as UIM claims.

Compensatory damages cannot be recovered under the Bad Faith Statute

Pennsylvania’s Bad Faith Statute only allows for recovery of punitive damages, interest, attorney’s fees, and costs. It essentially provides for additional remedies other than compensatory damages, which must be recovered under other theories, principally breach of contract.

Date of Decision: September 9, 2019

Ream v. Nationwide Property & Casualty Insurance Co., NAIC, U.S. District Court Western District of Pennsylvania No. 2:19-cv-00768, 2019 U.S. Dist. LEXIS 152870, 2019 WL 4254059 (W.D. Pa. Sept. 9, 2019) (Hornak, J.)

PENNSYLVANIA SUPERIOR COURT FINDS NO BAD FAITH WHERE NO BREACH OF CONTRACT (Pennsylvania Superior Court) (Not Precedential)

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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.)

FACTS MAKING OUT A POSSIBLE BAD FAITH CLAIM DID NOT SET OUT A PLAUSIBLE BAD FAITH CLAIM ABSENT SPECULATION (Middle District)

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Judge Caputo dismissed a UIM based bad faith count, but with leave to amend the complaint.

  1. He found these averments to be conclusory:

Failing objectively and fairly to evaluate Plaintiff’s claim;

Failing objectively and fairly to reevaluate Plaintiff’s claim based on new information;

Failing reasonably and adequately to investigate Plaintiff’s claim; and

Failing reasonably and adequately to evaluate or review the medical documentation in Defendant’s possession.

  1. He found these averments “regarding how Defendant handled the claim after receipt [to be] conclusory without additional factual support that would inform the court why Defendants actions are unreasonable”:

Engaging in dilatory and abusive claims handling;

Acting unreasonable and unfairly in response to Plaintiff’s claim;

Subrogating the interests of its insured and those entitled under its insured’s coverage to its own financial monetary interests;

Failing to promptly offer reasonable payments to the Plaintiff;

Acting unreasonably and unfairly by withholding underinsured motorist benefits justly due and owing to the Plaintiff; and

Failing to make an honest, intelligent, and objective settlement offer.

  1. He stated that the following averment was conclusory, circular, and proved nothing:

Not attempting in good faith to effectuate a fair, prompt, and equitable settlement of Plaintiff’s claim, in which the Defendant’s liability under the policy had become reasonably clear.

  1. He found the allegations that Defendant failed to adopt “reasonable standards” and subordinated “the interestsof its insured” to their own financial monetary interest to be conclusory in the absence of supporting facts.

Judge Caputo has previously described the method of stripping away conclusory allegations to determine a bad faith claim’s plausibility under federal pleading standards. A summary of his analysis can be found here.

Following the method of stripping away conclusory allegations in determining plausibility, Judge Caputo found here that the complaint simply alleged the following facts: an accident, the tortfeasor’s willingness to pay policy limits, the insurer’s agreement to that payment, the insured’s written demand for UIM benefits supported by a medical report, and the insurer’s failing to settle or resolve the UIM claim. These facts alone did not support the elements of a bad faith claim, i.e., unreasonable denial of benefits with a knowing or reckless disregard that the basis to deny benefits was unreasonable.

The court found that “[w]hile such assertions perhaps suggest that a bad faith claim is possible, they do not allow for any non-speculative inference that a finding of bad faith is plausible.”

Judge Caputo did permit the insured to amend the complaint, with the reminder that if the insured “elects to do so, the amended complaint must set forth facts, not merely conclusory statements, to support a bad faith claim.”

Date of Decision: August 14, 2019

Peters v. Geico Advantage Insurance Co., U. S. District Court Middle District of Pennsylvania NO. 19-CV-1119, 2019 U.S. Dist. LEXIS 137087 (M.D. Pa. Aug. 14, 2019) (Caputo, J.)

BAD FAITH CLAIM STATED WHERE INSURER TELLS INSURED TO “SUE US” AS A MEANS TO GET A MORE COMPLETE RECORD (Middle District)

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In this case, Judge Caputo found plaintiff pleaded a plausible bad faith claim.

The case involved a fatal auto injury, and the issue of whether the deceased’s father, owner of the car at issue, had an applicable policy covering the accident. The other driver was uninsured.

The carrier asked for additional information after demand was made under the father’s policy. The father sent additional information, but the carrier told him to file a complaint, so it could take discovery. The father brought UM claims, as well as breach of contract and bad faith claims.

The complaint alleged the key issue was the deceased son’s residence. The father provided numerous documents showing the son resided with him; but the carrier still declined coverage on the basis that proof of residency was lacking.

Judge Caputo rejected the carrier’s argument that the complaint amounted to boilerplate conclusory allegations of bad faith. Rather, the complaint alleged sufficient “factual matter to withstand a 12(b)(6) motion.” Specifically, “the Complaint indicate[s] that [the insurer’s] coverage decision under the Policy hinged on a determination of whether [son] resided with [father] at the time of the accident. And, upon request, [father] alleges that he provided more than ample documentation to establish that both he and [his son] resided at [the father’s home] at that time.” This included copies of a driver’s license and tax forms.

Allegedly, instead of asking for more information to fill putative gaps in this information, the carrier told father “sue us”. “Although such conduct may ultimately not amount to bad faith, it is plausible based on the factual assertions in the Complaint that [the carrier] acted in reckless disregard of its obligations under the Policy.”

Date of Decision: July 22, 2019

Fuentes v. USAA General Indemnity Co., U. S. District Court Middle District of Pennsylvania NO. 19-CV-1111, 2019 U.S. Dist. LEXIS 121362, 2019 WL 3288156 (M.D. Pa. July 22, 2019) (Caputo, J.)

EMAILS BETWEEN CLAIMS ADJUSTER AND PLAINTIFF’S COUNSEL AFTER INSURER’S DEFENSE COUNSEL’S INVOLVEMENT IS MADE KNOWN: IT’S BEST NOT TO DO THAT, EVEN IF ADJUSTER INITIATES THE CONTACT (Middle District)

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This UIM breach of contract and bad faith case involved an alleged ex parte contact with the carrier’s claims adjuster, after defense counsel had communicated a letter of representation to the insured’s counsel. Three months later after that representation letter, there were direct communications, via email exchanges, between plaintiff’s counsel and the claims adjuster. They discussed the plaintiff’s demands and claims handling events. The carrier brought a motion for a protective order to preclude use of these emails in the case, because of the allegedly impermissible ex parte contacts with a represented person.

The email initiating the communications came from the adjuster to plaintiff’s counsel. The carrier took the position this was inadvertent, asserting the adjuster actually intended the email for her own defense counsel. The court observed it was unclear whether the communication was inadvertent. In any event, the court found whether intended or inadvertent, the result is the same.

The court generally observed that the prudent course would have been for plaintiff’s counsel to communicate with defense counsel regarding the adjuster’s very first email, rather than responding to the adjuster. This clearly would have avoided the ensuing issues.

The court analyzed the contact under Rule of Professional Conduct 4.2, governing direct contacts with represented persons. It concluded the rule was not violated. There was no intent to create an unfair advantage or indicia of dishonest intent. Further, the court observed defense counsel did not make an issue of the email exchange for a year, in demanding that it not be disseminated by plaintiff’s counsel, e.g., to plaintiff’s expert.

However, though there was no rule violation, some remedial measures were warranted. Thus, the court precluded any information obtained from the adjuster via these emails, that could bind the carrier.

The court did deny a request for attorney’s fees on the motion. The communications were limited, and the conduct did not rise to the level of egregiousness that would call for an attorney’s fee award.

Date of Decision: July 17, 2019

Golden v. Brethren Mutual Insurance Co., U. S. District Court Middle District of Pennsylvania Civil No. 3:18-CV-02425, 2019 U.S. Dist. LEXIS 118519, 2019 WL 3216629 (M.D. Pa. July 17, 2019) (Saporito, M.J.)

 

BAD FAITH STATUTE OF LIMITATIONS NOT TOLLED, OR RENEWED, BY CHANGE IN THE LAW ON COVERAGE; NO PLAUSIBLE CLAIM PLEADED; BAD FAITH POSSIBLE EVEN IF BENEFIT NOT DUE (Philadelphia Federal)

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This UIM case was stimulated by the Pennsylvania Supreme Court’s recent decision reversing precedent on the household vehicle exclusion. In dismissing the bad faith claim, the court found:

  1. The two-year statute of limitations was not tolled by a change in the law.

  2. The change in the law, which resulted in the insured renewing her demand for coverage, did not re-start the statute of limitations.

  3. Alternatively, the insured failed to plead sufficient facts to set forth a plausible bad faith claim; rather she only made a few conclusory allegations.

The court did have a significant footnote, which addresses the long-standing debate over whether there can be statutory bad faith where no coverage is due. Judge Pappert clearly comes down on the side that bad faith can still exist, noting that “a claim for bad faith pursuant to 42 Pa. C.S. § 8371 is a separate and distinct cause of action and is not contingent on the resolution of the underlying contract claim. … Thus, if bad faith is asserted as to conduct beyond a denial of coverage, the bad faith claim is actionable as to that conduct regardless of whether the contract claim survives.” As we have noted before on this blog, other courts dispute this view.

Date of Decision: July 3, 2019

O’Brien v. GEICO Employees Insurance Co., U. S. District Court Eastern District of Pennsylvania CIVIL ACTION NO. 19-01920, 2019 U.S. Dist. LEXIS 110914 (E.D. Pa. July 3, 2019) (Pappert, J.)

PUNITIVE DAMAGES CLAIM PREVENTS REMAND; BAD FAITH PLEADED WHERE CASE IS NOT MERELY A VALUATION DISPUTE (Middle District)

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

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

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

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

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

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

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

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

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

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

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

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

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

Dates of Decision: July 1, 2019

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

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

COURT DISMISSES PREMATURE UIM BASED CLAIMS (Lackawanna Common Pleas)

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The excellent Tort Talk Blog has posted a summary of Judge Nealon’s trial court opinion dismissing a prematurely filed UIM and bad faith action, where the tortfeasor’s policy limits were unknown at the time of filing. A link to this summary can be found here. Our thanks to Dan Cummins, author of the Tort Talk Blog.