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

49 CONCLUSORY ALLEGATIONS ACCOMPANIED BY 5 FACTUAL ALLEGATIONS NOT SUFFICIENT TO STATE PLAUSIBLE BAD FAITH CLAIM (Middle District)

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This UIM bad faith case was dismissed for failure to state a plausible claim.

The complaint includes 49 bad faith allegations that the court found conclusory.  As such, they have no value to plaintiff in making a plausible claim there is clear and convincing evidence to establish the insurer acted unreasonably and recklessly disregarded that fact.

Stripped of these 49 bare-bones allegations, the court found only 5 facts actually set out in the complaint.  These amounted to the following facts:  the insured was in an accident with a third party tortfeasor; the insured was injured as a result of third party negligence; the insured requested the carrier consent to a settlement with the third party’s insurer, which was granted; the insured made written demand for UIM benefits, accompanied by medical records and other documents; and while the carrier offered to settle, the insured did not find the offer sufficient.

Middle District Judge Saporito these cursory allegations did not make out the elements of a bad faith claim.  There were no facts supporting a plausible claim that the insurer’s conduct was unreasonable, or that the insurer acted knowingly or in reckless disregard of its unreasonable conduct.  Quoting Eastern District Judge Buckwalter’s 2015 Pasqualino opinion, summarized here, the court states:

“While 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.” … Thus, the bad faith claim as presently constructed does not meet the pleading requirements of Iqbal and Twombly. We will, however, grant … leave to file an amended complaint as it is not clear that an amendment would be futile. … Failure to [re-plead a plausible bad faith claim in an amended complaint, however,] will result in the dismissal of this claim with prejudice.

Date of Decision:  October 1, 2021

Allman v. Metropolitan Group Property & Casualty Insurance Company, U.S. District Court Middle District of Pennsylvania No. 3:21-CV-01314, 2021 WL 4502263 (M.D. Pa. Oct. 1, 2021) (Saporito, J.)

TWO BAD FAITH OPINIONS BY PHILADELPHIA FEDERAL JUDGE DARNELL JONES: (1) BARE BONES UIM BAD FAITH CLAIM DISMISSED WITH LEAVE TO AMEND (2) NO DUTY TO DEFEND = NO BAD FAITH (Philadelphia Federal)

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Eastern District Judge Darnell Jones recently rendered two bad faith decisions just a few days apart.

CASE 1  – Underinsured Motorist Bad Faith Claim Dismissed Without Prejudice

In the first case, Judge Jones dismissed an underinsured motorist bad faith claim, with leave to amend.

The court focused on the recent Western District decision in Faith, summarized here, to emphasize bad faith can “include a lack of investigation, unnecessary or unfounded investigation, failure to communicate with the insured, or failure to promptly acknowledge or act on claims. Bad faith can also include poor claims-handling, the insurer’s failure to act with diligence or respond to the insured, scattershot investigation, and similar conduct.”

That being said, a UIM bad faith plaintiff “’cannot merely say that an insurer acted unfairly, but instead must describe with specificity what was unfair.’”  Judge Jones relies upon Philadelphia Federal Judge Baylson’s recent O’Brien decision, summarized here, which in turn relied upon Western District Judge Colville’s 2020 Pierchalski decision, summarized here, for this proposition.

Rather, “a Complaint alleging bad faith ‘must specifically include facts to address who, what, where, when, and how the alleged bad faith conduct occurred.’” Bare bones bad faith pleadings in Pennsylvania’s District Courts are routinely dismissed. As examples, Judge Jones cites Eastern District Judge Leeson’s 2020 Shetayh v. State Farm opinion, summarized here, the oft-cited 2012 Third Circuit opinion in Smith v. State Farm, summarized here, Eastern District Magistrate Judge Heffley’s decision in Camp v. NJM, summarized here, Eastern District Judge Slomsky’s 2017 decision in Toner v. GEICO, summarized here, and the Western District decision in Rosenberg v. Amica Mutual, summarized here.

The Complaint fell into the inadequate pleading column, as it was “devoid of facts necessary to infer a plausible bad faith claim.” Other than the accident date, the complaint has no “references to dates or time spans, yet claims several of Defendant’s alleged actions to be untimely.” Plaintiffs allege unreasonableness as to the insurer’s alleged lack of thorough claim assessment, “yet provide[s] no indication as to the manner in which these alleged deficiencies were unreasonable.”

The court cites Judge Baylson’s 2015 Allen v. State Farm case, summarized here, for the proposition that simply reciting that the insurer failed to properly investigate and evaluate a claim, and knew or recklessly disregarded its unreasonable conduct, are conclusory in nature, because all this language does is recite the elements of a bad faith claim, without pleading basic facts to support those elements.

Here, there are no facts pleaded from which the court could draw reasonable inferences supporting a plausible bad faith claim.  The “complaint alleges no factual content to suggest Defendant lacked a reasonable basis for denying the UIM coverage, or that Defendant knew or recklessly disregarded the lack of reasonable basis.”

Dismissal was without prejudice, however, because after the court’s “careful assessment of the allegations set forth in [the bad faith count] of Plaintiffs’ Complaint (as well as those incorporated by reference), this Court is unable to conclude that amendment would be futile.”

Date of Decision:  September 27, 2021

Kelly v. Progressive Advanced Insurance Company, U.S. District Court Eastern District of Pennsylvania No. CV 20-5661, 2021 WL 4399657 (E.D. Pa. Sept. 27, 2021) (Jones, II, J.)

CASE 2 – Bad Faith Not Possible Where No Duty to Defend

In the second case, Judge Jones found no duty to defend the insured, as the claims pleaded against the insured clearly fell within a policy exclusion. Once Judge Jones found coverage obligations absent, he stated the following in a footnote, addressing the bad faith claim:

“[B]ad faith claims cannot survive a determination that there was no duty to defend, because the court’s determination that there was no potential coverage means that the insurer had good cause to refuse to defend.” (internal quotations omitted)

Date of Decision:  October 1, 2021

Jeffers Farms, Inc. v. Liberty Insurance Underwriters, Inc., U.S. District Court Eastern District of Pennsylvania No. CV 20-5475, 2021 WL 4502785 (E.D. Pa. Oct. 1, 2021) (Jones, 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)

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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.

LARGE DISCREPANCY IN OFFER AND DEMAND ALONE NOT BAD FAITH, WITHOUT MORE FACTS/DETAILS SHOWING HOW OFFER WAS MADE IN BAD FAITH (Middle District)

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The court granted summary judgment to the insurer in this uninsured motorist bad faith case where the settlement offer was a small fraction of the demand.  Middle District Judge Wilson ruled the record only showed a valuation dispute, and that the insurer had conducted a detailed and timely investigation before making its settlement offers, whatever their size.

The court cited in detail the insurer’s investigative efforts in evaluating the claim. The UM policy had a $300,000 limit.  The insured demanded policy limits, and the carrier offered a small fraction of that to settle, while stating the investigation was ongoing.  The insured sued for breach of contract and bad faith.

Middle District Judge Wilson recited the general bad faith standards governing section 8371.  She further observed that, “A dispute as to the value of an insured’s claim is not unusual and does not, without more, amount to bad faith.” Further, “the failure to immediately accede to a demand for the policy limit cannot, without more, amount to bad faith”.

As to bad faith in claim handling, the court observed the carrier opened a file within 9 days of the accident at issue, and the claim representative “conducted an initial review the following day and was in frequent contact with [the insured] regarding the accident and her injuries until this lawsuit was filed.” The court reiterated the representative’s ongoing investigative efforts, and that the claim valuation was delayed by the need to obtain final records on the insured’s treatment.

After receiving and reviewing those records, the carrier “immediately evaluated [the insured’s] claim and offered her $7,500 to settle the UM claim based on … medical treatment and the aggravation of her degenerative disc disease.” After considering the offer, the insured demanded $300,000, which demand the carrier reviewed. After a subsequent discussion, the insured lowered her demand to $100,000.  A month later, however, the demand was again at $300,000.

The carrier continued following up, and offered $9,000, which was rejected.  The insured gave carrier notice she was going for more medical treatment. The claim representative reviewed the notes of that treatment, once completed, and increased the settlement offer to $11,500.  The demand remained at $300,000, and more medical care followed which the claim representative reviewed.  There were no additional demands before suit was filed.

With no evidentiary support in the record, the insured asserted “there is ‘irrefutable proof’ that [the insurer] acted in bad faith due to the ‘nominal offers’ that ‘fail to align with Plaintiff’s injuries and/or damages.’” Without more, the argument failed on its face, Judge Wilson stating, “the Third Circuit and this court have made clear, a disagreement over the value of [the insured’s] claim and failing to merely offer the policy limits does not equate to bad faith, without more, on the part of [the insurer].

Judge Wilson relies on the Third Circuit’s oft-cited Smith decision, summarized here, and Middle District Judge Caputo’s 2010 Calestini opinion, summarized here.  In, sum, Judge Wilson finds that the insured “has not provided anything more that would cause the court to find that [the insurer] did not have a reasonable basis for denying benefits.

Among recent decisions, it is interesting to compare and contrast this decision  with Judge Pratter’s Brown opinion, summarized here, and Western District Judge Haines’ Professional, Inc. decision, summarized here, applying the same principles to reach a similar result; and Western District Magistrate Judge Kelly’s opinion in Faith, summarized here, where a large discrepancy between an expert report on medical damages ($388,000) and a refusal to pay policy limits ($50,000), combined with an alleged failure to investigate, was sufficient to state a bad faith claim.

Date of Decision:  September 22, 2021

DeLuca v. United Financial Casualty Company, U. S. District Court Middle District of Pennsylvania No. 3:19-CV-01661, 2021 WL 4306119 (M.D. Pa. Sept. 22, 2021) (Wilson, J.)

BAD FAITH CLAIM PLAUSIBLY STATED FOR INSURER FORCING A CLAIM INTO LITIGATION WHEN IT ALLEGEDLY KNEW POLICY LIMITS WERE DUE AND REFUSED TO PAY THEM (Western District)

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Plaintiff successfully stated a bad faith claim in this underinsured motorist case.

Plaintiff alleged serious injuries, lost earnings and earning capacity, and emotional injuries. The UIM policy limit was $50,000.  The insured submitted documented medical claims showing the severity of his injuries, and a life care plan indicating over $388,000 in future medical expenses.  More specifically, the insured “provided documentation and medical records for a period immediately following the accident through October 1, 2020 connecting cervical root compression and bilateral disc protrusion with surgical ablation to the motor vehicle accident on August 11, 2018, and reflecting that [the insured] will require $388,117 in future medical care and related expenses).”

In addition, the insured alleged the carrier “failed (and continues to fail) to investigate and process his claim given information showing the seriousness of his injuries and resulting economic loss stemming from the accident.  Moreover, [the insurer] allegedly is “[f]orcing the plaintiff … to proceed to litigate his claims to recover underinsured motorist benefits.”

The carrier refused to pay the $50,000 limit, and the insured brought claims for breach of contract and bad faith.  Magistrate Judge Kelly found the insured set out a plausible bad faith claim, based on these allegations over the severity of the injuries, the huge gap between the policy limit and the alleged medical damages, and the insurer’s forcing the insured to litigate the UIM claim instead of paying policy limits.

The court recited the usual bad faith standards, including the standards that statutory bad faith can exist in the absence of a benefit denial, solely for a variety of poor claims handling practices.  [As noted for the last 14 years on this Blog, poor claim handling in the absence of any duty to pay or provide a benefit, as opposed to delaying in paying a benefit owed, should very likely not be the basis of a bad faith claim under Toy v. Metropolitan.  One of our many posts on the subject can be found here.]

In addition, and of considerable interest, the court stated that:

As particularly relevant to the allegations here, “bad faith is actionable regardless of whether it occurs before, during or after litigation…. [Moreover], using litigation in a bad faith effort to evade a duty owed under a policy would be actionable under Section 8371.” Hart v. Progressive Preferred Ins. Co., No. 17-1158, 2017 WL 11485593, at *3 (W.D. Pa. Dec. 6, 2017) (quoting W.V. Realty, Inc. v. Northern Ins. Co., 334 F.3d 306, 313 (3d Cir. 2003)). The required inquiry is fact specific and “depend[s] on the conduct of the insurer vis à vis the insured.” Condio v. Erie Ins. Exch., 899 A.2d 1136, 1143 (Pa. Super. 2006).

A summary of Hart,  a Report and Recommendation issued by Western District Magistrate Judge Mitchell, can be found here. He has served in the capacity of a Magistrate Judge since 1972.  The 2017 Hart case was dismissed before the R&R was adopted, but as any seasoned Pennsylvania practitioner knows that even Magistrate Judge Mitchell’s Reports and Recommendations will be treated seriously.

Date of Decision:  September 8, 2021

Faith v. State Farm Mut. Auto. Ins. Co., U.S. District Court Western District of Pennsylvania No. 21-CV-0013, 2021 WL 4078658 (W.D. Pa. Sept. 8, 2021) (Kelly, M.J.)

NO BAD FAITH PLEADED: (1) 38 BAD FAITH ALLEGATIONS ALL CONCLUSORY; (2) ONLY A VALUATION DISPUTE; (3) INSURER DID NOT “CONSTRUCTIVELY IGNORE” RECORDS SUPPORTING CLAIM; (4) NO DILATORY CONDUCT SPECIFICALLY PLEADED; (5) “LOW BALL” OFFER ALLEGATION ISN’T SUFFICIENT IN ITSELF TO STATE A BAD FAITH CLAIM (Philadelphia Federal)

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“If at first you don’t succeed, try and try again.”  That didn’t work in this case, where a bad faith claim was dismissed with prejudice after Eastern District Judge Pratter had already given the plaintiff leave to replead. A summary of Judge Pratter’s original decision in this uninsured motorist bad faith case can be found here.

In her second decision, Judge Pratter finds, among other things:

  1. “All told, the Amended Complaint contains a list of 38 ways in which Liberty Mutual allegedly acted in bad faith. But this list is a list of conclusions—not facts.”

  2. “[T]here are no details that would describe what was supposedly unfair about the process, other than that [the insured] disputes the value of the settlement offer.”

  3. There is no plausible for “constructively ignoring” medical records because the reviewer was not “medically educated”. “[T]here is nothing pled that the claims adjusters are somehow ill-equipped to perform their job—which entails reviewing medical records in connection with a claim.”

  4. The Court’s first opinion signaled the insured needed to plead more specific facts to support an allegation of bad faith dilatory conduct, “i.e., the number of months between demand and settlement offer.” However, “[t]he Amended Complaint does not describe the course of the parties’ dealings, let alone whether Liberty Mutual delayed its offer of settlement.”

  5. “In the final analysis, the Amended Complaint reflects a disagreement over the amount of settlement of [the insured’s] claim. To state a bad faith claim, an insured must do more than call [the insurer’s] offers ‘low-ball.’” As the Court explained at length in its prior opinion, this appears to be a familiar dispute between parties over the entitlement to UM coverage as an initial matter as well as the value of a claim to UM benefits. Moreover, accepting the well-pleaded allegations as true that [the insured] is indeed entitled to UM benefits, it does not necessarily follow that she is entitled to the limit of that coverage. A policy limit—as its name suggests—is the theoretical maximum that an insured could recover. ‘It is not the de facto value of a claim.’”

Date of Decision:  August 26, 2021

Brown v. LM Gen. Ins. Co.,  U.S. District Court Eastern District of Pennsylvania 2021 No. CV 21-2134, WL 3809075 (E.D. Pa. Aug. 26, 2021) (Pratter, J.)

ANOTHER INADEQUATELY PLEADED UIM BAD FAITH CLAIM IS DISMISSED WITHOUT PREJUDICE (Eastern District)

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Another UIM bad faith case.  Another dismissal for failure to plead beyond conclusory allegations.  Another dismissal with leave to amend, if the insured can meet the Twombly/Iqbal plausible fact pleading standards.

Judge Baylson relied on his January 2021 Baxley decision, summarized here, in granting the insurer’s motion to dismiss the bad faith claim.  In Baxley, the insured failed to “provide any explanation regarding how the defendant had responded to her claim, or what facts, apart from the defendant’s failure to pay her claim, indicated bad faith.”

The same was true in this case: “Plaintiffs do not provide sufficient factual allegations on which the Court can reasonably infer Defendant’s ill will. …. The claims of bad faith as described in ¶¶ 26-32 of the Complaint are overly vague and do not contain any specific factual allegations that suggest bad faith. For example, Plaintiffs plead no specific factual allegations as to how Defendant forced Plaintiffs to file the instant action. Nor does the Complaint give any clarifying details as to what the alleged ‘false pretexts’ and ‘invasive tactics’ utilized by Defendant were. Indeed, Plaintiffs’ sole factual allegation in the Complaint regarding Defendant’s action is that Defendant denied Plaintiffs’ claim. Just as in Baxley, this does not suffice.”

[Note: The court, citing the 1994 Terletsky decision, states that “[f]or an insurer’s failure to pay a claim to be considered in bad faith, the plaintiff must allege an underlying element of self-interest or ill will.” In 2017, however, Pennsylvania’s Supreme Court made clear in Rancosky that “we hold that proof of an insurance company’s motive of self-interest or ill-will is not a prerequisite to prevailing in a bad faith claim under Section 8371…. While such evidence is probative of the second Terletsky prong, we hold that evidence of the insurer’s knowledge or recklessness as to its lack of a reasonable basis in denying policy benefits is sufficient.” A link to our Rancosky summary can be found here.]

Date of Decision:  July 28, 2021

O’Brien v. Liberty Mutual Insurance, U.S. District Court Eastern District of Pennsylvania, No. 21-CV-01234, 2021 WL 3203405 (E.D. Pa. July 28, 2021) (Baylson, J.)

INSURER’S COVERAGE DENIAL OBJECTIVELY REASONABLE AND THUS NO BAD FAITH IS POSSIBLE (Western District)

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Western District Judge Hornak adopted Magistrate Judge Kelly’s Report and Recommendation to grant the insurer summary judgment, in this underinsured motorist coverage breach of contract and bad faith case.

First, the breach of contract claim hinged on whether the insurer’s underinsured motorist coverage rejection form comported with Pennsylvania’s Motor Vehicle Financial Responsibility Law (MVFRL).  The insured signed a form rejecting UIM coverage, but argued the form he signed did not meet the MVFRL’s requirements, and therefore should be deemed void.

The court rejected this argument, and found no UIM coverage due.  The court also found that the failure to include a proper renewal notice regarding the rejection of UIM coverage was a violation of the MVFRL. Renewal notice MVFRL violations, however, have long been held not to provide a private remedy in the courts.  Rather, any failure in the renewal form was solely for administrative review by the insurance department.

Thus, the insurer obtained summary judgment on the coverage claim.

In light of this ruling, the bad faith claim necessarily failed because there was an objectively reasonable basis to deny UIM coverage, since the insured himself had rejected UIM coverage.  While there were some flaws in the claim adjuster’s manner of denying coverage, the fact is that the adjuster reached the correct conclusion that no coverage was due; and the carrier consistently took that position throughout, including an independent analysis by coverage counsel after the adjuster’s initial denial that no coverage was due.

Dates of Decision:  July 12, 2021 (Report and Recommendation), August 2, 2021 (Order adopting Report and Recommendation)

Keeler v. Esurance Insurance Services, U.S. District Court Western District of Pennsylvania No. 20-271 (W.D.Pa. July 12, 2021) (Kelly, M.J.) (Report and Recommendation), adopted by Order of the District Court (Aug. 2, 2021) (Hornak, J.)

Our thanks to Attorney Daniel Cummins, author of the excellent TortTalk Blog, for bringing this case to our attention.

WESTERN DISTRICT JUDGE STICKMAN ISSUES TWO BAD FAITH OPINIONS: (1) DIFFERENCE IN VALUATION ALONE IS NOT BAD FAITH; (2) BAD FAITH CANNOT BE PURSUED AGAINST CARRIER’S CLAIM ADJUSTER (Western District)

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On July 19th, Judge Stickman held in Stegena v. Nationwide, that simply pleading the insured’s injuries are worth significantly more than the carrier’s valuation of the same injuries cannot, by itself, constitute bad faith.  One week later, Judge Stickman opined in the Alexander v. Mid-Century, that an insured could not bring breach of contract or bad faith claims against a carrier’s claim adjuster.

Valuation dispute alone cannot constitute bad faith

In this undersinsured motorist breach of contract and bad faith case, the insured’s “argument in support of her statutory bad faith claim consists almost entirely of nothing more than a bare recitation of the materials and evidence submitted in support of her claim, together with monetary valuations included in the opinions of experts procured after the initiation of this litigation….”

Judge Stickman found the complaint alleged a claim handling history that did not make out a plausible bad faith claim, with the insured trying to meet her clear and convincing evidence burden by simply emphasizing the amount of damages her experts found due to compensate her damages, which the carrier would not pay. Judge Stickman states: “The problem with [the insured’s] argument is that, although she provides sizeable dollar amounts, which her experts claim represent prospective lost wages and medical expenses, her argument fails to address the present issues before the Court—why there was an absence of a reasonable basis, or how [the insurer] knew or recklessly disregarded that absence.”

He recognizes that “under the right circumstances, an unsupported low-ball offer may support a claim for insurance bad faith … [but] it remains [the insured’s] burden to scrutinize the relationship between [the insurer’s] considerations and determinations.” Here, the insured’s failure to “identify, with any specificity, factual deficiencies illustrating the unreasonableness of [the insurer’s] conduct, demonstrates that her claim is more properly characterized as an inappropriate, generalized grievance over the monetary valuation of her claim.” Moreover, the record showed the carrier’s “investigation and determinations, and, more specifically, the process that he used to evaluate and value the claim … cannot be characterized as anything other than reasonable, as that term applies in the bad faith context.”

Judge Stickman cites Judge Caputo’s 2019 Moran decision in support, summarized here, where the Middle District court collected cases on valuation discrepancies and bad faith.

Finally, in reciting case law detailing Pennsylvania’s statutory bad faith standards, we observe that Judge Stickman quoted the long-standing principle that “an insurance company is not required to demonstrate its investigation yielded the correct conclusion or even that its conclusion more likely than not was accurate. The insurance company also is not required to show the process by which it reached its conclusion was flawless or that the investigatory methods it employed eliminated possibilities at odds with its conclusion. Rather, an insurance company simply must show it conducted a review or investigation sufficiently thorough to yield a reasonable foundation for its action.”

Date of Decision:  July 19, 2021

Stegena v. Nationwide Property & Casualty Insurance Company, U.S. District Court Western District of Pennsylvania No. 2:20-CV-428, 2021 WL 3038800 (W.D. Pa. July 19, 2021) (Stickman, J.)

No viable breach of contract or bad faith claim against individual adjuster

The insured brought  breach of contract and bad faith claims against both his insurer and its claim adjuster.  The defendants moved to dismiss, arguing there was no viable claim against the adjuster, and that the adjuster was joined to improperly destroy diversity jurisdiction and prevent removal to federal court.

Judge Stickman found Pennsylvania case law made clear that neither a breach of insurance contract or insurance bad faith claim could be pursued against an individual claim adjuster working for the insured’s carrier.  He cites the 2017 Pennsylvania Superior Court decision in Brown v. Everett, summarized here, holding that “a statutory action for bad faith can only be brought against the insurer,” and not an adjuster.

Judge Stickman rejected the argument that the adjuster could be sued under the “participation theory,” finding that theory inapposite to the context of an insurance adjuster handling a claim for an insurance company.  Thus, he dismissed the claims against the adjuster with prejudice, which further resulted in jurisdiction over the remaining claims against the insurer being proper in federal court.

Date of Decision:  July 26, 2021

Alexander v. Mid-Century Insurance Company, No. 2:21-CV-392, U.S. District Court Western District of Pennsylvania 2021 WL 3173621 (W.D. Pa. July 26, 2021) (Stickman, J.)

COURT DENIES REMAND BASED ON POTENTIAL PUNITIVE DAMAGE AND ATTORNEY’S FEE AWARDS (Middle District)

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Middle District Judge Mannion denied the insurer’s motion to remand this UIM bad faith case.  The plaintiff had $15,000 in UIM coverage, which was eventually paid in full, but continued to pursue a bad faith claim for a sum in excess of $50,000, including attorney’s fees and punitive damages.  The insured refused to stipulate that the claim was worth no more than $74,999.

Judge Mannion found that the punitive damages and attorney’s fees pursued under the bad faith statute could exceed the jurisdictional minimum, $75,000.  He looked to cases that had awarded punitive damages in 4:1 and 5:1 ratios, and a case upholding a 10:1 ratio. Moreover, “[s]ubstantial attorney’s fees awards, too, have been granted for insurance bad faith claims.”

Judge Mannion then states:

Because Plaintiff does not specifically limit his amended complaint to $75,000, and because no factual dispute is raised by the parties, the court proceeds to the legal certainty test. In light of the reasonable possibility that punitive damages and attorney’s fees may exceed $75,000, and considering Plaintiff’s refusal to cap damages at $75,000, the court finds that it does not appear to a legal certainty that Plaintiff’s claim is for less than the jurisdictional minimum. Therefore, Plaintiff’s Motion to Remand will be denied.

Date of Decision: July 19, 2021

Barbato v. Progressive Specialty Insurance Company, U.S. District Court Middle District of Pennsylvania No. CV 3:21-0732, 2021 WL 3033863 (M.D. Pa. July 19, 2021) (Mannion, J.)