Archive for the 'PA – Venue' Category

SEPTEMBER 2017 BAD FAITH CASES: FEDERAL REMAND WHERE POLICY’S FORUM SELECTION CLAUSE ALLOWS INSURED OR ASSIGNEE TO CHOSE COURT; ANTI-ASSIGNMENT CLAUSE INEFFECTIVE WHERE ASSIGNMENT IS POST-OCCURRENCE (Philadelphia Federal)

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This action originated from a bad faith suit filed in the Philadelphia County Court of Common Pleas. The insured alleged that the insurer refused to defend and indemnify in a separate Lehigh County action which resulted in a judgment of $500,000 against the insured. The insured assigned its rights against the insurer to the instant plaintiff-assignee.

The insurer removed the matter to federal court. Plaintiff filed a motion to remand, arguing that the insurance policy contained a “Service of Suit Amendment” whereby the insurer agreed to litigate in any forum chosen by the insured. The insurer argued that the Service of Suit Amendment pertains only to the original insured party, and not to an assignee.

The insurer further argued that the policy contained an anti-assignment clause, which further limits the plaintiff-assignee’s rights to enforce the forum selection clause.

Courts in the Third Circuit had not previously decided the question of whether an assignee could enforce a forum selection clause against an insurer. The Court held that “where an assignment is effective, the assignee stands in the shoes of the assignor and assumes all of his rights.”

The Court further ruled that per Pennsylvania law, “an insurer may not limit an insured’s ability to assign his or her rights under a policy after the occurrence of the event which gives rise to the insurer’s liability.” Because the assignment here occurred after the event that created liability, the plaintiff-assignee could enforce the forum selection clause against the insurer, despite the presence of an anti-assignment clause in the policy.

Lastly, the Court denied plaintiff-assignee’s request for attorneys’ fees, because the insurer did not lack an objectively reasonable basis for seeking removal.

Date of Decision: August 25, 2017

Wimberly v. First Fin. Ins. Co., No. 5:17-cv-02952, 2017 U.S. Dist. LEXIS 137380 (E.D. Pa. Aug. 25, 2017) (Leeson, Jr., J.)

DECEMBER 2016 BAD FAITH CASES: CONTRACTUAL CHOICE OF VENUE PROVISION DOES NOT APPLY TO BAD FAITH CLAIMS (Superior Court of Pennsylvania) (Not Precedential)

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In a 2 to 1 unpublished decision, the Superior Court ruled that a choice of venue provision did not apply to the insured’s bad faith claims. This was a UIM case. The majority found that bad faith claims are distinct from breach of contract/UIM claims, and therefore the insurance contract’s venue provisions did not apply to these distinct claims. The minority (and trial court) would have ruled otherwise, in the belief that the bad faith claim rises and falls with the UIM claim, and thus is so closely related as to be bound by the contractual venue provision.

The majority cited the Superior Court’s 1999 Adamski decision, which held “that bad faith claims are ‘neither related to nor dependent on the underlying contract claim against the insurer[,]’ and an insured is “not required to wait until the merits of the contract claim [are] decided to file suit for bad faith.’” It also cited the earlier March v. Paradise Mut. Ins. Co., for the proposition “that bad faith ‘claims under section 8371 are separate and distinct causes of action and [] the language of section 8371 does not indicate that success on the contract claim is a prerequisite to success on the bad faith claim’”.

The majority and dissent bring out the ongoing issue of whether section 8371 bad faith can exist if there is no denial of a contractual benefit, and the effect of the Supreme Court’s decision in Toy v. Metropolitan Life on Superior Court and federal decisions both before and after 2007.

Date of Decision: October 20, 2016

Cid v. Erie Ins. Grp., No. 3041 EDA 2015, 2016 Pa. Super. Unpub. LEXIS 3824 (Pa. Super. Ct. Oct. 20, 2016) (Dubow and Ford Elliott, JJ.) (not precedential)

JUNE 2015 BAD FAITH CASES: CHOICE OF FORUM PROVISION ENFORCEABLE AS TO EITHER COURT LISTED IN THE ALTERNATIVE; AND IT DID NOT PROVIDE THE INSURED WITH ABSOLUTE RIGHT TO CHOOSE AMONG THE LISTED JURISDICTIONS (Western District)

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In Smith v. Progressive Specialty Insurance Company, the insured’s motion to remand breach of contract and bad faith UIM claims was denied.  The motion focused on the policy’s forum selection clause.

The policy stated that coverage claims must be brought in the state court county of residence or in the U.S. District Court serving that county.  The insured asserted this language waived the insurer’s right of removal from a Court of Common Pleas, once chosen by the insured as the litigation venue.

The court rejected this argument, relying upon a body of prior case law concluding that the insurance policy language at issue was neither an agreement to “submit” to either jurisdiction subject to the insured’s choice, nor a consent to submit to the jurisdiction of “any court” on the insured’s request.  Rather it provided that any one of two courts was amenable to litigating disputes between the parties, as reflected in the policy’s use of the word disjunctive “or” when listing the courts in the alternative.

Date of Decision: May 29, 2015

Smith v. Progressive Specialty Ins. Co., 2:15-cv-528, 2015 U.S. Dist. LEXIS 69717 (W.D. Pa. May 29, 2015) (McVerry, J.)

JUNE 2014 BAD FAITH CASES: COURT FINDS INSURER COULD NOT ASSERT FORUM SELECTION CLAUSE AFTER IT CONSENTED TO REMOVAL TO FEDERAL COURT (Western District)

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In Roman v. UniGroup Worldwide, the plaintiff insured contracted with the defendant shipping company and its agents to transport his household property from Israel to Pittsburg. Along with the shipping contracts, he also took out a policy with the defendant insurer.

Plaintiff brought both statutory bad faith claims pursuant to the Pennsylvania Bad Faith statute, 42 Pa.Cons.Stat. § 8371, the Pennsylvania Unfair Insurance Practices Act, 40 P.S. § 1171.5(a), and Pennsylvania Unfair Insurance Practices Regulations, 31 Pa. Code § 146, et seq. Id. at ¶¶ 104-122 and common law breach of the implied duty of good faith, alleging that the insurer unreasonably refused to settle a claim by not investigating, adjusting, and paying the losses related to the claim promptly.

Plaintiff originally filed the action in state court, but the defendant shipping company filed a notice to remove to the Western District of Pennsylvania. The shipping company’s agents and the insurer both consented to the removal. The insurer filed a motion to dismiss for failure to state a claim based on an alleged violation of a forum selection clause.

The insurer argued that the insurance contract contains a forum selection clause designating Israel as the exclusive forum for resolving disputes and a governing law clause requiring application of British law.The defendant further argued that Plaintiff could not state a valid claim under British law due to violations of Britain’s Marine Insurance Act of 1906.

Specifically, they alleged that he had violated the Act’s affirmative duty to disclose risks by failing to notify the insurer of Hurricane Sandy’s impending landfall.

The Court held that the motion to dismiss for failure to state a claim was improper. Even if the forum selection clause was found to be valid, it would not deprive the District Court of jurisdiction, but rather, the Court could exercise its jurisdiction to decide the validity of the clause and then subsequently dismiss the case on a motion for summary judgment.

Further, the Court found that the insurer consented to the jurisdiction of the federal court by consenting to the notice of removal.

Magistrate Judge Eddy cited the Third Circuit decision Coastal Steel Corp. v. Tilghman Wheelabrator Ltd., 709 F.2d 190, 202 (3d Cir. 1983) for the proposition that a forum selection clause would be presumptively valid unless: (1) it is the result of fraud or overreaching, (2) enforcement would violate a strong policy of the forum, or (3) enforcement would result in litigation in a jurisdiction so seriously inconvenient as to be unreasonable.

Considering these factors, the Court found that it had insufficient information to make an informed decision regarding the validity of the forum selection clause. It recognized that there were inconsistencies in the language of the forum selection clause and also that there were still questions of fact involving whether the clause was properly signed and executed. Therefore, the court denied the motion to dismiss and ordered that the parties proceed to discovery.

Date of Decision: Report and Recommendation of Magistrate Judge April 14, 2014 (Eddy, M.J.) adopted by District Court, May 28, 2014

Roman v. Unigroup Worldwide, Inc., 2014 U.S. Dist. LEXIS 72338 (W.D. Pa. May 28, 2014) (Conti, J.)

SEPTEMBER 2013 BAD FAITH CASES: INSURER PREVAILS ON MOTION TO TRANSFER BASED ON JURISDICTION OF UNDERLYING CASE (Philadelphia Court of Common Pleas)

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The Court of Common Pleas of Philadelphia County transferred a bad faith case to the Court of Common Pleas of Dauphin County because the underlying suit was adjudicated in Dauphin County.

In the underlying case, plaintiffs brought suit against their landlords for personal injuries caused by mold in their rented apartment. The landlords’ insurer refused to indemnify two of the three landlords, but filed preliminary objections on behalf of one landlord, which were sustained resulting in the landlord being dismissed. Prior to any verdict or judgment, the two remaining landlords reached a settlement with the plaintiffs, under which the plaintiffs agreed to indemnify and hold harmless the landlords from any liability which they might have to plaintiffs or their insurers. Following an assessment of damages, a total judgment of $6,690,257.00 was entered in favor of plaintiffs.

Two years later, the insurers filed a petition to intervene in the underlying action seeking to strike the judgment. The judge granted the intervention and struck the judgment despite the delay. The insurers then sought to have the case transferred to Dauphin County where the underlying case had taken place.

The Common Pleas court found the matter was “intricately intertwined with the Court of Common Pleas in Dauphin County” and that “transfer was appropriate given the matter’s extensive procedural history” in the jurisdiction.

The court further described the “the structure of the underlying settlement,” which was entered into prior to the entry of a judgment or verdict as “extremely suspicious” and likely created with “an eye towards manufacturing a breach of contract and bad faith type claim” against the insurers. Based on these assertions, the court found “Philadelphia [was] simply not the best or most logical forum available,” because the bad faith action would require determinations regarding the insurers’ actions in the underlying Dauphin County case.

Date of Decision:  June 14, 2013

Schriner v. Peerless Ins. Co., August Term 2011, No. 01294, 2013 Phila. Ct. Com. Pl. LEXIS 188 (C.C.P. Phila.  June 14, 2013) (Younge, J.)

MARCH 2013 BAD FAITH CASES: COURT AFFIRMS TRIAL COURT’S COORDINATION OF COVERAGE AND DECLARATORY JUDGMENT ACTIONS IN PHILADELPHIA COUNTY (Superior Court)

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In Pa. Manufacturers’ Ass’n Ins. Co. v. Pa. State Univ., the insured appealed an order of the trial court that coordinated two simultaneous coverage actions taking place in different Pennsylvania counties. (See this blog). The first suit was a declaratory judgment action in Philadelphia and the second was a breach of contract suit in Centre County. The trial judge coordinated the actions, which were both collateral to an ongoing civil suit also located in Philadelphia.

On appeal, the court recognized that there was no dispute as to the presence of a common question of law or fact, meaning that the only issue in need of a resolution concerned the proper venue. The court affirmed the trial court’s coordination, reasoning that the convenience of the parties should not be the controlling factor, despite the insured’s contention to the contrary. Convenience is only one factor among many that influence the venue of a coordinated suit.

One judge issued a concurring opinion, agreeing in judgment but noting that the coverage action will not settle unless the underlying civil action settles as well. This will be more likely if all of the parties in both actions can “sit around the same table and negotiate” in the same venue.

Date of Decision: February 21, 2013

Pa. Manufacturers’ Ass’n Ins. Co. v. Pa. State Univ., 2013 PA Super 29 (Pa. Super. Ct. 2013) (Lazarus, J., Ott, J., Strassburger, J.)

SEPTEMBER 2012 BAD FAITH CASES: COURT RULES THAT COORDINATED BAD FAITH AND COVERAGE ACTIONS SHOULD REMAIN IN LOCALITY OF UNDERLYING PERSONAL INJURY (Philadelphia Commerce Court)

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In Pennsylvania Manufacturers Association Ins. Co. v. Pennsylvania State University, the trial court issued an opinion in support of its order granting an insurer’s motion to coordinate (1) a coverage case the insurer had filed and (2) a bad faith claim filed by insured. The court agreed to transfer the coordinated cases to be litigated in Philadelphia as opposed to Centre County, Pennsylvania.

After the parties filed their respective actions, they agreed that coordination was appropriate. However, the insured argued that the coordinated cases should be kept in Centre County. Under Pa.R.C.P. No. 213.1(c), the court reasoned that the first action was filed in Philadelphia, the underlying personal injury action was in Philadelphia and that Philadelphia was a more convenient location for the insurer, all attorneys and many witnesses. Moreover, the court opined, the Commerce Court of Philadelphia is a specialized program established to handle these types of cases.

Therefore, the court found that Philadelphia had the ability “to provide a fair and efficient method of adjudicating the controversy.”

Date of Decision: August 7, 2012

Pennsylvania Manufacturers Association Ins. Co. v. Pennsylvania State Univ, No. 4126, 2012 Phila. Ct. Com. Pl. LEXIS 249, Philadelphia Court of Common Pleas (C.C.P. Aug. 7, 2012) (New, J.)

MAY 2012 BAD FAITH CASES: BAD FAITH CLAIM CANNOT BE ASSIGNED, CONTINGENT FEE ATTORNEY NOT THIRD PARTY BENEFICIARY, CONTRACT CLAIM ASSIGNABLE BUT AGAINST PUBLIC POLICY TO DO SO (Philadelphia Federal)

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In Feingold v. State Farm Mutual Auto Insurance Company, the court partially granted the carrier’s motion to dismiss a breach of contract and bad faith suit brought by the insured and his alleged assignee, who was his prior case but had been subsequently disbarred. The case stems from a motor vehicle accident that occurred in 1998, where the insured was injured by an uninsured or underinsured motorist. The insured retained the assignee at that point prior to his disbarment.

After filing a motor for arbitration, the carrier never followed through with arrangements to schedule a medical exam. In 2010, the insured sought to schedule the arbitration but the carrier maintained that the statute of limitations on the insured’s claim had expired. The insured and his assignee then filed suit for breach of contract and bad faith. The carrier moved to dismiss the suit.

Turning to the plaintiff’s claims, the court partially granted the carrier’s motion to dismiss, ruling that the assignee had no standing to assert claims against the carrier. The court reasoned that “[a]n insured’s disbarred former attorney surely does not fall within the narrow class of individuals who may pursue a statutory bad faith claim.” The court also ruled that the former counsel’s claim that he was a “beneficiary” of the insured’s contract did not meet the standards for establishing third party beneficiary status.

Next, the court ruled, following an earlier decision against the same plaintiff, that statutory bad faith claims are in the nature of unliquidated tort claims which are un-assignable under Pennsylvania law. While breach of contract claims may be assignable, the court ruled that the assignment in this case, which permitted the disbarred assignee to function as the insured’s attorney, is contrary to public policy. As such, the court ruled that the assignee had no standing to bring these claims.

With respect to the insured’s claims, the court first ruled that the parties’ forum selection clause is ineffective, preventing the carrier’s claim of improper venue. The court also held that the pendency of arbitration in Delaware is not the proper ground for dismissal. Lastly, the court reasoned that the carrier was incorrect that the case should be dismissed because Delaware law, not Pennsylvania law, should apply.

Date of Decision: April 3, 2012

Feingold v. State Farm Mut. Auto. Ins. Co., NO. 11-6309, 2012 U.S. Dist. LEXIS 46696, U.S. District Court for the Eastern District of Pennsylvania (E.D. Pa. Apr. 3, 2012) (O’Neill, J.)

This case was affirmed in a short non-precedential opinion, wherein the court stated: “The District Court concluded that, as a threshold jurisdictional matter, Feingold had not alleged an Article III injury, and, therefore, lacked standing to pursue his claims against State Farm. We agree, and after review of the briefs and appendices submitted by the parties, we find no basis for disturbing the exceedingly thorough and well-reasoned April 3, 2012 opinion of the District Court. We thus affirm the order of the District Court substantially for the reasons set forth in its opinion.”

FEBRUARY 2011 BAD FAITH CASES
BAD FAITH ALLEGATION DISMISSED WITH LEAVE TO RE-FILE IN ANOTHER STATE UNDER FORUM NON CONVENIENS DOCTRINE (Philadelphia Commerce Court)

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Three joint insureds purchased a new aircraft in 2009.  They then contracted with the insurer for an “All-Clear Aircraft Policy,” under which the insurer would cover all three insureds against losses involving the plane.  The policy covered against “risk of physical loss of or accidental damage” to the aircraft while it was in fight and not in flight.

Less than two months after the insureds purchased the aircraft, a winter storm struck the airport where the aircraft was located, and the hangar where the insureds’ plane was stored collapsed.  Their aircraft suffered significant damage as a result of the incident.  The insureds submitted a claim to the insurer for $50 million under the “physical loss” and “accidental damage” provisions of the policy.  They claimed that because local authorities restricted access to the hanger housing the plane, the aircraft was considered “lost” under the policy and they were therefore entitled to the plane’s full cost.

The insurer denied the claim for the full purchase price, claiming that the insureds did not allow it to inspect the aircraft and perform a thorough assessment of damages.  It also justified its denial by asserting that there was no dispute as to the location of the aircraft and the restriction of access to the plane was only temporary.  The insureds responded by filing a Complaint against the insurer for breach of contract and bad faith, alleging that the insurer breached the policy for failing to pay the full amount for the “physical loss” of the aircraft and denying their claims for “accidental damage.”

The insurer moved for dismissal of the action and leave to re-file in Virginia under the forum non conveniens doctrine because the vast majority of the events leading to the suit occurred in Virginia (the airport with the hangar was in Virginia).  The insureds responded by claiming that the insurer did not meet the high burden required to disturb their choice of forum.

The doctrine of forum non conveniens, 42 Pa. Cons. Stat. § 5322(e), states that “when a tribunal finds that in the interest of substantial justice the matter should be heard in another forum, the tribunal may stay or dismiss the matter in whole or in part on any conditions that may be just.”  The court noted that (1) it should not disturb a plaintiff’s choice of forum except for “weighty reasons,” and (2) it cannot dismiss an action under this doctrine unless “an appropriate alternative forum is available.”

According to the court, this case satisfied the standards mentioned above.  It determined that an overwhelming amount of the events occurred in Virginia, and the events that did not occur in Virginia occurred in states other than Pennsylvania.  Also, the choice of law analysis led to a conclusion that Virginia law should apply.  The insureds were Virginia residents who kept a plane in Virginia and suffered damage in Virginia.  The court therefore dismissed the case with leave to re-file in Virginia.

Date of Decision:  January 5, 2011

821,393 LLC v. Liberty Mut. Ins. Co., May Term 2010, No. 3573, Commerce Case Management Program, Common of Pleas Court of Philadelphia County, Pennsylvania, Civil Trial Division, 2011 Phila. Ct. Com. Pl. LEXIS 7 (Jan. 5, 2011) (New, J.)

JUNE 2009 BAD FAITH CASES
SUPERIOR COURT REVERSES TRANSFER OF BAD FAITH CASE FROM PHILADELPHIA TO MONROE COUNTY (Superior Court)

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In Walls v. Phoenix Insurance Company, the Philadelphia Court of Common Pleas transferred the insured’s breach of contract and bad faith action on the grounds of forum non conveniens to the Court of Common Pleas of Monroe County.  The Superior Court reversed, finding that the original choice of forum was not vexatious.

Date of Decision:  May 19, 2009

Walls v. Phoenix Ins. Co., NO. 1702 EDA 2008, SUPERIOR COURT OF PENNSYLVANIA, 979 A.2d 847 (Pa. Super. May 19, 2009) (McEwen, J.)