Archive for the 'PA – Procedural Issues' Category

DEFENSE VERDICT FOR INSURER AFFIRMED; NO BAD FAITH BASED ON ALLEGED LOW-BALL OFFERS OR CLAIM HANDLING (Pennsylvania Superior Court) (Non-precedential)

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This fact-driver UIM bad faith case resulted in a non-jury verdict for the insurer.  Pennsylvania’s Superior Court affirmed.

[This is the second non-precedential Superior Court opinion reviewing bad faith verdicts that we’ve summarized in last three weeks, demonstrating the increasing role these non-precedential appellate decisions may come to play in briefing bad faith issues.  Per Pennsylvania Rule of Appellate Procedure 126(b), such decisions issued after May 19, 2019 can be cited for their persuasive authority.  This decision is also noteworthy in reiterating that it is not the court’s job on appeal to flesh out arguments or find support in the record that is not adduced by a party in its briefing.]

Factual and procedural background

Plaintiff was injured as a bus passenger, when another vehicle hit the bus.  The plaintiff’s symptoms and treatment concluded six months after the collision.

The tortfeasor only had $15,000 in coverage, and plaintiff sought UIM benefits under his brother’s policy. Plaintiff did not seek this UIM coverage, however, until 19 months after the collision.

The brother’s carrier began its investigation the same month the claim was reported. Both brothers were interviewed and provided evidence that would lead to there being no coverage, but plaintiff provided other evidence favoring coverage. After two months, the insurer completed its investigation, and concluded it would provide UIM coverage.

Shortly after, the insured provided a document package. The carrier evaluated the information and soon offered $5,000, additionally telling plaintiff’s counsel the insurer needed proof that plaintiff’s work loss was due to the collision and not any other causes. Instead of replying, 17 days later plaintiff filed his bad faith suit.

The complaint alleged bad faith based only on “low ball offers and the investigation as being excessively long….” No loss of consortium claim was ever pleaded, though it was mentioned in some correspondence between counsel.

The arbitration award and the arbitrator’s doubts

The underlying claim went to binding arbitration, while the bad faith claim was pursued in court.  Before the arbitration hearing, the insurer offered $12,500, and then $30,000, to settle. Plaintiff never lowered his demand below the $100,000 policy limit.  The arbitrator’s award “was not far above the final offer of $30,000.00.”

Although the arbitrator awarded money damages, he expressed doubts about plaintiff’s case.  He observed the contradiction between plaintiff’s telling medical personnel in October 2013 that his medical issues had resolved, while later claiming they did not resolve but continued to get worse.  The arbitrator also expressed concern over apparent conflicts between the plaintiff’s claim he could not, and did not, work, compared to the actual work and medical history. Among other things, the arbitrator recited details as to the funds plaintiff alleged he and his wife lived on for years, and how it appeared highly unlikely they could actually have survived on this amount without plaintiff himself having also worked (despite his assertions that he could not work).

In later reviewing the arbitration award for loss of consortium, the court expressed concerned that while the arbitrator observed the complaint failed to actually include any claim for loss of consortium, he still awarded $15,000 in loss of consortium damages. The arbitrator did so because the wife’s name was in the caption and the policy provided for loss of consortium damages.

The Superior Court was also concerned that the arbitrator never explained the basis for its other damage awards. “While the arbitrator awarded [plaintiff] $21,905.00 for lost wages and $35,000 for pain and suffering, this Court is again unable to determine the bases for these figures.”

The trial court’s verdict and reasoning, and Superior Court’s affirmance

The trial court ruled against plaintiffs on the merits.  First, the passenger’s wife claimed bad faith for the carrier failing to pay on the loss of consortium claim. But the trial court only learned of this loss of consortium claim the day of trial, and it refused to consider that belated claim. The Superior Court ultimately found this issue waived on appeal.

As to the bad faith claims for delays in the investigation and low ball offers, the trial court observed that plaintiff and his wife did not even appear at trial to support their claims. Rather they relied on witnesses associated with the insured to focus on the allegedly improper claims handling, and apparently an expert witness (whose testimony or report was not persuasive to the trial court judge). The trial court found plaintiff failed to meet his burden by putting on clear and convincing evidence of bad faith.

The Superior Court affirmed.

The “low ball” offer claim fails

In addressing the “low ball offer” bad faith claim, the court contrasted the instant facts with those in the seminal Boneberger case.  In Boneberger, the trial court found the insurer’s witnesses lacked credibility, did not conduct at IME when challenging medical records, actively promoted unethical claim handling practices, and that the insureds only brought suit after long negotiations and an arbitration award. In the present case, there were no similar credibility rulings against the insurer, there was an IME, and there was no finding the carrier promoted an unethical philosophy. Further, instead of allowing the investigation to develop, the bad faith suit was filed in short order, without any prolonged negotiations and before the arbitration award.

The Superior Court also rejected the argument that the arbitration award was evidence of bad faith “low ball” offers. As the court observed, the arbitrator did not find plaintiff and his wife credible, found their medical and wage evidence unreliable, and failed to explain sufficiently the basis for his damage awards. “The fact that the arbitrator awarded damages which were less than those sought … but more than what [was] offered does not support a finding that [the insurer] acted in bad faith.”

The claim handling argument fails

The court then rejected the argument for bad faith in evaluating the information plaintiff provided to the insurer. In rejecting this argument, the court not only found it “scattershot, unsupported by legal authority and undeveloped[,]” but made clear what courts will not do in reviewing cases on appeal.

The Superior Court will not play the role of advocate

  1. “Arguments not appropriately developed include those where the party has failed to cite any authority in support of a contention. This Court will not act as counsel and will not develop arguments on behalf of an appellant. Moreover, we observe that the Commonwealth Court, our sister appellate court, has aptly noted that [m]ere issue spotting without analysis or legal citation to support an assertion precludes our appellate review of [a] matter.”

  2. “While the [insureds] complain that [the insurer] failed to properly evaluate certain medical and wage evidence they provided, they do not specify the evidence, explain its relevance, or state where it is in the record. … The certified record, including transcripts, is nearly 6000 pages. While we have undertaken careful review, it is not our responsibility to comb through the record seeking the factual underpinnings of a claim. Commonwealth v. Mulholland, 702 A.2d 1027, 1034 n.5 (Pa. Super. 1997) (‘In a record containing thousands of pages, this court will not search every page to substantiate a party’s incomplete argument’).”

Superior Court would not reverse trial court credibility determination on expert

The Superior Court also ruled plaintiff had waived the argument that the trial court failed to properly consider expert testimony, while still observing that the “trial court, as the finder of fact, is free to believe all, part or none of the evidence presented. Issues of credibility and conflicts in evidence are for the trial court to resolve; this Court is not permitted to reexamine the weight and credibility determination or substitute our judgment for that of the fact finder.”

Date of Decision:  February 26, 2021

Gavasto v. 21st Century Indem. Ins. Co., Superior Court of Pennsylvania No. 1625 WDA 2019, 2021 WL 754026 (Pa. Super. Ct. Feb. 26, 2021) (McCaffery, Murray, Olson, JJ.)

FEDERAL CHOICE-OF-LAW PRINCIPLES REQUIRE APPLICATION OF NEW YORK LAW, ELIMINATING PLAINTIFF’S PENNSYLVANIA STATUTORY CLAIMS (Philadelphia Federal)

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The marine insurance policy at issue had a New York choice-of-law provision.  The insured attempted to assert claims under Pennsylvania law, including claims for breach of fiduciary duty, statutory bad faith under 42 Pa.C.S. § 8371, and violations of Pennsylvania’s Unfair Trade Practices and Consumer Protection Law.

Because marine insurance is governed by federal admiralty law, federal choice-of-law principles apply.  Under federal choice-of-law principles, and in light of the fact there were sufficient contacts with New York, the court enforced the choice-of-law provision and found the case subject to New York substantive law.  In addition, the court concluded, “that the public policy of a state where a case was filed cannot override the presumptive validity, under federal maritime choice-of-law principles, of a provision in a marine insurance contract where the chosen forum has a substantial relationship to the parties or the transaction.”

Thus, the court granted the insurer judgment on the pleadings, and dismissed the two Pennsylvania statutory claims, since they did not arise under New York law. The court also dismissed the breach of fiduciary duty claim, as no such cause of action exists under New York law for the mere breach of an insurance contract.

Date of Decision:  February 22, 2021

Great Lakes Ins. SE v. Raiders Retreat Realty Co., LLC, U.S. District Court Eastern District of Pennsylvania No. CV 19-04466, 2021 WL 668806 (E.D. Pa. Feb. 22, 2021) (Robreno, J.)

TRIAL COURT ABUSED ITS DISCRETION IN ALLOWING INSURED TO AMEND AT TRIAL TO ADD A NEW JERSEY BAD FAITH CLAIM AFTER INSURER HAD CLOSED ITS CASE (Superior Court of Pennsylvania) (Non-precedential)

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At trial, the Pennsylvania court permitted plaintiff orally to amend her claims to add a count for bad faith under New Jersey law, after the insurer had closed its case.  The trial court had earlier dismissed a Pennsylvania statutory bad faith claim, without prejudice.  That claim was never re-asserted.

The Superior Court reversed.

After carefully reviewing the case history and trial proceedings, the appellate court found the trial court abused its discretion in permitting this late amendment in light of the prejudice to the insurer. “Prior to trial, [the insured] never amended her complaint to bring a bad faith claim under New Jersey law following the dismissal of her Pennsylvania bad faith claim. As a result, [the insurer] stipulated to certain damages and chose its trial strategy believing that the only claim it was defending against was for breach of contract.” The insured unfairly used this stipulation at trial by claiming that the insurer chose not to put on evidence regarding the reasonableness of its conduct. However, “it did not present evidence on reasonableness because its conduct was not at issue.”

“Given that [the insurer] based its trial strategy on defending against a breach-of-contract claim only, the trial court abused its discretion in allowing [the insured] to amend her complaint to add a bad faith claim under New Jersey law after [the insurer] had rested its case. Accordingly, we reverse the trial court’s decision to permit that amendment. Consequently, we also reverse the trial court’s award of punitive damages and attorney’s fees … which were based upon a finding of bad faith.

Date of Decision: February 22, 2021

Salmon v. The Philadelphia Contributionship Insurance Company, Superior Court of Pennsylvania No. 416 EDA 2020, 2021 WL 653030 (Pa. Super. Ct. Feb. 19, 2021) (Bender, Lazarus, Stephens, JJ.) (Non-precedential)

COURT FINDS 61 TO 1 RATIO OF PUNITIVE TO COMPENSATORY DAMAGES IMPLAUSIBLE (Philadelphia Federal)

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Plaintiff sued his dental insurer in federal court for breach of contract, bad faith, and various other claims.  He moved for permission to proceed in forma pauperis, and while the court granted that motion, it dismissed the claims for lack of subject matter jurisdiction. Specifically, the complaint could not make out a claim in excess of $75,000.

The actual damages alleged were $1,200.  The court recognized the bad faith statute allowed for punitive damages, which could be considered toward establishing the $75,000 jurisdictional minimum amount in controversy.  Judge Marston found this to mean the insured was seeking at least $73,800 in punitive damages on his $1,200 compensatory damages claim, an approximate 61:1 ratio.

“But, as the Supreme Court has explained, ‘in practice, few awards exceeding a single-digit ratio between punitive and compensatory damages will satisfy due process.’” In this case, even allowing a punitive damages award nine times compensatory damages “is a mere $10,800—far below the jurisdictional amount.”

Relying on the Third Circuit’s unpublished opinion in Kalick v. Northwest Airlines, Judge Marston found there was no plausible claim that could reach $75,000, and dismissed for lack of subject matter jurisdiction.

Date of Decision:  January 22, 2021

Berkery v. Metropolitan Life Ins. Co., U.S. District Court Eastern District of Pennsylvania No. CV 21-26-KSM, 2021 WL 229320 (E.D. Pa. Jan. 22, 2021) (Marston, J.)

BAD FAITH CLAIM STATED WHERE COMPLAINT MAKES OUT CLAIM INSURER KNOWINGLY DENIED BENEFITS DUE (Philadelphia Federal)

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This case involves a discrepancy over whether an insured timely renewed his life insurance policy, two months before his death.  There was a dispute of fact over the date when the premium payment was mailed and received.

The carrier insisted the premium check was not mailed and received before the date necessary to maintain the policy. It deposited the insured’s payment check, but later returned the payment sum and deemed the policy lapsed on the basis the payment was outside the policy’s grace period. The beneficiary children, through their mother, alleged the check in fact was mailed and received within the grace period for premium payments. They sued for breach of contract and bad faith.

The insurer moved for judgment on the pleadings as to both counts.

First, the court denied judgment on the pleadings regarding the breach of contract claim. There was a dispute of fact over the mailing and receipt dates that could not be resolved via a motion for judgment on the pleadings.

Judge Slomsky then rejected the motion to dismiss the bad faith claim.

The plaintiffs alleged the insurer denied their claims without a reasonable basis, knowing that it had in fact received the insured’s premium payment during the grace period for continuing the policy. Further, the plaintiffs adequately alleged the insurer “knew of or recklessly disregarded the lack of reasonable basis because it knew [payment was timely] when it received and deposited the July Payment [from the deceased insured].”  Despite this knowledge, the insurer “refused to pay the Policy’s benefits and never issued a denial letter.”

In denying the motion, Judge Slomsky concluded that, “[a]t this stage, viewing the facts in the light most favorable to Plaintiffs, they are sufficient to raise an inference that [the insurer] refused to pay under the Policy in bad faith.”

Date of Decision: January 21, 2021

Mullin v. Reliastar Life Insurance Company, U.S. District Court Eastern District of Pennsylvania No. CV 20-1438, 2021 WL 210962 (E.D. Pa. Jan. 21, 2021) (Slomsky, J.)

DECLARATORY JUDGMENT RULING ON COVERAGE CANNOT BE APPEALED WHILE BAD FAITH CLAIM IS PENDING (Superior Court of Pennsylvania)

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The Montgomery County Court of Common Pleas granted partial summary judgment on declaratory judgment claims concerning coverage, and an appeal was taken. The Superior Court quashed the interlocutory appeal as other claims remained undecided. In supporting its decision, the Superior Court observed, among other things:

“This Court has repeatedly applied Bolmgren [v. State Farm Fire and Cas. Co., 758 A.2d 689 (Pa.Super. 2000)],when discussing the appealability of orders that resolve declaratory judgment claims but leave other claims outstanding. See, e.g., Bombar v. West American Ins. Co., 932 A.2d 78, 85-86 (Pa.Super. 2007) (holding that trial court’s initial January 19, 2005 order granting summary judgment on declaratory judgment count of complaint was not final and appealable, where that order did not determine amount of damages for remaining bad faith claim; appeal from later December 30, 2005 order resolving outstanding bad faith claim was proper); Cresswell v. Pennsylvania Nat. Mut. Cas. Ins. Co., 820 A.2d 172, 176 n.2 (Pa.Super. 2003) (determining trial court’s initial December 20, 2001 order granting partial summary judgment in favor of appellee on declaratory judgment claim was interlocutory and unappealable, where court’s order left unresolved additional bad faith claim; trial court’s later order of May 28, 2002, which disposed of sole remaining bad faith claim, was final and appealable)….”

Date of Decision: January 11, 2021

Schmitt v. State Farm Mut. Auto. Ins. Co., Superior Court of Pennsylvania No. 1767 EDA 2019, 2021 WL 79808 (Jan. 11, 2021) (King, Stabile, Stevens, JJ.)

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

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

Date of Decision: December 24, 2020

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

NO SECOND BITE AT THE APPLE IN RECONSIDERING BAD FAITH DISMISSAL; MVFRL TREBLE DAMAGES CLAIM STRICKEN (Philadelphia Federal)

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Eastern District Judge Pappert previously dismissed the insured’s UIM bad faith claim.  A summary of that decision can be found here.

Presently, Judge Pappert denied the insured’s motion for reconsideration. He cited case law making clear that motions for reconsideration are not second bites at the apple, but must show either: “(1) an intervening change in the controlling law; (2) the availability of new evidence that was not available when the court granted the motion … or (3) the need to correct a clear error of law or fact or to prevent manifest injustice.”

None of these factors existed. Thus, while the insured “may disagree with the Court’s determination, nothing in her motion shows that her bad faith claim was dismissed because of a clear error of law or that its dismissal amounts to manifest injustice.”

In his earlier decision, Judge Pappert also dismissed plaintiff’s claims for treble damages under the Motor Vehicle Financial Responsibility Law (MVFRL), on the basis the insured did not allege wanton conduct against the insurer. That dismissal, however, was without prejudice. The insured raised the same claim in its second amended complaint, but Judge Pappert found this amendment “still lacks sufficient allegations of wanton conduct, as she has not alleged ‘any new facts at all.’”

Rather than dismissing the claim under Rule 12(b)(6), consistent with the insurer’s motion Judge Pappert struck the treble damages claim per Rule 12(f).

Date of Decision:  December 18, 2020

Canfield v. Amica Mut. Ins. Co., U.S. District Court Eastern District of Pennsylvania No. CV 20-2794, 2020 WL 7479615 (E.D. Pa. Dec. 18, 2020) (Pappert, J.)

BAD FAITH DAMAGES CONSIDERED IN MEETING JURISDICTIONAL MINIMUM AMOUNT IN CONTROVERSY (Western District)

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The court dismissed this bad faith case for lack of diversity. Still, Judge Hornak opined on whether the plaintiff successfully alleged an amount in controversy above $75,000. The court found that, had there been complete diversity, it would have exercised jurisdiction.

“Courts ‘accept a party’s good faith allegation of the amount in controversy;’ however, when a defendant then challenges a plaintiff’s allegations of the amount in controversy, the plaintiff must provide ‘sufficient evidence’ to demonstrate the amount in controversy exceeds $75,000.” Courts “will only dismiss the case for failure to sufficiently allege the amount in controversy requirement if ‘it is apparent, to a legal certainty, that the plaintiff cannot recover the amount claimed.’”

In this case, the insured sought breach of contract damages and damages for statutory bad faith and violation of the UTPCPL. Judge Hornak believed the claims were asserted in good faith. Under these circumstances, the court could “not conclude ‘to a legal certainty’ that Plaintiffs cannot recover an amount that exceeds the seventy five thousand dollar ($75,000.00) requirement.”

Date of Decision: December 8, 2020

Amato v. AAA Interinsurance Exchange of the Automobile Club, U. S. District Court Western District of Pennsylvania No. 2:20-CV-00684, 2020 WL 7222769 (W.D. Pa. Dec. 8, 2020) (Hornak, J.)

BAD FAITH CLAIM DISMISSED FOR CONCLUSORY PLEADINGS; COURT REFUSES TO ALLOW AMENDMENT TO JOIN PARTIES THAT WOULD HAVE DESTROYED DIVERSITY (Western District)

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This UIM case was removed to federal court, and the insured moved to remand this procedurally complex matter.  The carrier opposed remand and moved to dismiss the insureds’ bad faith claims.

Court rejects amended complaint adding new parties that would destroy diversity

The plaintiffs’ initial UIM suit was against non-diverse defendants and the case was removed to federal court. After removal, the plaintiffs filed an Amended Complaint adding non-diverse parties from a separate auto accident. They moved to remand for lack of jurisdiction.  The court refused to allow the joinder and retained jurisdiction, per 28 U.S.C. sec. 1447(e).

The court observed there was no Third Circuit precedent on section 1447(e), and like other district courts in this Circuit, the court followed the Fifth Circuit in applying a four-factor test to scrutinize remand motions under these circumstances. This balance of equities test adds heightened standards for allowing amendment that would destroy diversity. (The factors to be considered include “[1] the extent to which the purpose of the amendment is to defeat federal jurisdiction, [2] whether plaintiff has been dilatory in asking for amendment, [3] whether plaintiff will be significantly injured if amendment is not allowed, and [4] any other factors bearing on the equities.”).

Bad faith claims dismissed for pleading conclusory allegations

Having retained jurisdiction, the court then addressed the insured’s breach of contract and bad faith claims.

The insureds never allege “the amount of liability insurance available to the tortfeasors for the accident, the status of her claim against the insured, and they do not aver whether the liability limits of the tortfeasor’s coverage has been exhausted.” Thus, the insurer argued the UIM claim was not ripe. The insurer also argued the insureds never set out “the nature of [the] injuries, damages, or specific conduct in support of the statutory bad faith claim.”

The court found both the breach of contract and bad faith claims consisted “only of conclusory and boilerplate statements … and therefore, the motion to dismiss these claims will be granted.” It was significant to the court that plaintiffs did not attach the policy. Plaintiffs claimed they could not locate the policy, and as the court allowed amendment it encouraged the parties to work together expeditiously to get plaintiffs a copy of the policy.

More significantly, the plaintiffs did not plead any specific facts about the carrier’s conduct. The “merely alleged legal conclusions, and because the legal conclusions pled in the [amended complaint] are not facts, they are not assumed to be true and do not meet the Twombly/Iqbal standard.”

Date of Decision: October 9, 2020

Pierchalski v. Pryor, U.S. District Court Western District of Pennsylvania No. 2:19-CV-01352-RJC, 2020 WL 5994981 (W.D. Pa. Oct. 9, 2020) (Colville, J.)