COURT RELIES ON DELAYS IN FACT, AND DELAYS AS DEFINED IN THE UNFAIR INSURANCE PRACTICES ACT (UIPA), IN ALLOWING BAD FAITH CASE TO PROCEED (Philadelphia Federal)

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The common theme in today’s two posts is the plaintiffs’ adequately pleading bad faith in federal court.

In this first post, the carrier moved to dismiss the uninsured motorist bad faith claim. The insured alleged bad faith for the carrier’s failing to negotiate or offer adequate compensation for damage claims submitted, with an apparent policy limits ($300,000) demand in place.

The court found the complaint adequately pleaded a bad faith claim, focusing on delays in the claims handling process. Significantly, some of the facts the court relied upon were framed expressly as violations of the Unfair Insurance Practices Act (UIPA). [Note: Compare this decision to the Eastern District Horn case, decided three weeks later, where the court stated “that, since the current bad faith standard was established in Terletsky ‘courts in the [Third] circuit have … refused to consider UIPA violations as evidence of bad faith.'” The Terletsky standards have since been adopted by Pennsylvania’s Supreme Court in Rancosky.]

The following facts were considered sufficient to support a plausible claim: “Defendant unduly delayed the investigative insurance process, which is aptly illustrated by his allegations that: Defendant became aware of Plaintiff’s claim ‘nearly immediately’ after the accident; Defendant failed to conduct a Statement Under Oath until January 5, 2018—nearly 18 months after the accident; Defendant did not perform an Independent Medical Evaluation for the case until May 9, 2018—nearly 23 months after the accident; and, Defendant did not make a first claim offer until two years and nine months after the accident.”

“With that said, the statutory violation would not be found in the delay per se, but rather in Defendant’s alleged failure to send any periodic, statutorily mandated communications, in writing, explaining such delay, and informing Plaintiff of when a decision on the claim might be expected, in violation of 31 Pa. Code § 146.6. Beyond the alleged delay in the investigation of the disputed claim, Plaintiff further pleads Defendant’s complete failure to provide the required written notices in connection with Defendant’s acceptance (or denial) of the disputed insurance claim until 17 months after the accident, in violation of 31 Pa. Code § 146.7(c)(1).” [Note: The court’s footnotes citing these two codes sections are quoted at length below]

“The consistent lack of timely notices, if ultimately proven true, would be relevant in determining the nature of Defendant’s dealings with Plaintiff, particularly so when considering Plaintiff’s averment that he did not receive a settlement offer until two years and nine days after the claimed accident, and for $285,000.00 below [the $300,000.00] policy limits.”

“This Court further notes that a plaintiff seeking damages for an insurer’s bad faith conduct under 42 Pa. Cons. Stat. § 8371 may attempt to prove bad faith by demonstrating that the insurer has violated one or more provisions of related Pennsylvania insurance statutes or regulations, even if they do not independently provide for private causes of action. See Berg v. Nationwide Mut. Ins. Co., 2012 PA Super 88, 44 A.3d 1164, 1174 (Pa. Super. 2012).”

“This Court finds that the extended duration, coupled with the alleged statutory violations, speak to a plausible ‘reckless disregard’ by Defendant as to its duties relating to good faith and fair dealing.”

Date of Decision: April 3, 2019

Blease v. Geico Casualty Co., U.S. District Court Eastern District of Pennsylvania CIVIL ACTION NO. 18-3893, 2019 U.S. Dist. LEXIS 57145 (E.D. Pa. April 3, 2019) (Jones, II, J.)

Footnote 5 states: Section 146.6 sets forth appropriate standards for prompt investigations of insurance claims, providing that “[e]very insurer shall complete investigation of a claim within 30 days after notification of claim, unless the investigation cannot reasonably be completed within the time. If the investigation cannot be completed within 30 days, and every 45 days thereafter, the insurer shall provide the claimant with a reasonable written explanation for the delay and state when a decision on the claim may be expected.” 31 Pa. Code § 146.6.

Footnote 6 states: 31 Pa. Code § 146.7(c)(1) sets forth standards for prompt, fair, and equitable settlements applicable to insurers: “If the insurer needs more time to determine whether a first-party claim should be accepted or denied, it shall so notify the first-party claimant within 15 working days after receipt of the proofs of loss giving the reasons more time is needed. If the investigation remains incomplete, the insurer shall, 30 days from the date of the initial notification and every 45 days thereafter, send to the claimant a letter setting forth the reasons additional time is needed for investigation and state when a decision on the claim may be expected.” 31 Pa. Code § 146.7(c)(1).

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