FEBRUARY 2016 BAD FAITH CASES: BAD FAITH CLAIM BASED ON INSURER’S ALLEGED COOPERATION WITH POLICE INVESTIGATION OF INSURED BARRED BY STATUTE OF LIMITATIONS (Philadelphia Court of Common Pleas)

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In Fieldhouse v. Metropolitan Property & Casualty Insurance Company, the Philadelphia Court of Common Pleas granted summary judgment on the insured’s bad faith claims, finding that the insured’s claim was barred by the applicable two-year limitations period.

On January 24, 2013, the insured filed a Complaint, alleging that he was in a car accident and his covered vehicle was damaged after striking a pedestrian. The insured’s car was impounded, and the insured submitted a claim to his insurer. In support of his claim for bad faith, the insured averred that the insurer’s employee assigned to investigate the claim acted in bad faith by “electing to actively participate in and contribute to a criminal investigation of the policyholder initiated by the Pennsylvania State Police… and obtained information which he thereafter shared with the Pennsylvania State Police.” The insured averred the employee’s actions occurred between August 13, 2008 and January 5, 2009.

The insurer asserted that the Pennsylvania State Police solicited information from the insurer as part of the police investigation into the insured. Moreover, it argued that the bad faith claims were time barred; that it was statutorily immune from civil suits for sharing information with law enforcement; there can be no bad faith by initiating a fraud investigation; the insured never presented a claim for damage, but even if he had presented a claim, it would be barred under the terms of the policy, and thus there could be no bad faith absent coverage.

The insurer argued that the statute of limitation began to run at the latest on January 5, 2009, when the employee last communicated with the police. The insured argued that the statute of limitations was tolled upon the institution of criminal charges, which were later noelle prossed.

The Court stated that “an action for bad faith may extend to an insurer’s investigative practices.” With regard to the two year statute of limitations for claims of bad faith, the Court stated that “the courts have expressly noticed that in contract actions the tolling of the statute begins at the time of the initial breach, whether or not the breach continues throughout the trial.” The court rejected the insured’s argument that the statute did not begin to run until the institution of criminal charges because there was no evidence that he was “induced not to sue”; and the criminal charges were brought at the instigation of the police, not the insurer.

Ultimately, the Court held that a cause of action accrues at the time of the insurer’s actions at issue, and because the alleged cooperation with the police was no later than January 5, 2009, the two year period ran before suit was instituted. [Note:  The court did not specifically address whether the statute of limitations accrues in bad faith cases at the time a benefit is denied, and how conduct evidencing bad faith relates to triggering the statute of limitations.  The Superior Court recently took a similar view that the statute of limitations in bad faith cases can be triggered by bad faith conduct which is not in and of itself the denial of a benefit.]

Date of Decision: December 1, 2015

Fieldhouse v. Metro. Prop. & Cas. Ins. Co., October Term 2012 No. 2205, 2015 Phila. Ct. Com. Pl. LEXIS 396 (C.C.P. Philadelphia Dec. 1, 2015) (Wright Padilla, J.)

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