Monthly Archive for February, 2006

FEBRUARY 2006 BAD FAITH CASES
STATE TRIAL COURT GRANTS MOTION TO COMPEL MOST OF INSURED’S DISCOVERY REQUESTS IN UIM BASED BAD FAITH ACTION (Blair)

In Rhodes v. USAA Casualty Insurance Company, the Court of Common Pleas of Blair County addressed numerous issues on the insured’s motion to compel discovery responses against the carrier in a bad faith action involving underinsured motorist claims.  The Court ordered that the following had to be produced in discovery by the carrier:  (1) the identity of the specific documents that were responsive to interrogatories, by bates number, where over 3,500 pages of documents were produced; (2) information concerning attempts to settle the underlying claim, though the carrier did not have to show settlement offers were in the insured’s best interest; (3) company policy relating to the use of information about unrelated claims involving the insured; (4) the identity of other bad faith cases involving the carrier’s handling of underinsured motorist claims in Pennsylvania and “the Third Circuit Court of Appeals”, which issue was analyzed under the Supreme Court’s precedent on punitive damages in State Farm Mutual Auto. Ins. Co. v. Campbell, 538 U.S. 408 (2003); (5) the existence of any policy designed to protect the privacy of the insured’s medical records during the claims handling for underinsured motorist claims; (6) documents regarding “roundtable” proceedings; (7) documents respecting costs the carrier expended relating to the underinsured motorist claim and the insurance policy; and (8) post-settlement conduct information within limits defined by Superior Court of Pennsylvania.

Date of decision:  February 9, 2006

Rhodes v. USAA Casualty Ins. Co., Court of Common Pleas of Blair County, No. 2004 GN 2279 (C.C.P. Blair  Feb. 9, 2006) (Doyle, J.)

FEBRUARY 2006 BAD FAITH CASES
POLICYHOLDER’S MISREPRESENTATIONS IN OBTAINING POLICY DID NOT REACH THE LEVEL OF BAD FAITH REQUIRED TO VOID THE POLICY (Philadelphia Commerce)

In Rutgers Casualty Insurance Company v. Richardson, Philadelphia’s Court of Common Pleas, Commerce Court, upheld as valid an insurance policy in the face of the carrier’s claims of misrepresentation in obtaining the policy.  Though the insured had moved from Pennsylvania to New York, resulting in some address discrepancies,  the court heavily weighed the fact that the insurer never sent a formal notice of cancellation of the policy.  The court noted that in order for an insurer to prove misrepresentation to void a policy, it must establish:  (1) that the representation was false; (2) that the subject matter was material to the risk; and (3) that the applicant knew it to be false and made the representation in bad faith.  Defendant’s address and driver license mistakes were inadvertent and not on the level of deliberate deception required to find bad faith on the part of defendant.  Because the insurer failed to establish that the policyholder knew his representation to be false, thus making the representations in bad faith, he carrier failed to meet its burden of proving that the insured had the requisite “deliberate intent to deceive.”

Date of Decision:  February 1, 2006

Rutgers Cas. Ins. Co. v. Richardson, Court of Common Pleas of Philadelphia, June Term 2004, No. 486, 2006 Phila. Ct. Com. Pl. LEXIS 70 (C.C.P. Philadelphia  Feb. 1, 2006) (Abramson, J.)

 

 
    

FEBRUARY 2006 BAD FAITH CASES
NO DUTY TO DEFEND BREACH OF CONTRACT, TORTUOUS INTERFERENCE, & GOOD FAITH AND FAIR DEALING CLAIMS AS ALL STEMMED FROM CONTRACT CLAIM (Philadelphia Commerce)

In Penn’s Market I v. Harleysville Insurance Company, the insured leased a unit in a retail shopping complex to the Chanda corporation, which was engaged in the business of ice cream and retail food sales.  Chanda sued the insured/lessor for Breach of Contract, Breach of Covenant of Good Faith and Fair Dealing, and Tortuous Interference with Business Relations. The carrier refused to defend the lessor, and the lessor brought suit.  The Philadelphia Commerce Court found that the duties allegedly breached were “created” by, and “grounded in,” the contract itself; the liability, if any, would have “stemmed” from the lease agreement alone; and the tort claim essentially “duplicated” a breach of contract claim.  Because the Court found that all three claims arose out of a contractual dispute, including the tort claim, it ruled that the carrier had no duty to defend in the Chanda litigation.  Under law repeatedly applied in the Commerce Case Management Program’s decisions, a breach of the implied of the duty faith and fair dealing is solely a contract claim, and such a contract claim cannot be maintained where there is a separate breach of contract count which encapsulates this implied duty claim.  The tort claim was rejected under the gist of the action theory.  Finally, the Court rejected the possibility of coverage under a constructive eviction theory.

Date of Decision: May 3, 2006

Penn’s Market. I v. Harleysville Insurance Company, February Term 2005, No. 557, 2006 Phila. Ct. Com. Pl. LEXIS 193 (C.C.P. Philadelphia May 3, 2006) (Abramson, J.)

 
        

FEBRUARY 2006 BAD FAITH CASES
THIRD PARTY ALLOWED TO PURSUE BAD FAITH CLAIM AGAINST INSURANCE CARRIER FOR INDEMNIFICATION, THOUGH NOT CONTRIBUTION (Philadelphia Federal)

In IAP Worldwide Servs. v. UTi United States, Inc., IAP engaged in the business of providing goods and services to the United States Military.  IAP hired defendants to transport twelve modules by sea from Alexandria, Egypt to a port in Jordan, then to Baghdad and Tikrit, Iraq by truck.  IAP and its insurance carrier sued Defendants for breach of contract after they lost the twelve modules and were unable to confirm their whereabouts.  The defendants counterclaimed against IAP’s carrier, arguing that: (1) the carrier was in a position to negotiate the return of the modules (presumably from the thieves that stole them) for a fraction of the amount of IAP’s claimed loss, but chose not to pay the ransom; and (2) the carrier improperly asserted its policy defenses against its insured and that this wrongful adjustment of the claim was also a proximate cause of IAP’s loss.  In short, despite their third party status, the defendants asserted a bad faith insurance claim.  Plaintiff’s filed a Motion to Dismiss on the basis that the carrier had no duty the defendants to act in good faith since they were not a party to the insurance contract.  However, the Court ruled that the defendants may assert a bad faith claim against the carrier for indemnification, but not for contribution.  The Court reasoned that Pennsylvania law only allows a right of contribution among joint-tortfeasors.  Since the defendants’ alleged wrong was losing the modules, and the carrier’s alleged wrong was not recovering the lost modules or otherwise covering the loss, the wrongs were separate from each other in nature and time.  Therefore, they were not joint-tortfeasors as a matter of law and there is no right of contribution.  Conversely, the defendant was permitted to pursue its counterclaim for indemnification under a bad faith theory against the carrier despite its third-party status.

Date of Decision: February 8, 2006

IAP Worldwide Servs. v. UTi United States, Inc., United States District Court for the Eastern District of PA, No. 040-4218, 2006 U.S. Dist. LEXIS 4766 (E.D. Pa. Feb. 8, 2006) (Savage, J.).

 

 

FEBRUARY 2006 BAD FAITH CASES
CONTRACTUAL BAD FAITH CLAIM PERMITTED INDEPENDENT OF STATUTORY BAD FAITH, BUT NO SEPARATE CAUSE OF ACTION FOR SPOLIATION (Lawrence)

In Harlan v. Erie Insurance Group, the Court of Common Pleas of Lawrence County, addressed whether a claim that the carrier breached the implied duty of good faith and fair dealing stated a cause of action.  The Pennsylvania state trial judge pointed out that this was not a statutory bad faith claim under 42 Pa.C.S. § 8371, but was a contract based claim; there being no bad faith tort claim of this nature under Pennsylvania law.  While limited in other contexts, Pennsylvania’s Supreme Court has recognized a contract claim for breach of the implied duty of good faith and fair dealing as the basis for a compensatory damage claim against an insurance carrier. Birth Center v. St. Paul Companies, Inc., 567 Pa. 386, 787 A.2d 376 (2001). The plaintiffs alleged that the carrier refused to cover the loss on a stolen and burned vehicle, and destroyed evidence that could have established coverage.  While permitting the contractual bad faith claim to proceed, the court declined to find that Pennsylvania law permitted a separate cause of action for spoliation.
Date of decision:  February 16, 2006
Harlan v. Erie Ins. Group, Court of Common Pleas of Lawrence County, No. 10388 of 2005, Civil Action (C.C.P. Lawrence  Feb. 16, 2006) (Motto, P. J.)

FEBRUARY 2006 BAD FAITH CASES
DISABILITY INSURANCE BAD FAITH CLAIM PRE-EMPTED BY ERISA (Philadelphia Federal)

In McBride v. Hartford Life & Accident Insurance Company, the U.S. District Court for the Eastern District of Pennsylvania held that Plaintiff’s Wage Payment and Collection Law (WPCL) and Bad Faith claims were preempted by ERISA. Plaintiff alleged she was wrongfully denied disability benefits under her ERISA benefit plan, however her claims were a result of the denial of disability benefits, items which plainly “related to” her ERISA plan. 

Date of Decision:  February 3, 2006

McBride v. Hartford Life & Accident Ins. Co., United States District Court, E.D. PA, Civil Action No. 05-6172, 2006 U.S. Dist. LEXIS 4278 (E. D. Pa. Feb. 3, 2006) (Yohn, J.)

 

 

FEBRUARY 2006 BAD FAITH CASES
CASE AGAINST INSURER & AGENT REMANDED, INCLUDING BAD FAITH CLAIM - COURT WOULD NOT APPLY ECONOMIC LOSS DOCTRINE TO BAR CONSUMER LAW CLAIMS (Philadelphia Federal)

In Seward v. Certo, a plaintiff sued her insurer and the insurer’s agent, the agent’s citizenship destroying diversity.  The claims included fraud and violations of Pennsylvania’s Unfair Trade Practices and Consumer Protection Law (UTPCPL), as well as bad faith and breach of contract claims against the carrier.  The carrier sought to remove the case anyway, claiming that complete diversity was only destroyed because of the agent’s fraudulent joinder as a defendant.  While the UTPCPL claimed was barred by Third Circuit precedent that would use the economic loss doctrine to bar UTPCPL claims, the Federal District Court had to determine whether or not plaintiff set forth a colorable claim in front of the State Trial Court; not whether the Federal Judge would have had to dismiss the UTPCPL claim if it were originally brought in Federal Court.  Philadelphia State Trial Courts interpreting the UTPCPL have expressly refused to apply the economic loss doctrine to bar UTPCPL claims.  Given such refusals, the Federal Judge found that the plaintiff stated a colorable claim against the agent in the original state filing; thus, there was no fraudulent joinder, diversity was destroyed, and all claims against both defendants, including the breach of contract and statutory bad faith claims against the carrier, were remanded to the State Court.

Date of Decision:  February 2, 2006

Seward v. Certo, U.S. District Court, Eastern District of PA, Civil Action No. 05-6363, 2006 U.S. Dist. LEXIS 4038 (E. D. Pa. Feb. 2, 2006) (Buckwalter, S.J.)