Monthly Archive for December, 2006

DECEMBER 2006 BAD FAITH CASES
JUDGMENT GRANTED TO INSURER FOR INSURED’S FAILURE TO PRODUCE FAMILY MEMBERS FOR DEPOSITION (Third Circuit)

    

In Murphy v. Federal Insurance Company, Plaintiff insured filed an action against Defendant insurer seeking coverage for damage allegedly caused by a tree falling on his house during Hurricane Floyd.  Plaintiff was the sole owner of the house.  However, Plaintiff’s wife was a named  insured on the homeowner’s policy along with Plaintiff.  After inspection of the property, Defendant questioned whether the damage had been caused in the manner described by Plaintiff.  Defendant refused coverage.  Plaintiff filed suit alleging claims at both common law as well as under the Pennsylvania insurance bad faith statute.  Defendant sought to depose Plaintiff’s wife and sons.  Plaintiff claimed that neither his wife nor his sons had any material knowledge and at the relevant times did not occupy the property.  Plaintiff refused to produce the family members for deposition, even after the Eastern District of Pennsylvania issued an Order compelling the depositions.  The Eastern District of Pennsylvania subsequently granted Defendant summary judgment.  The Third Circuit affirmed.  The Third Circuit found that the failure of Plaintiff to comply with the insurance policy–which allowed examination of insureds and “family members” of an insureds’ household–as well as the failure to comply with discovery orders, prejudiced Defendant.  As to Plaintiff’s claim that his wife and sons had no material knowledge of the matter, the Third Circuit noted that Defendant was not required to take Plaintiff’s word on the matter, but instead was entitled to the depositions under the insurance policy.

Date of Decision:  November 20, 2006

Murphy v. Federal Insurance Company, 2006 U.S. App. LEXIS 28694 (3d Cir. November 20, 2006) (Greenberg, C.J.), http://vls.law.villanova.edu/locator/3d/November2006/051814np.pdf

    

DECEMBER 2006 BAD FAITH CASES
CLAIMS OF BAD FAITH IN ATTEMPTING TO COLLECT OVERPAYMENT FROM INSURED DISMISSED ON SUMMARY JUDGMENT (Philadelphia Federal)

    

In Connolly v. Reliastar Insurance Company, Plaintiff insured went on long term leave from her place of employment due to severe stress and emotional issues.  It was undisputed that the long term disability insurance administrator promptly investigated and paid the insured full benefits.  The policy provided for benefits to be reduced by other income received by the beneficiary, including from Social Security or a retirement fund.  Plaintiff and the insurer entered into a written agreement where the insurer agreed to pay more benefits up front, instead of deducting the anticipated payments from the beginning, with the understanding that once the “other income” sources started to make payments, Plaintiff was to reimburse the insurer for the overpayments.  When Plaintiff began to receive SSDI and retirement benefits, the insurer, through its administrator, wrote three letters informing Plaintiff that she needed to remit the overpaid benefits.  When Plaintiff refused, the administrator placed the claim with a collection agent. 

Plaintiff brought suit against the insurer, its administrator, and the collection agent for breach of contractual and fiduciary obligations, as well as various Pennsylvania statutes including the Pennsylvania bad faith statute.  Plaintiff alleged that Defendants’ conduct in attempting to collect the money was outrageous, harassing, and in bad faith.  Plaintiff claimed that Defendants called before 7:30 a.m. and as late as 10:30 p.m., threatened to come to her residence to collect the money, to have her arrested, to seize her bank account, and to impose liens against her property and assets.  Plaintiff also claimed that Defendants continued to contact Plaintiff directly after she informed Defendants that she was represented by counsel.  The Eastern District of Pennsylvania granted Defendants’ Motion for Summary Judgment. 

As to the claim of Bad Faith under 42 Pa. Cons. Stat. Ann. § 8371, the Court noted that Plaintiff never introduced evidence that Defendants acted in bad faith in investigating, processing and satisfying her disability claim, and without such evidence, the policy could not form the basis of a violation of Section 8371.  The Court rejected Plaintiff’s putative bad faith expert’s opinion as to violations of Section 8371, finding it to add virtually nothing to the matter that was appropriate for the court’s consideration.  Further, as to Plaintiff’s claims of breach of contract and fiduciary obligations, the Court noted that Plaintiff never specified when the alleged threatening calls occurred, but instead averred generally that the threats were made on “several occasions.”  Further, the Court noted that even if the collection agent was overzealous in his efforts to collect the debt, it was undisputed that any contact was limited to one week, and that the isolated and few instances of contact did not rise to a breach of the implied duty of good faith and fair dealing, as a matter of law, in Defendant’s investigation nor the attempts to collect the debt.  Finally, the Court found that violations of the Pennsylvania Fair Credit Extension Uniformity Act, the Unfair Insurance Practices Act, and the Unfair Claims Settlement Practices Regulation do not establish per se bad faith conduct in the investigation or denial of benefits. 

Date of Decision:  November 16, 2006

Connolly v. Reliastar Life Ins. Co., Inc., 2006 U.S. Dist. LEXIS 83440 (E.D. Pa. November 13, 2006) (Joyner, J),

 
        

DECEMBER 2006 BAD FAITH CASES
COURT AWARDS ATTORNEYS’ FEES TO INSURER ON COUNTERCLAIMS IN BAD FAITH CASE (Western District)

In Leach v. Northwestern Mutual Insurance Company, Plaintiff insured filed an action against Defendant insurer seeking payments under a disability insurance policy issued by Defendant.  Plaintiff alleged breach of contract, bad faith and deceptive business practices, while Defendant filed a counterclaim for damages for breach of contract, unjust enrichment, misrepresentation and fraud.  After a jury found in favor of Defendant on all claims and counterclaims, the United States District Court for the Western District of Pennsylvania granted Defendant’s motion for attorneys’ fees, and directed Defendant to submit the amount of fees and costs of suit along with evidence in support thereof.  Defendant’s attorney accordingly filed a petition for fees and costs with supporting affidavits and exhibits, to which Plaintiff filed no objections, nor in any way challenged it before the Court.  In determining the award of attorneys’ fees, the Court used the “lodestar” formula, which requires that it multiply the number of hours reasonably expended on the litigation by a reasonable hourly rate, plus reasonable expenses.  The Court granted Defendant’s petition for an award of attorneys’ fees and costs of suit, and awarded Defendant attorneys’ fees and costs in the total amount of $228,005.38.

Date of Decision:  November 16, 2006

Leach v. Northwestern Mut. Ins. Co., The United States District Court for the Western District of Pennsylvania, No. 01-2364, 2006 U.S. Dist. LEXIS 83624 (W.D. Pa., November 16, 2006) (Cohill, J.)