Monthly Archive for August, 2007

AUGUST 2007 BAD FAITH CASES
COURT GRANTS INSURER'S MOTION FOR SUMMARY JUDGMENT AFTER PLAINTIFF FAILS TO ESTABLISH A CLAIM FOR BAD FAITH DELAY (Western District)

    

In Ressler v. Enterprise Rent-A-Car Co., plaintiffs, co-executors of the estate of the deceased, sought to recover damages resulting from the alleged improper handling of a claim under a personal accident insurance policy purchased by the deceased when he rented a car in Alaska.  While some dispute over missing documents occurred, defendants did ultimately mail personal accident insurance benefit checks for the benefit of the Estates of the deceased.

Defendants filed a Motion for Summary Judgment seeking dismissal of plaintiffs’ claims in there entirety.  Defendants argued that the bad faith claim failed because plaintiffs could not establish that the company acted in bad faith in processing their claim.  The defendants argued that undisputed evidence, in fact, showed they acted reasonably and in a timely manner in paying plaintiffs’ claims in full.  The court agreed with defendants in that no reasonable jury could conclude that plaintiffs had shown, by clear and convincing evidence, that defendants acted in bad faith in processing their claims.  Defendants paid plaintiffs’ claims in full within seven months of the accident and less than three months after plaintiffs submitted the necessary paperwork.  The court acknowledged that this circuit has held that far longer time periods did not support a claim for bad faith delay.  Therefore, defendants’ Motion for Summary Judgment as to plaintiffs’ bad faith claim was granted.

Date of Decision: July 13, 2007.

Ressler v. Enterprise Rent-A-Car Co., United States District Court for the Western District of Pennsylvania, No. 06-562, 2007 U.S. Dist. LEXIS 50967 (W.D. PA. July 13, 2007) (Ambrose, J.).
    

AUGUST 2007 BAD FAITH CASESNO RELIEF UNDER BAD FAITH STATUTE FOR AN INSURED ALLEGING THAT AN INSURER IMPROPERLY SOLICITED PURCHASE OF THE POLICY (Pennsylvania Supreme Court)

 

In Toy v. Metropolitan Life Insurance Company, the Pennsylvania Supreme Court considered whether a bad faith action, within the meaning of the Bad Faith Statute (§8371), may be premised on allegations that an insurer engaged in bad faith conduct in soliciting the insured to purchase an insurance policy.  Toy, the Plaintiff, in preparation for her retirement, met with Defendant Martini to discuss a 50/50 Savings Plan that Defendant Metropolitan Life offered.  Martini represented to Toy that the plan was a savings vehicle by which she would generate a fund of $100,000 by 65 if she make monthly payments of $50.  Martini also informed Toy that life insurance was part of the plan.  Toy received a Metropolitan policy of insurance which stated that Metropolitan would pay $31,544 and the other benefits of the policy when Toy died.  The policy also set forth a guaranteed cash value at age 65 of $11,008.86 based on a guaranteed interested rate of 4% a year.  Toy only looked at the cover sheet.  She eventually paid $1,400 in premiums, but stopped making payments when she learned of a Florida class action pending against Metropolitan.
Toy’s Complaint alleged that Defendants undertook a marketing scheme to disguise the true nature of the policy and misrepresent it to be a savings vehicle, that the misrepresentations caused her to believe she was investing in a savings plan and caused her to purchase life insurance she did not want.  In addition, she was prevented from securing the type of retirement product she needed and Defendants engaged in this practice for their own benefit as administrative fees associated with life insurance were higher.  Toy alleged claims under the Consumer Protection Law and a claim for bad faith under §8371 against Metropolitan.
After Toy’s case was initiated, a state trial court issued a ruling in Inhat v. Pover, 35 Pa.D&C.4th 120 (C.C.P. Allegheny 1997), which held that bad faith under §8371 was not limited to allegations that an insurer refused to cover claims, but could be founded on allegations that an insurer did not satisfy a duty that the law imposed upon it in its relationship with its insured.  The Inhat decision relied on the fact that in enacting §8371, the Legislature was creating a comprehensive remedy for fraudulent conduct.  The trial court in Toy applied the ruling in Inhat as to the elements of fraud.  Metropolitan moved for summary judgment arguing that because justifiable reliance is an element of common law fraud, it followed from the court’s construction of §8371 that justifiable reliance was an element of a bad faith claim.  Metropolitan also argued that the bad faith statute is limited to a claim that insurer failed to provide an insured with the benefits or coverages that his insurance policy provide.  The trial court granted Metropolitan’s motion for summary judgment in light of its construction of §8371 in Inhat and held that  justifiable reliance was an element of Toy’s bad faith claim.  Because Toy was unable to prove that she justifiably relied on the alleged misrepresentations, summary judgment was granted.
Toy appealed to the Superior Court, which affirmed the trial court’s order as to Toy’s §8371 claim.  The Superior Court, however, did not discuss the basis of the trial court’s decision.  Instead, it held that that the requisite elements of a bad faith claim are that the insurer refused to provide benefits and knew or recklessly disregarded that it lacked a reasonable basis for the refusal.  Since Toy’s claim did not include those elements, the Superior Court upheld the dismissal of Toy’s claims on other grounds.  The Supreme Court granted Toy’s petition for allowance of appeal, but limited review to whether the Superior Court’s decision that a claim under §8371 is limited to the unreasonable refusal by an insurance company to pay a valid claim conflicts with Pennsylvania law.
In determining this issue, the Supreme Court held that because §8371 speaks to an action “arising under an insurance policy”, the Legislature did not intend to provide a remedy under §8371 for bad faith practices in soliciting the purchase of a policy.  Based on the clear and explicit words of the statute, the Legislature did not intend to give relief under the bad faith statute to an insured who alleges that her insurer engaged in bad faith practices in soliciting the purchase of a policy.
Date of Decision:  July 18, 2007
Toy v. Metropolitan Life Insurance Company, Supreme Court of Pennsylvania, Nos. 33 and 34 WAP 2005, 2007 Pa. LEXIS 1463 (Pa. July 18, 2007) (Cappy, J.), corrected on August 1, 2007, 928 A.2d 186 (Pa. 2007).

 

AUGUST 2007 BAD FAITH CASES
COURT FINDS THAT INSURER ACTED IN BAD FAITH WHEN IT FAILED TO PROPERLY INVESTAGE THE CLAIM PRIOR TO DENYING COVERAGE (Pennsylvania Superior Court)

 

In Bombar v. The West American Insurance Co., the insured, an employer, filed a complaint against its insurer for bad faith in handling a claim.  The claim arose after one of the insured’s employees was severely injured in a forklift accident.  Initially, the insurer denied coverage due to the Products and Completed Operations Exclusion in the insured’s policy.  The deposition testimony indicated, however, that the insurance agents’ attempts to investigate the claims were only cursory, at best.  Agents were reassigned without obtaining the necessary statements from the parties, and the insurer never notified the insured in writing that its coverage was denied.
As a result, the court held that the insurer did not properly investigate the claim prior to refusing to pay the proceeds of the policy of its insured.  The court favorably cited section 146.6 of the Unfair Insurance Practices Act (UIPA) in reaching its determination, among other authorities.
The court determined that the Products and Completed Operations Exclusion did not apply so as to bar coverage, and the insurer acted in bad faith by not having a reasonable basis for denying benefits under the policy.
Date of Decision: July 26, 2007.
Bombar v. American West Ins. Co., 932 A.2d 78 (Pa. Super. Ct. 2007) (Stevens, J.)