Monthly Archive for December, 2007

DECMEBER 2007 BAD FAITH CASES
NO BAD FAITH UNDER FORCED-PLACED INSURANCE POLICY SINCE HOMEOWNER WAS NOT LISTED AS A NAMED INSURED UNDER THE POLICY (Philadelphia Federal)

    

In Caplen v. Security National Servicing Corp., Inc., plaintiff filed a complaint asserting claims for breach of contract and bad faith against an insurance carrier that insured plaintiff’s home through a forced-placed insurance policy purchased by plaintiff’s home mortgage lender.  The defendant insurer, however, filed a Motion for Summary Judgment and all of plaintiff’s claims were dismissed because plaintiff was not listed as a named insured under the forced-placed policy.  The Court held that the forced-placed policy insured the lender’s interests and not the plaintiff’s interests and since plaintiff was not a named insured under the policy, the defendant insurer owed neither a contractual nor fiduciary duty towards the plaintiff.

Date of decision: September 17, 2007

Caplen v. Security National Servicing Corp., United States District Court for the Eastern District of PA, No. 05-5982, 2007 U.S. Dist. LEXIS 74473 (E.D. Pa. Sept. 17, 2007). (Brody, J.)

J.T.L.
    

DECEMBER 2007 BAD FAITH CASES
PROOF OF “ILL-WILL” IS PROBATIVE ON INTENTIONALITY PRONG OF BAD FAITH TEST, BUT IS NOT ITSELF AN ELEMENT OF PROVING BAD FAITH (Pennsylvania Superior Court)

 

The Superior Court of Pennsylvania recently analyzed the elements necessary to sustain a bad faith claim in Greene v. United Services Automobile AssociationIn Greene, the plaintiffs sustained property damage to their home allegedly due to a roof leak and a tree which fell onto plaintiffs’ home.  The Greenes submitted claims under their homeowner’s policy issued by United Services Automobile Association.  The insurer concluded that most of the damages were not covered under the plaintiffs’ policy.  The Greenes subsequently filed a bad faith claim against their insurer due to its claims handling practices.  Plaintiffs alleged that the insurer’s investigator failed to respond to correspondence, failed to return telephone calls and waited eight months to issue a reimbursement check.  On appeal, Plaintiffs claimed that the trial court misinterpreted the law by requiring evidence of intentional misconduct as a prerequisite to sustaining a bad faith claim.
The Appellate Court began its analysis by stating that to constitute bad faith it is not necessary that an insurer’s conduct be fraudulent.  Nevertheless, mere negligence or bad judgment is not sufficient to support a finding of bad faith.  The Court stated that to support a bad faith claim, a plaintiff must prove, by clear and convincing evidence, that the insurer “(1) did not have a reasonable basis for denying benefits… and (2) knew or recklessly disregarded its lack of a reasonable basis in denying the claim.”  The Court, however, also acknowledged that in previous opinions it had stated that to prove a bad faith claim a party “must show that the insurer breached its duty of good faith through some motive of self-interest or ill-will.”  This in turn raised the question as to whether proof of ill-will was an additional element to the two-prong bad faith test.  The Court predicted that the Pennsylvania Supreme Court would rule “consistently with the holdings of the Pennsylvania Superior Court concerning the level of culpability that needs to be associated with a finding of bad faith.”  The Court held that although the “motive of self-interest or ill will” level of culpability is not a third element required for a finding of bad faith, it is probative of the second element requiring evidence that the “insurer knew or recklessly disregarded its lack of reasonable basis in denying the claim.”  Ultimately, the Appellate Court concluded that United Services Automobile Association did not act with ill-will and affirmed the trial Court’s denial of plaintiffs’ bad faith claim.
Date of Decision:  November 20, 2007
Greene v. United Services Auto Assoc., Superior Court of PA, No. 1815, 2007 Pa. Super. LEXIS 3875, 936 A.2d 1178 (Pa. Super. Nov. 20, 2007) (Colville, J.)
J.T.L.

 

DECEMBER 2007 BAD FAITH CASES
CASE REMANDED WHERE NO FRAUDULENT JOINDER OF NON-DIVERSE CO-DEFENDANT (Western District)

    

In Marsico v. Unum Group, the carrier removed the case on the basis that there was an ERISA based claim and/or diversity.  Plaintiff brought a breach of contract and bad faith claim against the carriers based on a denial of disability benefits, and also joined the doctor hired by the carrier to perform an IME, on the basis of conspiracy and/or malpractice (the doctor apparently concluding in his IME that there was no disability – at least one not subject to benefits).  The court found that the matter was not covered by ERISA, and that diversity could only be destroyed if there were a fraudulent joinder of the non-diverse doctor defendant.  The court found that “from a  fair reading of the complaint, it appears that plaintiff has set forth, in good faith, reasonable bases in fact and colorable claims against [the doctor], and that [the doctor] has not been fraudulently joined in an effort to defeat diversity of citizenship. Thus, complete diversity jurisdiction does not exist.”  The case was remanded.

Date of Decision:  November 28, 2007

Marsico v. Unum Group, No. 07-1482, 2007 U.S. Dist. LEXIS 87471 (W.D. Pa. November 28, 2007) (Schwab, J.)

L.A.