Monthly Archive for July, 2008

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JULY 2008 BAD FAITH CASES
COURT FOUND REMOVAL OF BAD FAITH CLAIM TO FEDERAL COURT WAS TIMELY (Western District)

Published on July 9, 2008 in Procedural Issues. Closed

         

In Wisinski v. American Commerce Group, Inc., American Commerce Insurance Company the insured filed claims for bad faith, breach of contract, and unfair trade practices arising out of the insured’s claim for uninsured motorist coverage following the insured’s motor vehicle accident with an uninsured motorist.  The insured filed this complaint in the Court of Common Pleas of Erie County.  The insurer then removed the action to federal court.  The insurer then filed a motion to remand arguing that the insurer’s notice of removal was untimely. While the insured agrees that the insurer filed the notice of removal within 30 days of the complaint, the insured argues that an “initial pleading” triggering the 30 day time period for removal was satisfied by the Writ of Summons, Motion to Compel Arbitration, and the insurer’s motion for reconsideration.  The court found that the insurer’s removal was timely because the notice was filed within 30 days of the filing of the complaint. Therefore the court denied the insured’s motion to remand and ordered an Initial Status Conference date. 

Date of Decision: February 5, 2008

Wisinski v. Am. Commerce Group, Inc.,2008 U.S. Dist. LEXIS 8393 (W.D. Pa. Feb. 5, 2008)( Cohill Jr., J.)

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INSURER’S SUMMARY JUDGMENT MOTION GRANTED DUE TO PLAINTIFF’S UNTIMELY FILING OF THEIR BAD FAITH CLAIM; NO ACTION CLAUSE DID NOT TOLL STATUTE (Western District)

Published on July 8, 2008 in Procedural Issues. Closed

In Thomas E. Campbell v. State Farm Mutual Automobile  Insurance Company, plaintiff initiated a bad faith claim against the insurer  stemming from an automobile accident in which he was a passenger.  Plaintiff was involved in an accident in which he was a passenger in the vehicle and the driver had an automobile insurance policy with State Farm. Prior to the accident, the insurer alleges that plaintiff’s wife cancelled the policy. However, plaintiff alleges that it was not her intention to cancel the policy. Plaintiff’s wife stated that she was under the impression that the insurance was not to be cancelled immediately, but would be covered for an extended period of time on both vehicles under the policy. The insurer’s claim representative investigated the matter, and recommended the claim be denied on the basis that the policy had been cancelled prior to the accident. The insurer admits that but for this cancellation the policy would have covered the claim; however on it denied the claim .  Plaintiff was awarded a judgment against the driver insured, and the insured assigned his rights against the insurer to plaintiff. 

Plaintiff filed  breach of contract and bad faith claims against the insurer.  The insurer filed a motion for summary judgment  and argued that the plaintiff’s bad faith claim was untimely.  The court stated that the statute of limitations begins to run on a bad faith claim when coverage is denied.  However, the plaintiff claims that due to the “no action clause” in the policy, the bad faith claim did not accrue until he obtained judgment against the insured driver.  The court found that “no action” clauses do not preclude suits by an insured against an insurer, and therefore the statute of limitations began when coverage was denied.  Plaintiff’s suit was brought more than 2 years later and was untimely. The court therefore granted insurer’s motion for summary judgment on the bad faith claim.  With regard to plaintiff’s breach of contract claim, the insurer argued that the plaintiff failed to adduce any evidence to support the claim. However, the court found that the plaintiff had produced sufficient evidence; and there was genuine issues of material fact on this issue and therefore denied  the insurer’s motion for summary judgment on the breach of contract claim.

Date of Decision: April 4, 2008

Campbell v. State Farm Mut. Auto. Ins. Co.,2008 U.S. Dist LEXIS 28361 (W.D. Pa. Apr. 4, 2008)(Lancaster, J.)

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JULY 2008 BAD FAITH CASES
INSURER’S MOTION TO DISMISS DENIED BECAUSE COURT FOUND THAT THE INSURED HAD TIMELY FILED THE CLAIM (Middle District)

Published on July 8, 2008 in Procedural Issues. Closed

In Bowers v. Nationwide Insurance Company a bad faith claim arose from an automobile accident involving Bowers and another driver.  Bowers was struck by another car and sustained severe and permanent injuries leaving him disabled and unable to work.  Bowers had an automobile policy with the insurer. Bowers suffered damages in excess of $800,000 yet the other driver had liability insurance with a limit of $15,000.  Bowers filed a claim with the insurer for  underinsured motorist benefits.  Bowers sought $500,000 in coverage which was the limit available under his policy.  The insurer offered $35,000.  Bowers agreed to mediate the claim but the mediation was unsuccessful.  Bowers then agreed to settle the claim for $300,000 but again the insurer continued to only offer $35,000.  Bowers then instituted litigation seeking to recover $500,000 in underinsured motorist benefits.  The matter went before an arbitration panel and Bowers was awarded $551,673. 

After obtaining this award, Bowers filed a complaint alleging that the insurer acted in bad faith by failing to conduct a reasonable investigation before engaging in procedures to resolve his claim. Bowers claimed that the insurer’s medical investigation of his condition was insufficient and they relied on an economic expert who was unqualified.  Bowers filed a motion of removal and then filed a motion to dismiss or in the alternative to strike portions of the complaint.  The insurer argued that the claim should be dismissed because the statute of limitations had run on the insured’s action because it had been more than two years. The insurer claimed that the statute of limitations accrued either in November 2004 or January 2005.  Bowers responded that at the time of the 2004 mediation, he was not aware that the insurer had acted in bad faith. Only at the  hearing in March 2005 did Bowers become aware of the insurer’s potential bad faith.  Therefore Bowers claimed that the statute of limitations accrued when he realized the insurer had made no effort to examine his allegations. 

The court found that the appropriate statute of limitations for a PA statutory bad faith claim is two years.  The court stated that such a claim accrues when the insurer denies liability because this is when the refusal to pay first occurs.  The court found that the insurer’s offer of $35,000 did not amount to a denial of coverage that would cause the statute of limitations to begin to run.  The insurer’s position could not be considered final and therefore the claim did not begin to accrue during the 2004 mediation.  In addition the letter from Bowers counsel in January 2005, which complained of the insurer’s unwillingness to offer more than $35,000 to settle the claim, failed to provide conclusive evidence that the insurer had refused coverage. The court held that the claim had not accrued after either of these incidents but instead accrued at Bowers arbitration hearing in March 2005. The court found that even if the initial claims based on the initial refusal by the insurer were time barred , the insurer’s actions at the arbitration hearing gave rise to a claim for bad faith unrelated to the initial refusal which was not time barred.  Therefore the court found that Bowers claim was timely filed and denied the insurer’s motion to dismiss.  The court also denied the insurer’s motion to strike portions of the complaint because the insurer’s motion to did not provide proper grounds for such a motion and instead alleged incorrect statements of law by Bowers, which the insurer can address when answering the complaint. 

Date of Decision: January 18, 2008

Bowers v. Nationwide Ins. Co., 2008 U.S. Dist. LEXIS 4025 (M.D. Pa. Jan. 18, 2008)(Munley, J.)

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JULY 2008 BAD FAITH CASES
MOTION TO REMAND COMPLAINT TO STATE COURT GRANTED WHERE AT LEAST ONE COLORABLE CLAIM EXISTED AGAINST NON-DIVERSE PARTIES (Middle District)

Published on July 7, 2008 in Procedural Issues. Closed

In Kenia v. Nationwide Mutual Insurance Company the insured initiated a complaint against the insurer, for among other things, bad faith relating to the processing of the insured’s claim for underinsured motorist benefits.  Kenia alleged he was injured in a motor vehicle accident and named the insurer, an Ohio corporation with its principal place of business in Ohio, and several alleged claims representatives of the insurer, who were all residents of Pennsylvania. Kenia initiated the action by filing a complaint in the Court of Common Pleas of Luzerne County.  The insurer then filed a notice of removal contending that the United States District Court for the Middle District of Pennsylvania had jurisdiction.  Kenia then filed a motion to remand.  A Magistrate Judge issued a report and recommendation that Kenia’s motion be granted because the complaint states colorable claims against the non diverse parties and therefore complete diversity jurisdiction does not exist. 

If a non diverse party has been joined as a defendant a removing defendant may avoid remand only by demonstrating that the non diverse party was fraudulently joined.  Joinder is fraudulent if there is no reasonable basis in fact or colorable ground supporting the claim against the joined defendant.  If there is even a possibility that a state court would find that the complaint states a cause of action against any one of the resident defendants the joinder must be found proper and the federal court must remand back to the state court. 

Kenia argued that there are colorable claims against all the defendants, including the non-diverse claims representatives, and all were properly named in the action.  The insurer argued that the non-diverse parties were fraudulently joined to defeat federal diversity jurisdiction.  The court found that the insurer did not satisfy its heavy burden of showing that the non-diverse parties were fraudulently joined. Kenia’s complaint advanced at least one claim, the alleged violation of Pennsylvania’s Unfair Trade Practices and Consumer Protection Law,  that was not wholly insubstantial or frivolous against the non-diverse parties.  Therefore the federal court did not have diversity jurisdiction and  granted Kenia’s motion to remand.

Date of Decision: January 25, 2008

Kenia v. Nationwide Mut. Ins. Co., No. 07-CV-1067, 2008 U.S. Dist. LEXIS 5547 (M.D. Pa. Jan. 25, 2008) (Jones, J.)

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JULY BAD FAITH CASES
TRANSFER OF VENUE GRANTED FOR BAD FAITH CLAIM WHERE PUBLIC AND PRIVATE INTERESTS BALANCED IN FAVOR OF TRANSFER (Philadelphia Federal)

Published on July 7, 2008 in Procedural Issues. Closed

     

In Bromily, Inc. v. State National Insurance Company, Inc. transfer of venue was requested for breach of contract and bad faith claims brought by the insured which allege that the insurer failed and refused to pay a claim for benefits owed under the insured’s policy. The insured is a Pennsylvania corporation  while the insurer is incorporated in Texas.  However  the insurer is licensed to issue policies of insurance in Pennsylvania and regularly conducts business in the City and County of Philadelphia.  The insured originally filed the claims in the Court of Common Pleas of Philadelphia County. The insurer filed a notice of removal in the Middle District of Pennsylvania.  The insured field a motion to transfer this matter to the Eastern District of Pennsylvania which was granted.  The insurer then filed a motion to transfer claiming that venue should be laid in the Middle District, rather than in the Eastern District. The court found that under 28 U.S.C. section 1406 venue is proper in the Eastern District because the insurer carries on a continuous and systematic part of its general business in this district and is subject to general personal jurisdiction there.  Therefore the court refused to transfer this case under section 1406 because the insurer resides in the Eastern District and venue is proper there.  However even though the Eastern District is a proper venue for the insured’s claims the court transferred the case to the Middle District under 28 U.S.C. section 1404(a). 

The court found that venue in the Middle District would be proper for this case because the insurer is subject to general personal jurisdiction throughout Pennsylvania and thus is a resident of the Eastern District as well as the Middle District.  Also the insured’s principal place of business is in the Middle district, the Middle District is the situs of the contract, and the relevant insured premises that gave rise to the claim are also located in the Middle District.  A substantial part of the events giving rise to the claim occurred in the Middle District making venue proper in the Middle District.  The sole factor weighing against the transfer of this action is that the insured’s preference is the Eastern District.  While the court acknowledges that great deference should be given to this factor, this preference is outweighed by the countervailing interests favoring transfer to the Middle District.  Therefore even though venue for the insured’s claims is proper in the Eastern District a balancing of private and public interests under section 1404(a) moved the court to transfer the claims to the Middle District. 

Date of Decision: February 8, 2008

Bromily, Inc. v. State Nat’l Ins. Co., 2008 U.S. Dist. LEXIS 9427 (E.D. Pa. Feb. 8, 2008)(Katz, J.)

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JULY 2008 BAD FAITH CASES
THIRD CIRCUIT VACATES SUMMARY JUDGMENT: LOWER COURT DID NOT GIVE PARTIES NOTICE AND ARGUMENT, & GENUINE ISSUE AS TO ENTITLEMENT TO A DEFENSE EXISTED (Third Circuit)

Published on July 7, 2008 in Procedural Issues. Closed

    

In Wolk v. Westport Insurance Corporation,  the insured brought a bad faith claim based on the insurer’s refusal to provide a defense.  The insured attorney had filed a products liability action on behalf of a client. The matter settled, and the client sought to enforce the settlement. A state appellate court reversed a denial of relief from the settlement, finding prima facie evidence that the client or the attorney committed fraud in the inducement by proffering false discovery responses in order to effect the settlement. The attorney notified the insurer of the state appellate court’s decision,  and also stated that he was informed that the other party in the product liability suit intended to hold him liable for the full share of the settlement if they were unsuccessful in the remand proceedings.   However, the insurer declined to provide a defense. The insurer took the position that it was not obligated to defend because there were not pleadings or proceedings directed specifically against the insured or his firm.

The Insured filed an action in the Court of Common Pleas for  breach of contract and bad faith. Insurer Westport removed this action to the District Court,  and then filed a motion to dismiss. The insurer asserted that a potential claim or threat of a claim did not trigger its duty to defend. The District Court granted the insurer’s motion for summary judgment and dismissed the insured’s action with prejudice.  However, the District Court converted the motion to dismiss into a motion for summary judgment, with no explanation and gave no notice to the parties of its intention to do so.

The Appellate Court found that the District Court erred in entering summary judgment without giving the parties notice, and without holding a hearing concerning the motion.  Furthermore there was a genuine issue about whether the insured was entitled to a defense under the policy.  Since there was a possibility that the claim against Wolk should have triggered a defense under his policy, and that the District Court’s entering of summary judgment was not a  harmless error, the Third circuit vacated the order granting summary judgment, and directed the District Court to conduct further proceedings consistent with its opinion.

Date of Decision: May 7, 2008

Wolk v. Westport Ins. Corp., 2008 U.S. App. LEXIS 9856 (3d Cir. May 7, 2008)(Alarcon, J.).

 

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JULY 2008 BAD FAITH CASES
REASONABLE FEE TO BE PAID DOCTOR BY THE INSURED FOR DEPOSITION TESTIMONY IF THE INSURED WISHES TO DEPOSE HIM FOR BAD FAITH CLAIM (Philadelphia Federal)

Published on July 4, 2008 in Discovery and Evidence. Closed

In Laferriere v. Zurich American Insurance Company  the insured brought a bad faith claim against the insurer stemming from an automobile accident where the insured suffered serious injuries.  The insured was involved in an automobile accident with another  driver. The insured had a policy with the insurer which provided for underinsured motorist coverage.  The insured settled the claim within the other driver’s policy limits with the express consent of the insurer and then made a claim under her policy.  After some delay, the insured received a substantial award against the insurer.

The insured brought an action in the United States District Court for the Eastern District of Pennsylvania against the insurer alleging that the insurer acted in bad faith in handling her claim.  The insured claims that the insurer delayed in making an offer of settlement, made totally inadequate settlement offers, and improperly sought to impede the resolution of her claim. The concern presently before the court relates to a physician the insurer retained to examine the insured.  The doctor drafted a report verifying the extent of the insured’s injuries and the fact that they were caused by the accident in question.  However the insurer refused to consent to the submission of the doctor’s report to the arbitrators deciding the case and also refused to permit the insured’s counsel to depose the doctor. 

The insured filed a motion to compel the deposition testimony of the doctor.  The insurer argues that the insured must first agree to pay a witness fee of $3,000 to the doctor because the doctor will be asked his professional opinion cannot be required to express such without compensation. The insured however argued that the doctor will be a fact witness and will not be expressing any professional opinion.  The court ordered upon consideration of the insured’s motion to compel the doctor’s deposition,  that the insured’s counsel first proceed by requests for admission.  If after that process the insured still wishes to depose the doctor the requires him to express a professional opinion the insured will be required to pay him a reasonable fee, not necessarily the $3,000 fee demanded by the insurer.  If the parties are unable to agree on a reasonable fee amount the court will decide the amount after the conclusion of the deposition.

Date of Decision: February 7, 2008

Laferriere v. Zurich Am. Ins. Co., 2008 U.S. Dist. LEXIS 9444 (E.D. Pa. Feb. 7, 2008)(Fullam, J.)

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JULY 2008 BAD FAITH CASES
INSURER’S MOTION FOR PARTIAL SUMMARY JUDGMENT DENIED WHERE UIM CLAIM UNDERVALUED (Western District)

Published on July 4, 2008 in General Bad Faith and Litigation Issues. Closed

    

In McCrory v. State Farm Mutual Automobile Insurance Company, this bad faith claim brought in the United States District Court for the Western District of Pennsylvania arose from an automobile accident involving Plaintiff-driver and another driver.  Plaintiff sought coverage of $100,000  from his insurer based on an underinsured motorist provision in their policy. The insurer refused to make this payment because it determined that Plaintiff’s claim was worth less than $200,000, which is the amount that triggered plaintiff’s UIM coverage.  However, three years after the insurer refused to pay,  Plaintiff was awarded $650,000 by an arbitration panel.  After this award the insurer  paid plaintiff $100,000 in underinsured motorist benefits.  Plaintiff filed a bad faith claim with regard to the handling and denial of her Underinsured Motorist Claim.  The insurer filed a motion for partial summary judgment and argued that Plaintiff cannot prove by clear and convincing evidence that it acted unreasonably in the handling of her claim. 

The court found that a reasonable juror could determine under the clear and convincing standard that the insurer did not have a reasonable basis for denying Plaintiff’s claim.  Plaintiff provided sufficient evidence for a reasonable juror to find bad faith such as insurer’s refusal to assign a monetary value to plaintiff’s claim because it did not know the amount of the first level of UIM coverage.  It is also possible that a reasonable juror could find that the insurer did not act in bad faith, and therefore the matter needs to be submitted to a jury. 

Date of Decision: April 7, 2008

McCrory v. State Farm Mut. Auto. Ins. Co.,  2008 U.S. Dist. LEXIS 28397 (W.D. Pa. Apr. 4, 2008) (Lancaster,G.)

 

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JULY 2008 BAD FAITH CASES
PLAINTIFF SUFFICIENTLY PLEADED BAD FAITH CLAIMS TO SURVIVE AS TO MOTIVE AND INVESTIGATION (Philadelphia Federal)

Published on July 3, 2008 in Claims Handling Procedures. Closed

    

In Brown v. Liberty Mutual Fire Insurance,  plaintiff filed a first party income loss claim in connection with a motor vehicle accident in which plaintiff suffered injuries.  Plaintiff was the driver of a vehicle that was rear ended.  Plaintiff’s policy provided coverage for first party medical expenses up to the amount of $10,000,  and for first party income loss benefits in the amount of $50,000.  Plaintiff made a claim for first party medical expenses which were paid by the insurer.  However,  plaintiff’s claim for income loss coverage was not paid. The insurer’s claims adjustor admitted that she failed to send forms for wage verification to the insured’s treating physicians and did not request the exact dates of disability from the doctors. She also failed to send the insureds’ tax return to a claims auditor after being on notice that the insureds were submitting the return in an attempt to prove wage loss. Two years later,  the insureds counsel contacted the insurer and requested that it pay the wage loss claim. A new claims adjustor was assigned, but the claim remained unresolved.

Plaintiff filed a bad faith and breach of contract claim. The insurer filed a motion for summary judgment and argued that it acted in full compliance with the terms of its policy,  and properly investigated and paid expenses to this claim. 

For the  Breach of  Contract claim, the insurer argued for summary judgment because plaintiff had not presented evidence of specific days of work missed, or actual loss of gross income,  to support her claim.  However,  the court found that the plaintiff had presented evidence in support of her claim that she lost real income.  The court stated that when analyzing a motion for summary judgment the court must view the facts in the light most favorable to the non moving party.  Based on the evidence presented by the plaintiff,  a reasonable jury could conclude that as a result of the accident the plaintiff suffered an actual loss of gross income.  Therefore,  the court denied the insurer’s motion for summary judgment on the breach of contract claim. 

For the Bad faith claim, the court also held that there was a genuine issue of material fact as to the insurer’s motives, and that the long delay and mishandling of the income loss claim could rise above mere negligence to bad faith. Therefore since a reasonable jury could find that the insurer acted in bad faith, the insurer’s motion for summary judgment with regard to the bad faith claim was denied. 

Date of Decision: March 26, 2008

Brown v. Liberty Mut. Fire Ins., 2008 U.S. Dist. LEXIS 24215 (E.D. Pa. Mar. 26, 2008)(Stengel, J.)

 

 

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JULY 2008 BAD FAITH CASES
INSURER DID NOT HAVE DUTY TO DEFEND OR INDEMNIFY AND THEREFORE DID NOT ACT IN BAD FAITH BECAUSE THE POLICY COVERAGE LANGUAGE WAS CLEAR AND UNAMBIGUOUS (Third Circuit)

Published on July 3, 2008 in Coverage Issues. Closed

    

In Henkel Corporation v. Hartford Accident & Indemnity Company; Liberty Mutual Insurance Company, an insured filed a complaint against their insurer for the insurer’s failure to defend and indemnify the insured against products liability suits.  Appellant Henkel corporation was formerly knows as Locite Corporation.  Locite acquired Permatex Company, Inc. in 1972.  In 1978,  Permatex company merged into Locite Corporation. Between 1976 and 1985, the insurer issued to Locite comprehensive general liability insurance policies of completed operations and products liability. In the policies,  Hartford agreed to provide defense and indemnity coverage for bodily injury or property damage.  

After these policies were issued, Henkel purchased Locite and the companies merged.  Lawsuits have been filed in New Jersey, New York, and Pennsylvania state courts by plaintiffs,  alleging injuries as a result of exposure to asbestos containing products, including Permatex brand products.  However,  none of these suits named Henkel, Locite, or Permatex Company as a defendant.  The suits named a wholly owned subsidiary of Henkel, and another entity completely unrelated to Henkel,  as defendants.  However,  Henkel still had previously incurred costs defending and settling some of these Underlying Suits even though it was not named as a defendant.  Henkel filed a claim with the insurer,  and the insurer refused to provide defense and indemnity coverage. 

The insured filed suit for breach of  contract and bad faith. The complaint sought damages and also requests a declaration that the insurer is obligated to defend and indemnify the insured in all pending and future cases alleging injury as a result of exposure to Permatex-brand asbestos containing products. The District Court  dismissed  the  complaint finding that the insurer had no duty to defend Henkel in the Underlying Suits because it had only agreed to defend and indemnify Locite in cases where Locite or a successor in interest was named as a defendant in the action.  The insured then sought relief in the United States Court of Appeals for the Third Circuit. The insured argued that the District Court erred in dismissing their complaint. The appellate court found that the contractual provision at issue was clear and not ambiguous.  The duty to defend and indemnify was only triggered if the insured entity was named as a defendant in the suit.  The court therefore held that the insurer had no duty to defend because an insured entity was not named as a defendant in any of the Underlying Suits.  Therefore the insurer did not breach the contract or act in bad faith by refusing to defend or indemnify the insured. 

Date of Decision: March 27, 2008

Henkel Corp. v. Hartford Accident & Indem. Co., 2008 U.S. App. LEXIS 6496 (3d Cir. Pa. Mar. 27, 2008) (Barry, J.)

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