Daily Archive for August 29th, 2008

AUGUST 2008 BAD FAITH CASES
CLAIM PRECLUSION DIRECTLY BARRED BAD FAITH CLAIM (Western District)

Published on August 29, 2008 in Procedural Issues. Closed

        

In Fogarty v. USA Truck, Inc. a ten count complaint was brought by Fogarty, including a bad faith claim arising out of a vehicular accident in which Fogarty was involved.  Fogarty was employed as an interstate driver and his employer was self insured and provided insurance coverage to him.  Fogarty was scheduled to make a delivery on a morning when there were dangerous road conditions. Fogarty advised the dispatcher that given the situation, he did not want to leave until conditions had improved.  Fogarty’s employer, through the risk manager and dispatcher, informed him if he did not leave he would be fired. Fogarty went on the delivery and was involved in a vehicular accident. In the accident report Fogarty told police at the scene that his employer had wrongfully caused him to drive in unsafe conditions by threatening to fire him. The employer was not happy about this statement and the risk manager made a statement that Fogarty would be lucky if they did anything for him.  Fogarty was subsequently fired for failure to return to work even though he had presented excuses from two doctors stating that he had not yet recovered from injuries received in the accident. Another driver involved in the accident filed suit against Fogarty and his employer and an attorney named Levin was provided to represent both parties.  However, Fogarty claims that his employer would not let the attorney do anything to defend him without first getting permission.  Fogarty then hired another attorney and Levin withdrew his representation due to conflict of interest which Fogarty alleged was a breach of fiduciary duty. Fogarty’s employer then hired a third attorney, McKenna, to represent Fogarty but again would not let him fully defend him without prior approval. Therefore Fogarty fired him.

Fogarty filed a ten count complaint including a bad faith claim against his employer and his employer’s risk manager individually.  The employer and risk manager individually filed motions to dismiss.  The lower court dismissed the insured’s claims. The appellate court affirmed the district court’s dismissal of the bad faith insurance claim because, even if one were to assume a duty on the part of the employer to provide the insured with legal representation, the record showed that the employer had initially provided such service to Fogarty.  Therefore the court found that claim preclusion directly barred Fogarty’s bad faith claim against his employer/insurer. In addition since the claims against the employer had been dismissed , no claim could proceed against the corporation’s employee who was acting within the scope of his employment.  The  court found that since the claims against the employer had been precluded, the claims against the risk manger individually were also barred. Therefore the motions to dismiss were granted. 

Date of decision: June 30, 2008

Fogarty v. USA Truck, Inc.,2008 U.S. Dist. LEXIS 50270 (W.D. Pa. June 30, 2008)(Standish, J.)

J.M.A.
    

AUGUST 2008 BAD FAITH CASES
INSURER’S MOTION TO BIFURCATE BAD FAITH CLAIM PENDING DISPOSITION OF THE DUTY TO DEFEND CLAIMS DENIED (Philadelphia Federal)

Published on August 29, 2008 in Procedural Issues. Closed

         

In Rohm and Haas Company v. Utica Mutual Insurance Company, the insureds commenced an action seeking a declaratory judgment that the insurer had a duty to defend and indemnify insureds in connection with a lawsuit brought against insureds for alleged exposure to contaminated air and groundwater from insureds’ manufacturing facility.  Insureds also asserted breach of contract and a bad faith claim arising from insurer’s handling and investigation of the underlying claim.  Insurer moved to bifurcate discovery and trial relating to the bad faith claim pending the outcome of the duty to defend claims because the insurer argued that a ruling in its favor on the duty to defend claims would dispose of the bad faith claim.  The court acknowledged that claims may be bifurcated for convenience, to avoid prejudice, or to expedite and economize.  Addressing the insurer’s argument, the court noted that, while bad faith claims generally require a predicate contractual claim, such as breach of a duty to defend, bad faith claims may also proceed based on other grounds, such as the handling and investigation of the underlying claim in bad faith.  Therefore, the duty to defend claims were not necessarily dispositive of the bad faith claim.  The court also noted that that the insurer failed to demonstrate that bifurcation would promote expedition or economy.  As a result, the insurer’s motion to bifurcate was denied. 

Date of decision:  June 20, 2008

Rohm and Haas Company v. Utica Mutual Insurance Company, United States District Court for the Eastern District of Pennsylvania, Civil Action No. 07-584 (E.D. Pa. June 20, 2008) (Pratter, J.)
R.E.M.