Daily Archive for January 20th, 2010

JANUARY 2010 BAD FAITH CASES
TESTIMONY OF INSURED’S PUBLIC INSURANCE ADJUSTER EXCLUDED ON BAD FAITH CLAIM BUT ALLOWED ON INSURER’S ALLEGED VIOLATION OF THE UIPA (Middle District)

In Hered, LLC v. Seneca Insurance Company, the insurer denied the insured’s claim for a fire loss and damage to its business premises on the basis that the insured fraudulently misrepresented the functioning of the sprinklers in the insured building.  The insured sued the insurer for breach of contract and bad faith. The insurer filed a motion to exclude expert testimony of the public insurance adjuster who had been hired by the insured to adjust its fire loss. The insurer argued that a public adjuster should not be allowed to testify that the insurer acted in bad faith in handling the insured’s claim and failing to pay the claim. 

At oral argument, the insured’s counsel conceded that the expert was not qualified and competent to testify that the insurer acted in bad faith. The court held that while expert testimony may be appropriate to establish that an insurer lacked a reasonable basis for denying an insured’s claim, in the present case, the insured could not present expert testimony regarding the bad faith claim.  Accordingly, the court granted the insurer’s motion to exclude expert testimony with respect to the bad faith claim. 

The court denied the insurer’s motion to exclude expert testimony with respect to the expert’s opinion that the insurer had violated the Unfair Insurance Practices Act  (UIPA).  The court found that the probative value of the expert testimony substantially outweighed any danger of  unfair prejudice to the insurer and that any possible prejudice could be cured by an appropriate jury instruction.

Date of Decision: February 21, 2008

Hered, LLC v. Seneca Ins. Co., Civil Action No. 3:CV-06-0255, United States District Court for the Middle District of Pennsylvania, 2008 U.S. Dist. LEXIS 111943 (M.D. Pa February 21, 2008) (Blewitt, U.S.M.J.).

JANUARY 2010 BAD FAITH CASES
NO BAD FAITH WHERE INSURER ACTED PROMPTLY AND PROFESSIONALLY AND ARBITRATION AWARD WAS 50% MORE THAN INSURER’S OFFER (Pennsylvania Superior Court)

In Johnson v. Progressive Insurance Company, the insured’s car was rear-ended by another vehicle, resulting in a knee injury.  The insured’s automobile insurance included $100,000 in underinsured motorist (“UIM”) benefits.  Over one year after the accident, the insured advised the insurer that he intended to pursue his UIM coverage.  Within days, the insurer acknowledged the claim and promptly consented to the insured’s request to settle the underlying tort action against the driver of the other car. 

One month after the insured settled his tort claim, the insurer requested documentation to support the nature and extent of the insured’s injuries, as well as information regarding the insured’s five prior automobile accidents.  Instead of providing the requested documentation, the insured made a demand for arbitration and suggested that the insurer’s request relating to the prior accidents was made in bad faith.  The insured did not provide the insurer with permission to review his medical records for another month, and the insurer did not receive all of the medical records for an additional four months.

The insured demanded the full amount of UIM coverage of $100,000, and the insurer offered $30,000. At arbitration, the insured was awarded $75,000.  The insured subsequently sued the insurer for bad faith.  The trial court granted the insurer’s motion for summary judgment, and the insured appealed. 

The Superior Court affirmed the trial court, stating that there was “no question that the claim was handled promptly and professionally by the insurer.”  The court found that the facts involved nothing more than a normal dispute between an insured and insurer over the value of an UIM claim. The court noted that the insurer’s offer was slightly less than fifty percent of the insured’s award, and emphasized that bad faith is not present merely because an insurer makes a low but reasonable estimate of an insured’s damages.  The court stated that allowing an action to proceed under these facts “would invite a floodgate of litigation any time an arbitration award is more than an insurer’s offer to settle, even though the award is substantially below the insured’s demand.”

Date of Decision: December 28, 2009

Johnson v. Progressive Ins. Co., No. 3173 EDA 2008, Superior Court of Pennsylvania, 2009 Pa. Super. LEXIS 4988, 987 A.2d 781 (Pa Super. Ct. December 28, 2009) (Bowes, J.)