Monthly Archive for September, 2010

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SEPTEMBER 2010 BAD FAITH CASES
COURT PROVIDES INSURED OPPORTUNITY TO RE-PLEAD BAD FAITH CLAIM ON MOTION TO DISMISS (Philadelphia Federal)

Published on September 11, 2010 in Procedural Issues. Closed

In Delalla v. Hanover Insurance, there was an underlying action between the insureds and a company concerning trademark infringement, unjust enrichment, and unfair competition.  The insureds’ insurer appointed an attorney to represent them, and he reached settlement with the company.  The insureds then filed a complaint in the current case, asserting a breach of the insurer’s obligation to the insurer by entering into an agreement to settle the underlying action.

Among the claims was a bad faith allegation against the insurer.  The insureds claimed that the insurer acted in bad faith by “(1) issuing an equivocal reservation of rights letter rather than full and unequivocal coverage and defense; (2) by using its reservation as an instrumentality of coercion and duress against plaintiffs; and (3) placing its profit motivation exclusively and blindly ahead of its insureds’ business rights and benefit.”  However, the court determined that the insureds needed to file an amended complaint in order for the allegation to survive because the original Complaint did not comply with pleading standards.  Many of the allegations were implausible, and there were multiple procedural and substantive defects.

The insureds had refused to file an amended complaint, so in this opinion the court decided to require them to show cause as to why it should not dismiss the Complaint.  It could have dismissed the case at this time, but it instead gave the insureds ten days to file a memorandum to show cause why the Complaint should not be dismissed without prejudice.

Date of Decision:  August 17, 2010

Delalla v. Hanover Ins., Civil Action No. 10-858, United States District Court for the Eastern District of Pennsylvania, 2010 U.S. Dist. LEXIS 84826 (E.D. Pa. Aug. 17, 2010) (Baylson, J.)

SEPTEMBER 2010 BAD FAITH CASES
NO RECONSIDERATION OF A DENIAL OF A BAD FAITH CLAIM WHEN EVIDENCE PRESENTED IS INCOMPLETE (Western District)

Published on September 11, 2010 in Procedural Issues. Closed

In Graham v. Progressive Direct Insurance Company, the insureds had filed a motion for reconsideration after the court adopted the recommendation of a special master to dismiss their claims for underinsured motorists benefits, bad faith, and loss of consortium.

The court noted that “reconsideration of a prior order is only warranted if the moving party demonstrates: (1) an intervening change in the controlling law; (2) the availability of new evidence which was not available when the court issued its order; or (3) the need to correct a clear error of law or fact or to prevent a manifest injustice.”  The insureds in this case did not assert that there had been any changes in the controlling law or that there was a clear error of law or fact.  They only claimed that new evidence of depositions should persuade the court to reconsider the ruling that the insureds were not entitled to the discovery of certain claims information.

The court rejected the insureds’ argument, determining that the evidence the insureds relied upon was incomplete.  It therefore denied the insureds’ motion for reconsideration.

Date of Decision:  August 6, 2010

Graham v. Progressive Direct Ins. Co., Civil Action No. 09-969, United States District Court for the Western District of Pennsylvania, 2010 U.S. Dist. LEXIS 79402 (W.D. Pa. Aug. 6, 2010) (Fischer, J.)

SEPTEMBER 2010 BAD FAITH CASES
NO BAD FAITH WHERE INSURER PROVIDES THE INSUREDS OPPORTUNITIES TO CORRECT THEIR INSURANCE POLICY (Allegheny County)

Published on September 10, 2010 in Claims Handling Procedures. Closed

In Addlespurger v. Motorists Mutual Insurance Company, the insureds were issued a homeowner’s policy for their condominium by the insurer.  The policy provided $50,000 coverage for condominium, $50,000 for personal property and $20,000 for the loss of use.  A fire occurred in the condominium, damaging many items around the unit.

A claims specialist advised the insureds that the repairs were not complex and could be finished in approximately one month.  He also said that the insurer would pay for the insureds to stay at a furnished apartment for the month, but the insureds instead decided to stay at a more expensive hotel.  For approximately four months, the insureds and the claims specialist could not agree on estimates for repairs and temporary living expenses, but the insurer did tender thousands of dollars to the insureds in multiple payments.

Around nine months after the fire, the parties met to present their final estimates, and the insureds’ estimate was about $15,000 greater than the insurer’s.

The insureds filed a claim against the insurer, alleging that the insurer acted in bad faith in refusing and delaying payment of their benefits.  The court noted that in Pennsylvania, a plaintiff must show that “the insurer (1) did not have a reasonable basis for denying benefits under the policy and (2) knew or recklessly disregarded its lack of a reasonable basis in denying the claim” (Condio v. Erie Ins. Exchange, 2006 PA Super 92, 899 A.2d 1136, 1143 (Pa. Super. 2006).  Here, it determined that the insurer did not act unreasonably in delaying payment with ill will or self-interest, as the evidence established that the it acted reasonably in responding promptly to communication and did not act in bad faith.  Therefore, the court ruled in favor of the insurer.

Date of Decision:  April 16, 2010

Addlespurger v. Motorists Mut. Ins. Co., Civil Action No. G.D.05-001524, Common Pleas Court of Allegheny County, Pennsylvania, Civil Division, 2010 Pa. Dist. & Cnty. Dec. LEXIS 137 (Pa. County Ct. April 16, 2010) (James. J.)

SEPTEMBER 2010 BAD FAITH CASES
NO BAD FAITH WHERE INSURER PROVIDES THE INSUREDS OPPORTUNITIES TO CORRECT THEIR INSURANCE POLICY (Middle District)

Published on September 9, 2010 in General Bad Faith and Litigation Issues. Closed

In Amica Mutual Insurance Company v. Fogel, the dispute centered on whether Pennsylvania or New Jersey law should apply to a policy that the insurer issued to the insured.  The policy was negotiated and delivered in New Jersey, but a fatal accident had occurred in Pennsylvania after the insureds had moved there.  The insureds had not changed their driver’s licenses, registration, and insurance to reflect their new status as Pennsylvania residents when the accident occurred.

The magistrate judge assigned to the case applied a Pennsylvania choice of law analysis, which led to his recommendation that (1) New Jersey law be applied to the insurance policy at issue, and (2) the insurer’s Motion for Summary Judgment be granted with respect to the insureds’ counterclaim for bad faith.  The insureds filed an objection to the recommendations.

The insureds had claimed that there was bad faith in handling the claim for their insurance benefits.  If Pennsylvania law applied, the insureds could get stacked benefits, but could not do so if New Jersey law applied.  The insureds argued that the carrier failed to conduct an adequate investigation into their position that Pennsylvania law applied, and that this constituted bad faith.  In adopting the Magistrate Judges’ Report and Recommendation, the District Judge observed that the insureds asserted that it was impossible to follow the insurer’s procedure to obtain drivers licenses and register vehicles when moving from New Jersey to Pennsylvania, but in fact it was definitely possible for that to occur.  The Magistrate Judge found that New Jersey law did apply, thus undermining the insureds claim that there could be bad faith in connection with the adequacy of investigating the application of Pennsylvania law.  Further, the Magistrate Judge had stated that: “The very existence of questions regarding the proper application of law in this case, and the fact that there are extant judicial decisions that have considered the very legal questions raised in this case and have reached mixed results, substantially undermines the [insureds’] bad faith claim in this case.” The District Court therefore accepted the magistrate judge’s recommendations, granting the insurer’s Motion for Summary Judgment on the bad faith claim while denying the insureds’ cross-Motion for Summary Judgment.

Date of Decision:  July 29, 2010

Amica Mut. Ins. Co. v. Fogel, Civil Action No. 1:09-cv-674, United States District Court for the Middle District of Pennsylvania,  2010 U.S. Dist. LEXIS 76744 (M.D. Pa. July 29, 2010) (Jones, III, J.)