Monthly Archive for February, 2011

FEBRUARY 2011 BAD FAITH CASES
THIRD CIRCUIT AFFIRMS SUMMARY JUDGMENT ON BAD FAITH CLAIM WHEN INSURER AT MOST ACTED NEGLIGENTLY IN FAILING TO TAKE CERTAIN ACTIONS (Third Circuit)

In Luse v. Liberty Mutual Fire Insurance Company, the insureds, husband and wife, suffered damages to their condominium from an accidental fire in their kitchen.  The insurer covered them under a condominium insurance policy.  Four days after the fire occurred, the insurer sent a representative to the home, and he determined that the residence was livable.  The wife, who was the only resident present at the time, did not ask about relocation when the representative inspected the home.

The husband had multiple phone conversations with the insurer’s claims supervisor, but he also allegedly did not initially ask about relocation.  About three weeks after the fire, the husband’s respiratory therapist contacted two of the insurer’s employees and told them that keeping the insured in his home was risky to his health.  At that time, the insurer quickly relocated the insureds to a hotel.

The insureds were not satisfied with the relocation at that time, and they filed a suit for bad faith under Pennsylvania’s Bad Faith Statute, 42 Pa. Cons. Stat. § 8371.  They first alleged that the insurer failed to properly investigate their claim and did not promptly act to relocate them to another residence immediately.  They also claimed that the insurer acted in bad faith by not informing the insureds that their condominium insurance policy provided them with primary living expense coverage.

The district court had determined that there was no evidence sufficient to create a genuine issue of material fact as to whether or not the insurer acted in bad faith, and the Third Circuit agreed.  When the initial inspection occurred four days after the fire, the wife did not mention a possible need to relocate, and it was disputed whether she mentioned her husband’s health condition at all.  Also, once the insurer did gain knowledge of the insured’s respiratory condition, it immediately took steps to relocate the family.  At most, the court stated, the failure to learn of the insured’s medical condition for 20 days after the fire was negligent, and it therefore did not constitute bad faith.

Concerning the other bad faith allegation, the Third Circuit agreed with the district court that the insurer’s failure to inform the insureds about their condominium policy providing primary living expense coverage was not an intentional withholding of information.  It held that because the insurer’s representative determined upon inspection that the condominium was livable and the insureds made no request for relocation, the insurer had a reasonable basis for withholding the information about living expenses.  Therefore, the court affirmed the district court’s order granting summary judgment to the insurer on the bad faith claim.

Date of Decision:  February 11, 2011

Luse v. Liberty Mut. Fire Ins. Co., No. 10-3363, United States Court of Appeals for the Third Circuit, 2011 U.S. App. LEXIS 2725 (Feb. 11, 2011) (Ambro, J. Chagares, J., and Nygaard, J.)

FEBRUARY 2011 BAD FAITH CASES
COURT DENIES INSUREDS’ MOTION TO AMEND TO INCLUDE BAD FAITH ALLEGATIONS TO A CLASS ACTION WHEN MOTION FILED AFTER 8 MONTHS OF DISCOVERY (Western District)

In Graham v. Progressive Direct Insurance Company, one of the two married insureds was involved in a motor vehicle accident with an underinsured motorist who failed to stop at a stop sign.  The other driver’s insurer determined that she was at fault, and the insured’s injuries were in excess of the $25,000 limits under her policy.  That insurer paid the insured the full $25,000 it owed under the policy, and the insureds then made an underinsured motorists claim with their insurer. The insureds had a stacked policy with limits of $500,000.

The insurer made a settlement offer to the insureds for $55,000, but the insureds rejected the offer and filed suit in response.  They alleged that the insurer acted in bad faith during the settlement negotiations, as its offer was “far below any reasonable value attributable to the . . . claim and [the insurer] knew that the offer was far below a fair and reasonable offer.”  They also alleged that the insurer’s offer was an attempt to pay less for their claim than similar underinsured claims it had previously handled, and that it failed to follow its own internal procedures, rules, and claim-handling practices while evaluating their claim.  Finally, it was alleged that the insurer acted in bad faith in removing the uninsured/underinsured arbitration clause from the insurance policy without giving notice to the insureds and without reducing their premiums.

After eight months of discovery, and eight months after the expiration date for filing to amend pleadings and join parties, the insureds filed a Motion for Leave to File a Second Complaint, seeking to transform the litigation to a class action suit.  They claimed that the class of plaintiffs included all Pennsylvania insureds who purchased an auto policy from the insurer with an uninsured/underinsured motorist arbitration provision that was eventually eliminated from the policy without notice.  Before the court in this opinion was the motion to file the Second Complaint.

The court analyzed the motion under Rules 16 and 15 of the Federal Rules of Civil Procedure.  Rule 16(b) states that “[a] schedule may modified only for good cause and with the judge’s consent.”  In this case, the court concluded that the insureds failed to demonstrate good cause to amend the schedule.  In addition to submitting their motion eight months after the deadline for amending pleadings and joining parties, the insured’s assertion that they relied on evidence in filing the motion that they had not learned of until months after the deadline was dismissed.  Instead, the insureds relied on facts that were in their possession since the outset of litigation.

Under Rule 15, courts are directed that “the court should freely grant leave when justice so requires.”  However, prior federal case law had stated that courts should deny motions to amend when there would be undue delay or prejudice towards a party.  The court determined that the insurer demonstrated that it would be subject to undue delay if it granted the motion, as the insurer had already spent eight months in discovery.  It also felt that the insurer would be prejudiced if it authorized the amendment, as it would “transform this litigation from a straightforward individual action brought by two plaintiffs into a complex class action involving potentially hundreds or thousands of plaintiffs.”  Because neither Rule 15 nor Rule 16 helped the insureds’ case, the court denied the insureds’ Motion for Leave to File a Second Amended Complaint.

Date of Decision:  September 15, 2010

Graham v. Progressive Direct Ins. Co., Civil Action No. 09-969, United States District Court for the Western District of Pennsylvania, 271 F.R.D. 112; 2010 U.S. Dist. LEXIS 96324, (Sept. 15, 2010) (Fischer, J.)

 

A summary on this blog concerning a prior opinion from this case can be found here.

FEBRUARY 2011 BAD FAITH CASES
MOTION TO STAY BAD FAITH CLAIM DENIED BECAUSE BREACH OF CONTRACT CLAIM HAD NOT YET BEEN DISPOSED (Middle District)

In Scotti v. USAA Casualty Insurance Company, the insured was injured in a car accident, and she claimed that the negligence of the diver of the other car caused it when he failed to stop for a traffic signal.  The other driver was insured with a bodily injury limit of $100,000, but the insured claimed that her injuries cost more than that amount.  Her policy with the insurer included underinsured motorist coverage, and she informed the insurer about eight months after the accident that she would pursue a claim.

The insurer notified the insured that although it received authorization to obtain her medical and wage information, her claim would remain unresolved because her treatment was ongoing.  The insured then filed a Complaint with counts for breach of contract and bad faith. 

Before the court in this opinion was a motion by the insurer to strike certain paragraphs from the breach of contract claim and stay the bad faith claim.

With respect to the breach of contract claim, the insurer contended that some of the allegations in that section included phrases more often associated with bad faith, which would unfairly prejudice the insurer before a jury.  The court, however, could not conclude that the disputed paragraphs were “redundant, immaterial, impertinent, or scandalous such that the interests of justice require[d] the drastic remedy requested,” and it denied the motion.

Concerning its motion to stay the bad faith claim, the insurer had argued that because the insured had not succeeded on her breach of contract claim, there was no basis for the bad faith claim.  Prior case law, however, had only suggested that “a bad faith action cannot lie where it has been determined that there has been no breach of a duty under the insurance contract.”  In this case, the breach of contract claim had not yet been decided.  Also, the court felt that it would be best for all parties if discovery occurred for the two claims simultaneously.  The court therefore denied the insurer’s motion for a stay on the bad faith claim.

Date of Decision:  February 11, 2010

Scotti v. USAA Cas. Ins. Co., No. 3:10cv1538, United States District Court for the Middle District of Pennsylvania, 2011 U.S. Dist. LEXIS 13515, February 11, 2011 (Munley, J.)

FEBRUARY 2011 BAD FAITH CASES
FEBRUARY 2011 BAD FAITH CASES
SUMMARY JUDGMENT TO INSURER ON BAD FAITH CLAIM WHEN INSURER REASONABLY BELIEVES INSURED FRAUDULENTLY SUBMITTED HIS CLAIM; EXPERT OPINION NOT USEFUL (Third Circuit)

In Lockhart v. State Farm Mutual Auto Insurance Company, the insured owned a truck.  Under a policy with the insured, the insurer covered the vehicle against theft.  In May 2007, the insured alleged that his vehicle was stolen, and the vehicle was never recovered.  Exceptions to the policy existed if the vehicle was stolen “by or at the direction of an insured” or if the insured “made false statements with the intent to conceal or misrepresent any material fact or circumstance in connection with any claim under [the] policy.”

After an investigation, the insurer denied the insured’s claim, stating that the claim was fraudulent because the insured did not have his vehicle stolen without his knowledge.  The insured then filed a suit, asserting claims for breach of contract and bad faith.  The district court at first granted summary judgment to the insurer on the bad faith claim and denied summary judgment on the breach of contract claim, although it later also dismissed the breach of contract claim. 

The appeal before the Third Circuit, however, only addressed the initial granting of summary judgment on the bad faith claim.

The insured submitted two arguments on appeal.  Fist, he claimed that the insurer denied his claim out of spite for a similar claim he had submitted four years earlier for a stolen automobile.  Additionally, the insured asserted that the district court erred when disregarding his expert witness’s report.  The expert, in his report, stated his opinion that the insurer had no legitimate reason to deny the insured’s claim, and that it only denied the claim in retribution for having paid the insured’s prior claim.

The Third Circuit did not accept either of the insured’s arguments.  The insured had submitted an internal communication from within the insurer where an employee stated that he would not “reward another fraudulent claim from [the insured].”  The court interpreted this communication as the insurer simply demonstrating that it believed that the insured’s current claim was fraudulent, and therefore it had a reasonable basis to deny the claim.  Also, the court agreed with the district court’s determination that the expert opinion did not contribute any useful information other than stating an opinion.  Therefore, the Third Circuit affirmed all of the district court’s orders, including the one granting the insurer summary judgment on the bad faith claim.

Date of Decision:  February 8, 2011

Lockhart v. State Farm Mut. Auto. Ins. Co., No. 10-1992, United States Court of Appeals for the Third Circuit, 2011 U.S. App. LEXIS 2476 (February 8, 2011) (Greenberg, J.)

FEBRUARY 2011 BAD FAITH CASES
NO BAD FAITH WHEN INSURER JUSTIFIABLY REQUESTS EXAMINATION UNDER OATH TO DETERMINE INSURED’S KNOWLEDGE OF PROPERTY’S DETERIORATING CONDITIONS AND WHERE JURY FINDS PAYMENT $1 MILLION LOW (Philadelphia Commerce Court)

In Portside Investors, L.P. v. Northern Insurance Company of New York, the insured owned Pier 34 in Philadelphia. it was issued a first party Property Policy by the insurer that covered risks of direct physical loss to the pier and the building on it for up to $4.3 million.  It contained certain exclusions for different causes of loss, including collapse, but collapses would be covered by the policy if caused by hidden decay.

In May 2000, a portion of Pier 34 collapsed, killing three individuals and injuring others.  The insured quickly filed an insurance claim with the insurer, and the insured hired a public adjuster and another consulting company to handle the claim and investigate the cause of the collapse, respectively.  Five months later, the insured submitted a Sworn Proof of Loss seeking over $15 million, and it identified the cause of loss as hidden decay. 

The insurer informed the insured that first party property coverage was available for certain property damage and other expenses, and it eventually paid the insured $2.7 million to settle claims for the loss of structure on the pier, costs of debris removal, and lost income.  It then made a payment of $200,000 for the actual cash value of the pier. 

The insured was not satisfied with the amount paid for the pier’s actual cash value, and it demanded an appraisal.  Despite the policy stating that either party can demand an appraisal if it disagrees with the other party over the value of the property, the insurer never selected an appraiser.  The insured proceeded to file a suit against the insurer for breach of contract and bad faith.

The case went to trial, and the jury awarded the insured over $1.4 million as the actual cash value of the pier at the time of collapse.  While it increased the award to the insured for actual cash value by over $1.2 million, the court found that the insurer’s conduct did not amount to bad faith under Pennsylvania’s bad faith statute, 42 Pa. C.S.A. § 8371.  The insured then filed a motion for post-trial relief regarding its bad faith claim, and the court denied the motion.  The insured filed an appeal of the court’s decision.  The trial court issued an opinion for the appellate court’s review as required by the Pennsylvania Rules of Civil Procedure.

After discussing bad faith statue, the court analyzed the facts of the case in light of the necessary standards in finding bad faith on the part of an insurer.  In this case, the insured alleged that the insurer acted in bad faith when it requested an examination under oath, after it had paid some of the claims to the insured and after the insured made a request for an appraisal to determine the pier’s actual cash value.

The court noted several facts and events that led to a belief that the insured knew of the pier’s physical decline prior to its collapse.  Both principals who were leasing the pier from the insured had learned of the deteriorating conditions in the year leading up to the incident.  The insurer requested an examination under oath of one of the principals to determine his knowledge of the pier’s decay, and the court determined that this request, even after the insured demanded an appraisal, “was not made in and did not constitute bad faith.”  In fact, in addition to failing to take any action to compel the insurer to appoint an appraiser, the insured did not seek to appoint an appraiser itself.  Because it found no bad faith on the part of the insurer, the Court opined that it had appropriately found in favor of the insurer on the statutory bad faith claim.

Date of Decision:  January 5, 2011

Portside Investors, L.P. v. Northern Ins. Co., No. 889, Common Pleas Court of Philadelphia County, Pennsylvania, Civil Trial Division, 2011 Phila. Ct. Com. Pl. LEXIS 19 (Jan. 5, 2011) (Bernstein, J.)

 

In a later decision on January 13, 2011, the Court recommended a reversal of the jury verdict with respect to the awarding of $1.4 million based on the breach of contract claim.  This opinion did not address the bad faith claim.  This later proceeding can be found at Portside Investors, L.P. v. Northern Ins. Co., 2011 Phila. Ct. Com. Pl. LEXIS 22,

20 Pa. D. & C.5th 497 (Jan. 13, 2011) (Bernstein, J.).

FEBRUARY 2011 BAD FAITH CASES
SUMMARY JUDGMENT GRANTED TO INSURER ON BAD FAITH CLAIM (Philadelphia County Common Pleas Court)

In Garvin v. Allstate Insurance Company, the insured had appealed an order the court issued in 2008 granting the insurer summary judgment with respect to her bad faith claim.  Without stating the facts, the court noted that to establish bad faith, an insured must demonstrate that the insurer lacked a reasonable basis for denying benefits and knew or recklessly disregarded the lack of a reasonable basis for such denial.

Here, the court determined that the insurer properly relied on its own inspections in addition to the opinions of other inspectors when making its decision to deny benefits under the insurance policy’s exclusions.  Therefore, the court affirmed its granting of summary judgment to the insurer on the bad faith claim.

Date of Decision:  January 19, 2011

Garvin v. Allstate Ins. Co., No.: 2729, Common Pleas Court of Philadelphia County, Pennsylvania, Civil Trial Division, 2011 Phila. Ct. Com. Pl. LEXIS 9, (Jan. 19, 2011) (Di Vito, J.)

FEBRUARY 2011 BAD FAITH CASES
BAD FAITH SUIT REMANDED TO STATE COURT WHEN IT IS CLOSELY RELATED TO A PENDING STATE COURT CONTRACT SUIT (Western District)

In Columbia Gas of Pennsylvania v. American International Group, two individuals were injured in a gas explosion.  Contractors were installing utility lines in the area where a guard rail was being installed when they punctured a gas line, causing the explosion.  The victims sued Columbia Gas, Heath Consultants, and two contractor defendants in state court as a result of the injuries they sustained.

Columbia Gas then sued Heath Consultants and several insurers in a separate bad faith action, which the opinion summarized here addressed.  Columbia asserted that Heath Consultants, a policyholder of the suit’s insurer defendants, entered into an agreement with it to procure certain coverage, indemnify it, and include it as an additional insured on insurance policies.  The case was removed to federal court on grounds of diversity jurisdiction, and Columbia then filed a motion to remand.

Columbia argued that the federal court should not exercise jurisdiction over the separate bad faith action because of the related pending state court litigation.  The defendants asserted that the Declaratory Judgment Act, 28 U.S.C. § 2201, allows the federal court to exert jurisdiction.  The act states, in part, that a court “may declare the rights . . . of any interested party.”

The court, however, limited the scope of the Declaratory Judgment Act.  It stated that courts should try to avoid “duplicative and piecemeal litigation.”  In this case, the bad faith claim before the court and the underlying claim involving contract law were somewhat duplicative and related.  Despite the underlying claim focusing on breach of contract and personal injuries and the current claim being for bad faith, bad faith presupposes an insurer/insured relationship.  Whether Columbia was considered an insured, and therefore whether it would be eligible to state a bad faith claim in the current action, depended on its liability in the underlying action.

The court thus determined that the two claims were not separate and distinct.  It finally noted that several courts within the Third Circuit’s jurisdiction “have declined to hear declaratory coverage matters between insureds and insurers, even if accompanied by a coercive claim, when the insured’s personal injury case was pending in state court.”  It determined that the entire litigation should be remanded to the state court where the underlying litigation was pending, and it therefore granted Columbia’s Motion to Remand.

Date of Decision:  January 27, 2011

Columbia Gas v. Am. Int’l Group, No. 10-1131, United States District Court for the Western District of Pennsylvania, 2011 U.S. Dist. LEXIS 7919, (Jan. 27, 2011) (Ambrose, J.)

FEBRUARY 2011 BAD FAITH CASES
INSURER’S MOTION TO DISMISS GRANTED WHEN INSURED’S POLICY APPLICATION CONTAINS NUMEROUS FRAUDULENT MISREPRESENTATIONS (Philadelphia Federal)

In Sadel v. Berkshire Life Insurance Company of America, the insured was a pharmacist who owned two pharmacies in Philadelphia.  He decided to seek treatment after using unprescribed narcotics from his pharmacy’s supply for about three months.  He was diagnosed with substance abuse disorder and underwent a series of individual and group therapy sessions. 

More than two years after first seeking treatment, the insured purchased a disability insurance policy from the insurer.  On his application, he stated that he never had used narcotics or any other controlled substance, that he never had received counseling or treatment for alcohol or drug use, and that he had not been treated in the past ten years for anxiety, depression, nervousness, stress, or mental/nervous disorder.  Later, he claimed that he did not disclose his use of substances and subsequent treatment because he “breezed through” the application questions with the insurer’s agent, and that he wanted to keep his treatment confidential “because of the stigma in society associated with non-prescription drug use.”

After the insurer’s agent completed the application, he mailed it to the insured, who signed it.  A portion of the contract stated that the insured affirmed that all answers he gave were complete and true to the best of his knowledge.  He was issued the disability insurance policy about two weeks later.

Around two years after being issued the disability policy, the insured was the victim of an armed robbery at one of his pharmacies, where he was shot in the hand.  He had three fingers amputated and allegedly suffered severe emotional and mental distress as a result of the incident.  He returned to work part-time until he was robbed again only a few months later.  Soon after the second robbery, he decided he could no longer work at the pharmacy, put the insurer on notice of a disability claim, and sold one of his pharmacies.

Eventually, the insurer obtained medical records, which divulged that the insured had taken narcotics in the past and sought treatment for it.  The insurer’s claims adjuster notified the insured that it found inconsistencies in his policy application, and she forwarded a memorandum on the issue to the company’s legal department. 

Before the insurer took action or completed its investigation, the insured filed suit, seeking money damages for the disability income benefits.  His Complaint contained counts for breach of contract and bad faith.  The insurer filed a motion to dismiss the entire Complaint.

The insurer asserted that it could properly rescind the insured’s disability policy based on numerous false misrepresentations made by the insured on his application.  The court first noted that “under Pennsylvania law, a life insurance policy is void ab initio where the applicant’s representations are:  1) false; 2) made fraudulently or otherwise made in bad faith; and 3) material to the risk assumed.”  In this case, the insured actually admitted to his treating social worker and acknowledged at deposition that some of his responses on the policy application were fraudulent misrepresentations.  The court therefore determined that the policy could be rescinded by the insurer, and it would not be breaching its contract in doing so.

Concerning the bad faith claim, the insured alleged that there was no reason for denying his disability claim and that the insurer unjustifiably delayed its decision for a long time before inappropriately threatening to rescind the insured’s policy.  The court dismissed the insured’s expert’s opinion that the insurer acted in bad faith as failing to create a genuine issue of material fact or provide clear evidence of bad faith.  The undisputed record showed that the insured took four months to produce documents requested by the insurer for its investigation, and the insurer also had difficulty obtaining documents from the insured’s therapist.  The expert’s report also contained inadmissible legal opinions about Pennsylvania law.  These factors, combined with the insured’s fraudulent misrepresentations creating a reasonable basis to deny him benefits, caused the court to grant the insurer’s motion for summary judgment with respect to the bad faith claim and all other counts in the Complaint.

Date of Decision:  January 28, 2011

Sadel v. Berkshire Life Ins. Co. of Am., Civil Action 09-612, United States District Court for the Eastern District of Pennsylvania, 2011 U.S. Dist. LEXIS 8993, (Jan. 28, 2011) (Goldberg, J.)

 

This case was subsequently affirmed on appeal.

FEBRUARY 2011 BAD FAITH CASES
BAD FAITH ALLEGATION DISMISSED WHEN INSURED SIMPLY RESTATES THE ELEMENTS NECESSARY FOR PROVING A BAD FAITH CLAIM WITHOUT PROVIDING ANY FACTUAL SUPPORT (Philadelphia Federal)

In Eley v. State Farm Insurance Company, the insured suffered significant injuries in a motor vehicle collision with an underinsured driver, whose liability policy was limited at $15,000.  The insured, on the other hand, was covered by the insurer under a policy containing underinsured motorist (UIM) coverage for $100,000, with stacking on two vehicles for a total of $200,000.  She filed a claim with the insurer, requesting $195,000 for her injuries and her husband’s loss of consortium.

Approximately two months after the insured demanded the $195,000 payment, the insurer still had not responded or even provided a counteroffer for settlement, so the insured filed a lawsuit.  The Complaint contained counts for breach of contract and bad faith, as the insured alleged that the insurer failed to negotiate her claim in good faith by not properly investigating and evaluating her claim for UIM coverage.  The insurer then filed a motion to dismiss the bad faith claim, stating that the insured had not alleged specific facts to show, if the allegations were true, that it acted bad faith.

The court first summarized the insured’s allegations of bad faith.  She had claimed that the insurer had no basis for (1) failing to negotiate the UIM claim in good faith and (2) failing to properly investigate and evaluate the her claim, and that the insurer knew or recklessly disregarded the fact that it had no reasonable basis for acting the way it did.  The insured did not, however, allege any specific actions the insurer took showing that it actually acted in bad faith.

The court noted that “these bare-bones allegations [were] devoid of factual specificity,” as the insured simply provided “threadbare recitals of the elements of a cause of action, supported by mere conclusory statements.”  Because the insured simply restated the elements necessary to prove a bad faith allegation rather than providing any factual support that would help satisfy the necessary elements, the court granted the insurer’s motion to dismiss the bad faith count of the insured’s Complaint.

The dismissal was without prejudice, implying that plaintiff could amend its complaint to properly plead the claim, if possible.

Date of Decision:  January 31, 2011

Eley v. State Farm Ins. Co., No. 10-cv-5564, United States District Court for the Eastern District of Pennsylvania, 2011 U.S. Dist. LEXIS 8915, (Jan. 31, 2011) (Baylson, J.)

FEBRUARY 2011 BAD FAITH CASES
COURT DECLINES MOTION TO STAY OR DISCONTINUE BAD FAITH DISPUTE AFTER THE INSURED IS INDICTED ON CRIMINAL FRAUD CHARGES (Western District)

In Reck v. Berkshire Life Insurance Company of America, a car accident caused injuries to the insured’s spine and associated muscles and joints.  He had an individual disability policy with the insurer, which provided coverage for total and residual disability.  Despite the insured promptly providing the insurer with information regarding the accident and his injuries, the insurer denied his request for both total and residual disability.

The insured filed suit after the insurer denied his benefits, alleging both breach of contract and bad faith in his Complaint.  After an unsuccessful mediation and a deposition that was not completed, but before trial began, the insured was indicted on charges of wire fraud.

Initially, the insured continued the discovery process after the indictment, as he scheduled certain depositions of physicians and other witnesses.  Soon after, however, he filed a motion for stay of civil proceedings or to discontinue the case, without prejudice, until his criminal proceedings have concluded.  He also filed an emergency motion for a protective order to prohibit discovery during the pendency of the other motions.

The insured claimed that because he was indicted for his duties as a real estate appraiser and the lawsuit he had filed focused on his ability to perform the functions of a real estate appraiser, the issues significantly overlapped.  The insurer responded that the civil case was close to completion, and it would be a significant burden if the court allowed a stay or discontinuance after all of the expenses it had occurred.

The court noted that the insured’s status as a criminal defendant did weigh in favor of granting his motions, but it felt that all the other factors weighed in favor of denying the insured’s request for a stay.  Discovery had all but been completed, and it was in the parties’ best interests to proceed as planned because many important business records had been destroyed and it was therefore even more important for witnesses to remember certain things.  Also, while the indictment concerned activities from 2005, the insured did not even purchase the disability insurance until 2007.  These factors, combined with the court’s general interest in judicial efficiency and promptly resolving civil disputes, led to the court to denying all of the insured’s motions and allowing the civil case to proceed as planned.

Date of Decision:  January 31, 2011

Reck v. Berkshire Life Ins. Co. of Am., Civil Action No. 10-0529, United States District Court for the Western District of Pennsylvania, 2011 U.S. Dist. LEXIS 8831, (Jan. 31, 2011) (Lancaster, J.)