Monthly Archive for July, 2016

JULY 2016 BAD FAITH CASES: NO BAD FAITH BECAUSE OF EXCLUSION ON SOME CLAIMS, AND NO FACTS OF BAD CLAIMS HANDLING ON OTHERS (Middle District)

Myerski v. First Acceptance Ins. Co., involved the most common form of bad faith litigation, UM/UIM claims, as well as other claims. There was an issue in the case about whether the injured driver was excluded under his mother’s policy because he lived in the same house and/or used her car frequently. The record showed the insurer reasonably asserted the exclusion’s application.

The court then looked at the claims handling. There was no bad faith in the back and forth between the insured’s counsel and the carrier, with the court going through the details of each communication; the rapidity in which suit was filed; and the ongoing nature of the investigation. The court then stated: “The question remains whether bad faith may be found in Defendants’ initial handling of the case.” The above cited exclusion did not apply to either PIP or UM/UIM claims. The plaintiff argued that the insurer had “arbitrarily denied coverage without any justification and delayed in allegedly opening a pip claim until 4 months after the accident,” and had “made verbal affirmations that they were denying all of the Plaintiff’s claims based on an exclusion which does not apply to such claims and cannot be relied upon by the Defendants to deny coverage.” However, under the facts of record, the case did not “support the conclusion that any refusal to pay the property damage claim constituted bad faith.

After another detailed analysis, the court further rejected the insured’s argument to have stated a claim for wrongful refusal to pay claims for first party medical benefits and uninsured motorist benefits. However, the communications from the insured to the insurer did not establish a clear and convincing case that demand had been made specifically on these two issues and then been denied in bad faith.

Finally, the court denied a distinct breach of the contractual covenant of good faith and bad dealing claim, as “Plaintiff’s claim for a breach of the covenant of good faith and fair dealing is properly dismissed because Plaintiff also asserts a breach of contract claim seeking PIP and UM benefits.”

Date of Decision: June 10, 2016

Myerski v. First Acceptance Ins. Co., 3:16-CV-488, 2016 U.S. Dist. LEXIS 76201 (M.D. Pa. June 10, 2016) (Conaboy, J.)

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JULY 2016 BAD FAITH CASES: A LOW BUT REASONABLE LOSS ESTIMATE CANNOT BE BAD FAITH (Western District)

In Gowton v. State Farm Fire & Casualty Company the insured’s sole allegation of bad faith was a conclusory averment that a refusal to pay in the amounts alleged due was bad faith. The complaint also averred at one point that the insurer relied on loss calculations that were unsupportable, without any explanation of why they were inadequate. Under Pennsylvania case law, a low but reasonable estimate of a loss is not bad faith. Thus, an unsupported claim that an insurer estimated low, by itself, cannot be bad faith. The court dismissed with leave to file an amended complaint.

Date of Decision: June 29, 2016

Gowton v. State Farm Fire & Cas. Co., No. 15-1164, 2016 U.S. Dist. LEXIS 84454 (W.D. Pa. June 29, 2016) (Bissoon, J.)

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JULY 2016 BAD FAITH CASES: BAD FAITH CLAIM AGAINST INSURER CONCERNING CRIMINAL CLAIMS AGAINST INSURED FOR HAVING MADE AN INSURANCE CLAIM IS NOT TOLLED UNTIL VINDICATION UNLESS INSURER INSTIGATED CRIMINAL PROCEEDING (Superior Court of Pennsylvania) (not precedential)

In Fieldhouse v. Metropolitan Property and Casualty Insurance Company, the court provides an overview on when tolling applies to the bad faith statute of limitations where the issue involves criminal charges against an insured for a false insurance claim. The court points out that tolling applies if the insurer instigates the criminal proceeding, until the time when the insured successfully defends against the criminal charges. However, where the criminal process is not initiated through the insurer’s effort, there is no tolling.

Date of Decision: June 21, 2016

Fieldhouse v. Metro. Prop. & Cas. Ins. Co., No. 3056 EDA 2015, 2016 Pa. Super. Unpub. LEXIS 2166 (Pa. Super. Ct. June 21, 2016) (Bowes, Mundy, Musmanno, JJ.) (not precedential)

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JULY 2016 BAD FAITH CASES: REASONABLE INVESTIGATION ELIMINATES BASIS FOR BAD FAITH CLAIM, AS INSURED COULD NOT SHOW BY CLEAR AND CONVINCING EVIDENCE THAT INSURER HAD “NO GOOD REASON” TO DENY COVERAGE (Philadelphia Federal)

Dougherty v. Allstate Property & Casualty Company involved a claim for water damage from burst pipes. The insurer took the position that the insured failed to properly maintain his furnace, leading to freezing and the burst pipes. The insurer asserted a frozen pipe exclusion and a maintenance failure exclusion. The insured brought breach of contract and bad faith claims. The court granted summary judgment to the insurer on both counts.

On the bad faith count, the court used a “no good reason” to deny coverage standard as a means of measuring bad faith. Thus, it was not unreasonable to focus the investigation on the furnaces’ condition “given that the water damage to the property occurred in January in Pennsylvania in an unoccupied property where the gauge on the oil tank read empty at the time of the loss (even though the gauge was later determined to be faulty).” The furnace had failed due to a clogged nozzle. The insured offered no evidence to show why the insurer should have concluded that “the discharge of water caused the furnace to malfunction and not the other way around.” The court also noted that the “plaintiff testified that he has no evidence that anyone [had] any ill will towards him or that anyone … tried to influence [the expert’s] conclusions.”

Date of Decision: May 5, 2016

Dougherty v. Allstate Prop. & Cas. Ins. Co., No. 14-7270, 2016 U.S. Dist. LEXIS 59667 (E.D. Pa. May 5, 2016)

This decision was affirmed on appeal.

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JULY 2016 BAD FAITH CASES: COURT RETAINED JURISDICTION OVER INSURER’S DECLARATORY JUDGMENT ACTION, REFUSING TO ABSTAIN UNDER SUMMY/REIFER (Western District)

In Westport Insurance Corp. v. Hippo, the insured defendant was subject to a professional malpractice action in state court. The insurer brought a declaratory judgment action in federal court, seeking a ruling of no duty to defend or indemnify the state court action. The insured then brought its own declaratory judgment and bad faith action against the insurer in state court. The insured further asked the federal court to decline jurisdiction over the insurer’s declaratory judgment action. The court applied the 8 part Reifer test and decided to exercise jurisdiction over the insurer’s declaratory judgment action.  [Note: Reifer had seemed to indicate additional factors, beyond the Third Circuit’s seminal Summy decision, favoring the exercise of jurisdiction over declaratory judgment actions, though it was a matter clearly to be weighed carefully on either side].

Other 2016 post-Reifer decisions show most district courts declining jurisdiction over insurance declaratory judgment actions, at least in opinions available on Lexis. See, e.g., Kline v. Travelers Personal Security Ins. Co. (Middle District), Rachel II, Inc. v. State National Ins. Co. (Eastern District), Liberty Insurance Corp. v. Higgenbotham, No. 2:16-cv-38 (Western District March 24, 2016), Firemen’s Insurance Co. v. B. R. Kreider & Son, Inc. (Eastern District), Steadfast Insurance Co. v. Environmental Barrier Co. (Western District), Easterday v. Federated Mutual Ins. Co. (Eastern District), State Farm Mutual Automobile Ins. Co. v. Biddle (Western District).

In one other Western District case, the court did retain jurisdiction, Rafferty v. Metropolitan Life Ins. Co.

Date of Decision: April 28, 2016

Westport Ins. Corp. v. Hippo, 2016 U.S. Dist. LEXIS 56573 (W.D. Pa. April 28, 2016) (Gibson, J.)

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JULY 2016 BAD FAITH CASES: NO BAD FAITH ON BASIS OF: (1) LACK OF COMMUNICATION OR INVESTIATION, (2) DIFFERENCE OF OPINION IN CALCULATING LOSS OR (3) PUTATIVE FAILURE TO ASSIGN LARGE LOSS ADJUSTER (Philadelphia Federal)

Whalen v. State Farm Fire & Casualty Co. involved a first party homeowners’ bad faith claim. The court dismissed that claim on summary judgment. The case involved a significant water damage loss due to a failed line going to an upstairs sink which went undetected for a substantial period while the insured was on vacation.

The first bad faith claim was based on an alleged failure to provide the homeowner with information, conduct a reasonable investigation, and to explain coverage decisions. The court drilled down into the detailed record of the insurer’s efforts and conduct, and found no clear and convincing evidence of bad faith on the summary judgment record. The insurer responded to the public adjuster, and offered reasons for its decision not to pay portions of the claimed losses.

The court next rejected the argument that the insurer’s loss calculations were made in bad faith. A difference of opinion in calculating the loss cannot constitute bad faith.

Finally, the court rejected the argument of bad faith failure to assign a large loss adjuster. The record did not establish by clear and convincing evidence this was factually true, but even if so, it would at most be negligence and negligence is not a basis for bad faith.

Date of Decision: April 25, 2016

Whalen v. State Farm Fire & Cas. Co., 2016 U.S. Dist. LEXIS 54628 (E.D. Pa. Apr. 25, 2016) (Padova, J.)

 

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JULY 2016 BAD FAITH CASES: EVEN A PITHY COMPLAINT CAN STATE A PLAUSIBLE CLAIM WHERE INSURER ALLEGEDLY MADE NO OFFER IN RESPONSE TO ALLEGEDLY COVERED LOSSES (Middle District)

Turner v. State Farm Fire & Casualty Company was a first party fire loss case. The insurer moved to dismiss a bad faith count under Twombly/Iqbal, which the court denied. The court found the complaint, which was neither lengthy nor highly detailed, was still adequately pleaded.

The insureds alleged the property was insured for contents coverage and other miscellaneous coverages in the amount of $159,060.00. The complaint alleged that despite repeated demands, the carrier refused to make any payment on claims subject to these coverages. The court stated: “Common sense does suggest that the items of personalty in the Plaintiffs’ damaged residence almost necessarily had some value. Because we are told that [the insurer] had offered nothing at the time the suit was filed, we are asked to assume that [the insurer’s] refusal to remit any amount in recognition of these claims is enough to establish that this complaint states a bad faith claim….” The insureds also alleged they documented the value of their claim through the report of a public adjuster, which was furnished to the insurer; and that despite being advised of the extent of the losses, the insurer made no offer to compensate the allegedly covered losses.

This was sufficient to meet the Twombly plausibility standard.

Date of Decision: January 14, 2016

Turner v. State Farm Fire & Cas. Co., Case No. 15-CV-906, 2016 U.S. Dist. LEXIS 4825 (M.D. Pa. January 14, 2016) (Conaboy, J.)

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