Archive for the 'PA – Claims Handling Procedures' Category

JANUARY 2018 BAD FAITH CASES: INSUREDS ALLEGING BAD FAITH MUST “DESCRIBE WHO, WHAT, WHERE, WHEN, AND HOW THE ALLEGED BAD FAITH CONDUCT OCCURRED”; LETTER TO INSURANCE DEPARTMENT DID NOT SHOW BAD FAITH (Philadelphia Federal)

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The insured resided with her long-time partner at her home in Philadelphia when it was damaged by a fire. No one but the insured was listed on the policy.

Following the fire, the insured and her partner sought benefits under the policy for personal property destroyed and for home repairs. The insurer paid the insured $115,125.40 for home repairs, $160,982.21 for damage to personal property, and $37,784.81 for additional living expenses. The insurer did not pay the insured’s partner any benefits, arguing that he was not an insured person under the terms of the policy.

In addition, the insured received home repair estimates that ranged from $310,000 to $341,000, and the insurer did not pay any additional benefits beyond its $115,125.40 payment. The insured and her partner sued for bad faith, among other claims. The insurer moved for judgment on the pleadings.

The insured and her partner supported their bad faith claim with three arguments: (1) the insurer acted in bad faith when it sent a letter containing erroneous information about the claim to the Pennsylvania Insurance Department; (2) the insurer failed to obtain an appraisal; and (3) the insurer failed to properly investigate, evaluate, and communicate with the insured about the claim. The Court rejected all three of these arguments.

The court generally observed that “Pennsylvania federal and state courts have defined ‘bad faith’ as ‘a frivolous or unfounded refusal to pay proceeds of a policy.’” Specifically, as to the three arguments:

  1. The Court held that, in sending the letter containing erroneous information to the PID, there’s no evidence that this was done with a “motive of self-interest or ill will[,]” and was likely mere negligence.

[Note: The Court quoted case law stating, “A claimant must show that the insurer acted in bad faith based on some motive of self-interest or ill will.” However, this would appear to contradict the Supreme Court’s holding in Rancosky, that the motive of self-interest or ill will is not a required element of establishing a bad faith claim.]

  1. The policy stated that if there is an appraisal dispute, any party may demand an appraisal. The insured failed to make this demand.
  2. The Court held that the insured’s third argument was too vague to constitute bad faith, as insureds “must ‘describe who, what, where, when, and how the alleged bad faith conduct occurred.”

The Court dismissed all of the claims, but declined to award the insurer judgment on the pleadings, because it granted the insured leave to amend her complaint.

Date of Decision: December 21, 2017

Elican v. Allstate Ins. Co., No. 17-03105, 2017 U.S. Dist. LEXIS 209901 (E.D. Pa. Dec. 21, 2017) (Pappert, J.)

DECEMBER 2017 BAD FAITH CASES: NO BAD FAITH WHERE INSURER FOLLOWED INDUSTRY PRACTICES, PROPERLY DEDUCTED SUM FROM PAYMENT DUE, AND TREATED ELECTRONIC SIGNATURE AS BINDING FOR PURPOSES OF A KNOWING WAIVER (Philadelphia Federal)

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The insured was involved in a motor vehicle accident. The insured’s policy provided for first party medical benefits up to $50,000, income loss protection benefits up to $5,000, and UIM coverage up to $100,000. The insurer happened to insure both the insured plaintiff and the tortfeasor, on two different policies. The insurer opened a first-party claim file and a third-party claim file.

The insured gave notice of her intent to make a lost-income claim, and forwarded partial information supporting this claim to the insurer. Several months later, the insurer submitted the medical file to a peer review organization (“PRO”) pursuant to the Pennsylvania Motor Vehicle Financial Responsibility law. Five months later, the insured’s counsel requested that the insurer open a UIM claim under the existing first-party claim. The insurer did so, but also denied coverage for the third-party claim on the basis the insured selected a limited-tort option, which, with some exceptions, restricts the right of a plaintiff to recover noneconomic damages unless the injury is sufficiently serious.

$5,400 in first-party medical benefits were paid to the insured. The insurer continued to request full documentation regarding the lost wage claim. The insurer credited $15,000 toward its policy under the UIM claim.

The insured sued for breach of contract and bad faith in state court, and the action was removed to federal court. The insurer moved for summary judgment on the bad faith claim, arguing that a valid dispute over the value of the insured’s claim does not rise to bad faith. While the insured did not contest the legitimate dispute as to the value of her claim, she argued that the insurer’s means and methods in handling the claim amounted to bad faith.

Specifically, the insured argued (1) that the insurer was not entitled to a $15,000 credit against its own policy; (2) the insurer failed to meet its burden to show that the insured was bound by limited tort; (3) the insurer, in bad faith, attempted to stop the insured’s medical treatment or force the insured to rely on a lack of ongoing treatment; and (4) the insurer’s failure to review its own file is not a sufficient basis to claim it did not have complete documentation for the wage loss claim.

The Court rejected all of the insured’s arguments. First, the Court stated “Pennsylvania courts have . . . held that UIM awards are properly reduced by the full amount of the tortfeasor’s policy limits . . . .” Thus, the $15,000 credit was proper. Second, the Court found that full tort insurance was waived under the policy terms, because the insured’s electronic signature on the policy sufficed to show that the waiver was knowing and intelligent. Third, the insurer sending its claim file to a PRO is consistent with industry practice and in no way “amounts to bad faith.” The Court rejected the final argument as well. While the insurer did have wage loss information regarding the insured’s part-time job, it did not have this information regarding the insured’s full-time position.

The Court granted the insurer’s motion for summary judgment, and dismissed the bad faith claim with prejudice.

Date of Decision: December 11, 2017

Jallad v. Progressive Advanced Ins. Co., Civil Action No. 16-4795, (E.D. Pa. Dec. 11, 2017) (Kelly, Sr. J.)

DECEMBER 2017 BAD FAITH CASES: MOTION TO DISMISS DENIED WHERE ALLEGATIONS CONCERNING LACK OF SETTELEMENT OFFERS ARE SPECIFIC ENOUGH AND SUFFICIENT TO SUPPORT BAD FAITH CLAIM (Western District)

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This is a report and recommendation written by the U.S. Magistrate Judge. Final determination on the issues is subject to future rulings by the District Court Judge.

The insured suffered numerous injuries after being hit head-on by a drunk and underinsured driver. The insured allegedly suffered facial scarring, facial lacerations, a cervical strain, head injuries, headaches, a broken finger, and ligament tears, among other injuries. The insured settled the underlying action with the tortfeasor’s insurer for the maximum policy limits of $15,000. Arguing that his damages exceeded that amount, the insured filed a UIM claim under his own policy, which contained UIM benefits up to $250,000. The complaint alleges that despite providing the insurer with reasonable proofs of damages, the insurer has failed to offer any amount and has failed to offer an explanation as to why it has not made an offer.

The action was then removed to federal court. The insurer filed a motion to dismiss the bad faith claim, arguing that there exists a genuine dispute as to the value of the insured’s UIM claim. The insured argued the motion to dismiss should be denied, because the insurer’s refusal to make any offer or provide an explanation constitutes bad faith.

In construing a motion to dismiss under Rule 12(b)(6), the Magistrate Judge stated that “when there are well-pleaded factual allegations, a court should assume their veracity and then determine whether they plausibly give rise to an entitlement for relief.” The magistrate recommended that the motion to dismiss be denied, because the insured’s allegations that “[the insurer] has failed to make any offers of payment on the UIM claim or any evaluations of it” are specific and sufficient to constitute bad faith at this stage of the litigation. Lastly, the magistrate judge wrote that whether the bad faith claim survives a motion for summary judgment is a completely separate matter, which would need to be decided with a more developed discovery record.

Date of Decision: December 6, 2017

Hart v. Progressive Preferred Ins. Co., Civil Action No. 17-1158, (W.D. Pa. Dec. 6, 2017) (Mitchell, M.J.)

DECEMBER 2017 BAD FAITH CASES: NO BAD FAITH WHERE: INSURER CONTINUALLY INVESTIGATED CLAIM; MADE LOW BUT REASONABLE SETTLEMENT OFFERS; DELAY IN ISSUING EXPERT REPORT WAS BASED ON POTENTIALLY IMMINENT SETTLEMENT; DISCOUNTING OFFER FOR TORTFEASOR PAYMENT FELL WITHIN TOTAL LIABILITY VALUATION (Philadelphia Court of Common Pleas)

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This is a UIM bad faith action that went to verdict in Philadelphia’s Court of Common Pleas, with the Court ruling for the insurer.

The injured insured settled a lawsuit with the tortfeasor’s insurer for $50,000 in March of 2012, and then filed a UIM claim with his own insurer. The insurer continually investigated the claim, and ultimately valued the insured’s injuries between $50,000 and $75,000. The insurer discounted the previously paid $50,000 amount from the March 2012 settlement in its own settlement offers.

The insurer initially offered $7,500, but increased its offer six times in a span of 10 months through a course of ongoing negotiations, upon receiving new information during that time. The insured refused to settle for any amount less than the $100,000 UIM policy limits. When the insured ultimately produced documentation that his injuries were regressing, and that he may never live pain free again, the insurer offered $100,000, which the insured accepted.

The insured then sued for bad faith, arguing that (1) the insurer had no reasonable basis for its negotiating position at any time during the ten-month period; and (2) the insurer acted in bad faith for its consistent undervaluation of the claim. After a six-day bench trial, the Court found in favor of the insurer.

The Court found that a ten-month claim window is inherently unreasonable, and the evidence suggested that the claim continually had ongoing developments complicating the evaluation process. The Court further found that “[e]ach step of the way, [the insurer] acknowledged and credited new information and responded accordingly,” and low but reasonable settlement offers do not amount to bad faith.

The Court further found that defense counsel instructing its IME expert to delay writing his report was not done to unreasonably prolong negotiations, but to control litigation costs when counsel believed the case was on the eve of settlement. Lastly, the Court found that, when discounting the March 2012 settlement, all of the insurer’s offers fell within “the total valuation for UIM liability.”

Date of Decision: November 2, 2017

Camiolo v. Erie Insurance Exchange, July Term 2015 Case No. 1750, (C.C.P. Phila. Nov. 2, 2017) (Colins, J.)

Our thanks to Dan Cummins of the wonderful Tort Talk Blog for bringing this case to our attention.

DECEMBER 2017 BAD FAITH CASES: APPLYING NEW YORK LAW OR PENNSYLVANIA LAW, MISTAKE DID NOT CONSTITUTE BAD FAITH (Philadelphia Federal)

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The tortfeasor struck the insured as he was riding his bicycle. USAA insured the tortfeasor under a policy containing a liability limit of $15,000. The insured held policies with Progressive (providing for $50,000 in UIM benefits) and State Farm (providing for $100,000 in UIM coverage). USAA tendered its policy limits to the insured in an attempt to settle the claim, which the insured accepted. The insured requested consent with Progressive to settle the claim, and while the insured’s attorney contacted State Farm to notify it of the claim, there was no mention made of the settlement offer. A second correspondence to State Farm also failed to notify it of the settlement.

The State Farm policy contained language denying coverage if the insured settles any lawsuit “without our written consent.” State Farm denied coverage because it believed that the USAA policy provided benefits “equal to or exceeding” the benefits provided under the State Farm policy. This mistake “occurred after [the insured] had extinguished State Farm’s right of subrogation, and nothing [the insured] did was the result of State Farm’s initial mistake.” State Farm acknowledged its claim handling mistake, but then denied UIM coverage because the insured “never [gave] notice and sought consent to accept USAA’s tender of liability limits available under the [tortfeasor’s] policy.”

The insured sued for bad faith, and State Farm moved for summary judgment. The court previously decided that New York law controls. The court ruled that the insureds failed to show that (1) the USAA settlement did not prejudice State Farm’s subrogation rights; and (2) State Farm did not waive the insured’s obligation to provide it with advance notice of settlement of the claim.

As to the bad faith claim, the Court held that “State Farm had a valid basis for denying benefits under New York law.” The Court reasoned that State Farm’s initial claims handling error does not rise to the level of bad faith, because the error was not only corrected, but it was “not causally related to the legitimate basis on which it denied the [UIM] claim.” The Court further held that even if Pennsylvania law controlled, nothing in this case would be sufficient to support a bad faith claim. The Court granted State Farm’s motion for summary judgment.

Date of Decision: November 30, 2017

Bennett v. State Farm Fire & Cas. Co., CIVIL ACTION NO. 15-5170, 2017 U.S. Dist. LEXIS 197515 (E.D. Pa. Nov. 30, 2017) (McHugh, J.)

NOVEMBER 2017 BAD FAITH CASES: NO EVIDENCE OF BAD FAITH OR SUPPORT IN POLICY LANGUAGE THAT INSURER ACTED IN BAD FAITH (Philadelphia Federal)

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This case involved coverage based upon a flood during home renovations. The insureds brought breach of contract and bad faith claims, based upon the alleged failures “(1) to pay to replace the entire marble kitchen floor; (2) to pay for a two-bedroom suite; (3) to pay for additional costs for food; and, (4) to pay for depreciation.” The insurer sought summary judgment on the bad faith claims, which the court granted.

The court generally found the coverage and claims handling causes of action lacked factual support, and so could not support a bad faith claim. Its only detailed bad faith analysis went to a claim for providing adequate living accommodations when the insureds had to vacate their home for repairs.

“Plaintiffs claim that [the insurer] refused in bad faith to provide Plaintiffs a two-bedroom suite and now acts in bad faith by not paying the difference. Plaintiffs cite no record evidence suggesting [the insurer] unreasonably refused to provide them a two-bedroom suite. To the contrary, [the insurer] points to evidence that it did attempt to do so — after Plaintiffs requested to move from a two-bedroom suite already being provided by [the insurer] — but there were no two-bedroom suites available in the location Plaintiffs requested. Plaintiffs also do not identify a provision in the insurance contract obligating [the insurer] to pay the difference.”

Date of Decision: November 15, 2017

Barnwell v. Liberty Mutual Insurance Co., CIVIL ACTION NO. 16-4739, 2017 U.S. Dist. LEXIS 188427 (E.D. Pa. Nov. 15, 2017) (Beetlestone, J.)

NOVEMBER 2017 BAD FAITH CASES: NO BAD FAITH WHERE NO COVERAGE DUE; AND INDEPENDENTLY, NO BAD FAITH FOR FAILURE TO INVESTIGATE (Third Circuit)

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In this case, the Third Circuit affirmed the trial court’s grant of summary judgment on coverage and bad faith claims. Quoting the relevant language on bad faith:

“[The insured] argues that [the carrier] acted in bad faith by refusing to cover the claim and by failing to adequately investigate it. We agree with the District Court that this claim has no merit. Generally, there can be no bad faith claim for denial of coverage if the insurer was correct as a matter of law in denying coverage. Frog, Switch & Mfg. Co., Inc. v. Travelers Ins. Co.,193 F.3d 742, 751 n.9 (3d Cir. 1999). Thus, as we agree with the District Court that [the] breach of contract claim was meritless, so too was his bad faith claim.”

Even though the court stated the forgoing, it still addressed the issue of whether bad faith could be based solely upon a failure to investigate. As has been raised numerous times in this blog, there is an issue of whether section 8371 bad faith is cognizable for poor investigation practices in the absence of the denial (or delay in providing) of  a benefit.

“Nor can [the] bad faith claim stand independently based on [the] failure to investigate the claim before denying it. Rancosky v. Wash. Nat’l Ins. Co., 2015 PA Super 264, 130 A.3d 79, 94 (Pa. Super. 2015) (“Bad faith conduct includes lack of good faith investigation into the facts”). The record evidence clearly establishes that [the carrier] appropriately investigated [the] claim before determining that it was not covered under the Policy, inter alia, by hiring a private investigator to investigate the claim and to interview [the insured] and [the insured’s lessee], by sending a … field adjuster, and by setting forth the reasons for denial in a formal coverage opinion.”

Date of Decision: November 15, 2017

Wehrenberg v. Metropolitan Property & Casualty Insurance Co., U. S. Court of Appeals for the Third Circuit, No. 17-1327, 2017 U.S. App. LEXIS 22887 (3d Cir. Nov. 15, 2017) (Ambro, Krause, Rendell, JJ.)

NOVMEBER 2017 BAD FAITH CASES: NO BAD FAITH WHERE TIMELY DENIAL BASED ON REASONABLE READING OF POLICY (Philadelphia Federal)

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In this UIM case, the court found that “within approximately four weeks of being notified of Plaintiff’s claim, Defendant [insurer] apparently investigated and denied his claim on the basis of a reasonable reading of the Policy language and the law applicable to such situations. …. In such circumstances, there is no basis for finding that Defendant acted in bad faith, and summary judgment is proper.”

Date of Decision: October 31, 2017

Reeves v. Travelers Cos., NO. 16-6448, 2017 U.S. Dist. LEXIS 179720 (E.D. Pa. Oct. 31, 2017) (Baylson, J.)

NOVEMBER 2017 BAD FAITH CASES: JURY MUST DECIDE IF BASIS FOR DELAY IN PAYING BENEFITS WAS AN INNOCENT MISTAKE AND PART OF A STRATAGEM TO UNDERPAY THE INSURED (Middle District)

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In this UIM bad faith case, the insurer paid the demand of $35,000 four months after demand was made. The insured asserted bad faith conduct during this period. The insured alleged unreasonable and intentional delays in payment, that should have been paid without delay. The key issue was whether the size of a workers’ compensation lien revealed that the insurer should have paid the demand immediately.

There was an issue over whether the claims handler innocently or knowingly misstated the size of the workers compensation lien. The court found this was a jury question: “If the jurors determine that there was an intentional effort to mislead Plaintiff into settling his case for less than the policy limits, an award of bad faith could be a reasonable result here. If the jurors determine that [the claims handler’s] misstatement regarding the size of the lien was a result of honest mistake, the jurors might reasonably conclude no bad faith was present.” Thus, summary judgment was denied.

Date of Decision: October 25, 2017

Farrell v. United Financial Casualty Co., CIVIL DIVISION NO. 3:16-CV-02180-RPC, 2017 U.S. Dist. LEXIS 177042 (M.D. Pa. Oct. 25, 2017) (Conaboy, J.)

NOVEMBER 2017 BAD FAITH CASES: PLAUSIBLE BAD FAITH CLAIM BASED ON ALLEGED DILATORY CONDUCT AND UNDER-EVALUATION (Middle District)

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This UIM bad faith case was previously dismissed for failure to set out a plausible claim. Given leave to amend, the insured successfully defeated a second motion to dismiss, now adequately alleging bad faith investigation and claim evaluation. The insured alleged the following.

The insured gave notice of his uninsured motorist claim, supplying the insurer with a police report and requesting copies of property damage photos in the insured’s files. One month later the insured provided treatment information and medical records, and a workers’ compensation decision finding the insured was entitled to benefits. Very shortly after that, the insured submitted to an orthopedic IME, with the doctor concluding the insured was in guarded condition and injured in the accident at issue. Three months later, the insurer provided updated treatment records.

Eight months after initial notice the insured provided a “specific and detailed liability and damages package, including hundreds of pages of Plaintiff’s medical records, which went without a response.” One month later the insured asked for a status report, which was promised but was not provided. Another request was made an ignored later that same month, and the following month, the insured gave the insurer permission to obtain investigation records.

Status was again requested, and the adjuster promised to get back to the insured, but did not do so with an actual report on the status. Additional status requests were made without any definitive responses, though the insurer did supply a copy of its investigative file over one year after the notice of claim was first made.

The insured went to the adjuster’s supervisor to ask for a settlement offer, which was made in the amount of $225,000. The existing medical lien and wage loss claims at the time were $122,000 and increasing. The insurer increased its settlement offer and ultimately retained counsel, who arranged for 3 additional medical examinations. These occurred over the following month.

The insured made a policy limits demand, and alleged that the insurer wrote back “setting forth falsities designed to devalue Plaintiff’s claim, including that he delayed in reporting the accident, that Plaintiff had a ‘significant medical history’, that there was only ‘minor property damage’, and that there were ‘other relevant factors’ that Defendant failed to identify.” The insured alleges that a response rebutting these errors was made the next day, “and to request a more reasonable offer in light of Plaintiff’s injuries.”

The court refused to dismiss the statutory bad faith claim, finding these allegations went beyond the bare bones and conclusory averments in the original complaint. Rather, “the Amended Complaint sets forth factual support pertaining to Defendant’s alleged refusal to promptly communicate with Plaintiff, its repeated misrepresentations to Plaintiff, and its failure to comply with various insurance regulations.” The court then found that the averments could constitute bad faith. “With respect to the claimed lack of prompt communication with Defendant, Plaintiff pleads with specificity numerous instances where he contacted Defendant regarding the status of his uninsured motorist claim and his inquiries were either ignored or dealt with in a cursory, non-responsive manner.”

“Third, the Amended Complaint supplies additional facts regarding Defendant’s bad faith in connection with its initial settlement offer by alleging that, at the time the offer was made, Defendant knew Plaintiff, nearly thirty (30) months after the hit-in-run accident, was still unable to work and undergoing continued medical treatment. As a result, Defendant knew that Plaintiff’s medical and wage loss liens were rapidly increasing. Viewing these facts in the light most favorable to Plaintiff, he alleges plausible bad faith claims.”

“Fourth, the Amended Complaint contains adequate allegations calling into question the sufficiency and timeliness of Defendant’s investigation and evaluation of Plaintiff’s uninsured motorist claim. In particular, despite repeated requests from Plaintiff to evaluate his claim and consider the claim for review, Defendant’s adjuster seemingly ignored those requests and did not get the claim scheduled for review for over two (2) months. These allegations provide further factual support of plausible bad faith conduct.”

“Finally, where, as here, bad faith claims are based on ‘an entire course of alleged dilatory conduct, rather than on a particular incident or denial of a claim, the finder of fact will have to consider the entire course of conduct in order to determine whether the Defendant’s handling of [Plaintiff’s uninsured motorist] claim was conducted in bad faith.’”

Date of Decision: October 10, 2017

Meyers v. Protective Ins. Co., NO. 3:16-CV-01821, 2017 U.S. Dist. LEXIS 166955 (M.D. Pa. Oct. 10, 2017) (Caputo, J.)