Archive for the 'PA – Claims Handling Procedures' Category

APRIL 2015 BAD FAITH CASES: INSURED DENIED SUMMARY JUDGMENT WHERE CLAIMS HANDLING ISSUES AND BAD FAITH TO BE RESOLVED BY JURY (Middle District)

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In Scheirer v. Nationwide Insurance Company of America, the insured pleaded bad faith, among other claims, for an alleged inordinate delay in handling her claim. The claim involved alleged uninsured motorist (“UM”) benefits owed as a result of an injury the insured suffered in a bus accident. Both the insured and insurer brought motions for summary judgment.

The insured claimed the insurer acted in bad faith “by failing to properly and promptly evaluate and investigate her UM claim, by failing to timely respond to her demands, by failing to promptly resolve her claim within the policy limits, by failing to act promptly upon communication regarding her claim, by failing to have reasonable standards with respect to her claim, by failing to pay her claim when it had all of the necessary information, by failing to provide a fair and equitable settlement of her claim, by failing to negotiate with her counsel, by forcing her to commence litigation to recover her rightful amount due under her policy, and by offering her substantially less than the amounts due on her claim.”

The court cited to general bad faith principles in applying section 8371, and added, citing earlier cases, that “’Pennsylvania law does not limit bad faith claims to unreasonable denials of coverage[]’ and, ‘[a] bad faith can have various other bases, including an insurer’s lack of investigation, lack of adequate legal research concerning coverage, or failure to communicate with the insured.’”  The cases cited stood for the proposition that “a bad faith claim includes ‘a frivolous or unfounded refusal to pay, lack of investigation into the facts, or a failure to communicate with the insured.’”

In this case, the insured based “in large part, her bad faith claim on the above stated alternative grounds. As stated, bad faith is not limited to the insurance company’s bad faith in denying its insured’s claim and can include the company’s investigative practices.”  The court found that “disputes exist as to whether defendant conducted a prompt investigation of plaintiff’s UM claim, as to whether defendant promptly evaluated and investigated plaintiff’s UM claim, as to whether defendant failed to timely respond to plaintiff’s demands, as to whether defendant failed to promptly resolve plaintiff’s claim within the $100,000 policy limits, as to whether defendant failed to act promptly upon communication regarding plaintiff’s claim, as to whether defendant failed to have reasonable standards with respect to plaintiff’s UM claim, and as to whether defendant failed to timely pay plaintiff’s UM claim when it had all of the necessary information.” The court held that “a reasonable trier of fact could find that the defendant failed to make a good faith and timely payment on plaintiff’s UM claim.” The open issues included the insurer’s position that it acted reasonably in light of not having all necessary information, or whether it had the necessary information; the timeliness of compensating the insured; the time between the incident and an IME; whether a deposition was unduly delayed; and the timing of responses to letters from the insured’s counsel and a monetary demand. The court stated: “In short, the record is not clear if defendant breached its duty of good faith regarding its handling of plaintiff’s UM claim and, if so, whether this breach was through a motive of self-interest or ill will as opposed to mere negligence.”  Thus, both summary judgment motions were denied.

Date of Decision: March 9, 2015

Scheirer v. Nationwide Insurance Company of America, Civil Action No. 3:13-CV-1397, 2015 U.S. Dist. LEXIS 28286 (M.D. Pa. March 9, 2015) (Mannion, J.)

Note: As reported over the years throughout this Blog, there is some question whether bad conduct in claims handling, without a denial of any benefit, can be a basis for statutory bad faith.  This is most notable in the context where it turns out no coverage was ever due under the policy, e.g., because of any exclusion.

Poor conduct that leads to delay in payment of a benefit (or provision of a defense in a third party case) can be seen as a denial of a benefit (“a delay in payment of a third party claim, if of inordinate and unreasonable length, effectively becomes a denial of the claim.”).  However, to the extent that a benefit is neither denied nor delayed, whether there is a cause of action under section 8371 for, e.g., failures to communicate or poor investigation practices alone, remains open to challenge.  By way of comparison some courts find that violations of the Unfair Insurance Practices Act, in and of themselves, cannot be the basis for a statutory bad faith claim or even be considered as evidence of bad faith, following D’Ambrosio; whereas some courts would allow this as evidence of bad faith, but not bad faith per se. Even here, however, there seem to be some decisions indicating UIPA violations can be the basis of a bad faith claim. In light of D’Ambrosio, this may simply be that the same conduct violating the UIPA simultaneously creates the basis for section 8371 bad faith, and it is not the UIPA violation as such that creates bad faith, but the conduct itself.  Additionally, there is the issue of whether there can be bad faith if no coverage was ever due, because the reasonable basis prong of the bad faith test is objectively met.

MARCH 2015 BAD FAITH CASES: SUPERIOR COURT UPHOLDS BAD FAITH PUNITIVE DAMAGES AWARD, AND PERMITS INCLUSION OF ATTORNEY’S FEES AS PART OF BASE NUMBER UPON WHICH TO CALCULATE PUNITIVE DAMAGES (Superior Court of Pennsylvania, non-precedential)

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In Davis v. Fidelity National Title Insurance Company, a non-precedential decision of the Superior Court, the insured brought breach of contract and bad faith claims against its title insurer.  After a lengthy process from the time the claim was made to the time the insurer paid another party claiming an ownership interest to clear title, the insured alleged it suffered lost profits, and that the insured acted in bad faith by not addressing the claim promptly.  It was almost 5 years between the date the claim was made to the carrier, and the date payment was made to the third party to clear title.

The trial court awarded $224,760 in compensatory damages (combining increased buildings costs on the project and lost profits), which the Superior Court affirmed, agreeing that the future damages were not so speculative as to preclude recovery.  On the bad faith claim, the trial court further awarded $158,450 in attorney’s fees and $1,572,909.24 in punitive damages.  The insurer did not challenge the bad faith claim as such, but challenged the amount of the punitive damages award based upon (1) that it was excessive under U.S. Supreme Court standards as set forth in State Farm Mutual Automobile Insurance Company v. Campbell and its progeny; and (2) that the attorney’s fee award should not have been included in the compensatory damage base number on which to calculate punitive damages.  The Superior Court rejected both arguments.

The court cited a number of cases that included attorney’s fees in the compensatory damage base upon which punitive damages could be determined, rejecting the insurer’s argument on that point.  Further, including the attorney’s fees with the compensatory damages, the punitive damages award was a 4:1 ratio with the compensatory damages, well within Campbell’s constitutional parameters.  Moreover, the court reviewed the factors Campbell considered in determining punitive damages, focusing on the time delays as falling within the degree of reprehensibility factor (the most important factor to consider), and citing Pennsylvania’s Unfair Insurance Practices Act and Unfair Claims Settlement Practices Act regulatory standards in evaluating this factor.  The court stated that “it is difficult to find an area in which [the insurer] acted in conformance with accepted statutory, regulatory or internal standards.” It affirmed the bad faith award of punitive damages given by the trial court.

Date of Decision:  March 18, 2015

Davis v. Fidelity National Title Insurance Company, Superior Court of Pennsylvania, No. 672 MDA 2014 (Pa. Super. Ct. March 18, 2015) (Ott, Bowes, Stabile, JJ).

The trial court decision is Davis v. Fid. Nat’l Ins. Co., 2010-CV-8868, COMMON PLEAS COURT OF LACKAWANNA COUNTY, PENNSYLVANIA, 2014 Pa. Dist. & Cnty. Dec. LEXIS 225 (C.C.P. Lacka. March 28, 2014) (Minora, J.)

MARCH 2015 BAD FAITH CASES: WHERE MATERIAL ISSUES OF FACT EXIST OVER ALLEGED MISREPRESENTATIONS BY INSURED, COURT WOULD NEITHER DISMISS THE INSURED’S BREACH OF CONTRACT CLAIM OR THE INSURER’S STATUTORY FRAUD CLAIM; HOWEVER, STATUTORY BAD FAITH CLAIM COULD BE DISMISSED (Philadelphia Federal)

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In Henriquez-Disla v. Allstate Property & Casualty Insurance Company, the court addressed a battle of bad faith claims, the insured alleging breach of contract and bad faith for claim denials; and the insurer alleging insurance fraud in seeking dismissal of the insureds’ claims, and in pursuing affirmative relief under the insurance fraud statute, 18 Pa. C.S.A. § 4117(a)(2).  The insured and his wife made certain misstatements in applying for insurance and in seeking coverage for losses from a fire and earlier theft.  The insured disputed the materiality of these misstatements and raised issues as to intent, focusing on either a language barrier issue or that the misstatements were explicable, or de minimis in nature.  The court went through each alleged misrepresentation in detail, and concluded that the insurer’s motion for summary judgment would be granted on the bad faith claim, but that the breach of contract claim could proceed.  On the other end, the court denied the plaintiffs’ summary judgment on the insurance fraud claim, and allowed that claim to proceed as well.

As to the bad faith claim, this was “premised on the denial of benefits, the investigatory methods utilized, and [the carrier’s] alleged use of [the insured’s] language barrier as a pretext to deny coverage.” The insurer countered that the insureds did not produce any evidence that the carrier acted unreasonably or in bad faith.  The insureds attempted to counter this, by arguing that the carrier had admitted the insureds were not responsible for the theft or fire for which they were making claims.

Observing that an insurer’s investigation need not be flawless, and that negligence is not enough to show bad faith, the court agreed that the plaintiff failed to meet the burden of showing that the insurer lacked a reasonable basis for denying the claims. The court focused on the inconsistencies in the insureds’ statements, and that “there were sufficient contradictions in the testimony to justify [the insurer’s] decision. The court cited the principle that: “An insurer ‘may defeat a bad faith claim “by showing that it conducted a review or investigation sufficiently thorough to yield a reasonable foundation for its action.”’”

As to the contract claim, the insurer sought summary judgment on the basis that the policy should be found void for material misrepresentation. The court, however, refused to find the record so clear on material misrepresentation that this count could be dismissed. The court found “that it would be inappropriate on the current record to find as a matter of law that the inconsistencies … are material misrepresentations. As previously stated, innocent mistakes are insufficient to warrant summary judgment. …. As explained, many of the inconsistencies may be the product of miscommunication, misunderstanding, or a language barrier.”

However, this same lack of clarity also preserved the insurer’s fraud claim against the insured.  To make out a claim under section 4117, the alleged false claimant must “knowingly or with the intent to defraud the insurer present false, incomplete or misleading information regarding a material fact.” The court had ruled earlier a jury could find that the “inconsistencies in Plaintiffs’ statements may be the product of miscommunication, misunderstanding, a language barrier, or an attempt to mislead the insurer.”  Thus, summary judgment was inappropriate.

The court did go on to make some significant observations on the insurance fraud statute.  The court found the fact that the insureds themselves had no connection to the theft or fire for which they sought coverage insufficient to escape the fraud statute’s scope. Rather, the statute does not require them to be responsible for the loss itself.  Rather, if an insured makes a false statement concerning a subject relevant and germane to the insurer’s investigation as it was proceeding, that could be a material misrepresentation under the statute, which could afford the insurer relief. Thus, in this case, “[s]tatements regarding the [insureds’] whereabouts at the time of the losses, how they learned of the losses, and resultant damages, among others, are clearly germane to the insurer’s investigation.”

Next, the court refused to grant the insureds summary judgment on the basis that the insurer failed to allege damages. The court recognized that the damages would not be known until after the trial had concluded, if the insurer were successful, and that such a damages determination “is routinely left for the court after a verdict has been returned in favor of the insurer. At that point, the counter-claimant presents the court with a request for expenses, costs and fees.”

Finally, the court observed that the parties disputed the insurer’s burden of proof under the fraud statute, i.e., preponderance of the evidence vs. clear and convincing evidence. The court stated the statute was silent on this issue, and courts were split on the issue.  The court instructed the parties to do further briefing, as this would be an issue at trial. The court specifically directed the parties to address a Pennsylvania Superior Court case applying the clear and convincing evidence standard when an insurer is seeking to void a policy ab initio for fraud, and a 1998 district court case which had applied the preponderance of the evidence standard to section 4117, observing “that the legislature could have adopted a clear and convincing standard but did not….”

Date of Decision: February 10, 2015

Henriquez-Disla v. Allstate Property & Casualty Insurance Company, CIVIL ACTION NO. 13-284, 2015 U.S. Dist. LEXIS 15699 (E.D. Pa. February 10, 2015) (Hey, U.S.M.J.)

MARCH 2015 BAD FAITH CASES: INSURED’S BAD FAITH CLAIM COULD NOT BE DISMISSED SOLELY ON BASIS THAT EXAMINATION UNDER OATH HAD NOT OCCURRED PRIOR TO FILING SUIT, UNDER THE CIRCUMSTANCES OF THIS CASE (Western District)

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In Johnson v. State Farm Mutual Automobile Insurance Company, the insured wife was hit by an underinsured motorist while jogging.  The insureds’ own UIM limits were $250,000.  The injuries were diagnosed as serious and she sought policy limits.

During negotiations in early 2014, the insurer made offers of less than policy limits, and when the matter did not settle, sought an examination under oath (“EUO”) and/or statement under oath.  The insured’s counsel responded that the matter clearly was headed to litigation, and the EUO could be done in the form of a deposition.  Breach of contract and bad faith litigation was instituted about two months later.

The insurer moved to dismiss the bad faith claim on the basis of the insureds’ declining to submit to EUOs prior to filing suit: approximately 20 months after their filing the original UIM claim with the insurer; 8 months after the ongoing provision of significant and uncontroverted record medical evidence to the insurer; and 2 months after the insurer’s request for the injured wife’s EUO.

The court denied the motion as to both claims.  As to the contract claim, it observed case law that a refusal to submit to an examination under oath could be the basis to deny a claim in some circumstances; but here, the insured had offered to present herself for a deposition and the insurer had not taken up that offer.  Thus, the EUO was not a condition precedent to bringing suit.

As to the bad faith claim, the Court found that the insureds had pleaded more than bare bones allegations, by providing  specific allegations as to the nature of the injury, medical evidence provided to the insurer, a chronology of events, a description of the parties’ course of conduct, and the bases for the allegation of statutory bad faith, “e.g., that the ‘uncontradicted medical evidence provided’ of the ‘totality and permanency’ of Plaintiff Wife’s injury was sufficient, in the circumstances of the case, to require[]payment in full of UMC benefits under its ‘obligation and duty of good faith and fair dealing.’” The court contrasted this with earlier case law where a plaintiff failed to clearly plead that injuries were from the accident at issue, and the plaintiff had refused to submit to a further IME which apparently could have provided some clarity on that issue.

Thus, the motion to dismiss the bad faith claim was denied, the court observing that the insurer had the ability to attack that claim later, after discovery had been taken.  Moreover, instead of simply ordering the insurer to answer, the court stated that the matter would proceed to “Answer and deposition”.

Date of Decision: February 24, 2015

Johnson v. State Farm Mut. Auto. Ins. Co., Civil Action No. 14 – 928, 2015 U.S. Dist. LEXIS 21786 (W.D. Pa. February 24, 2015) (Lenihan, U.S.M.J.)

MARCH 2015 BAD FAITH CASES: SUMMARY JUDGMENT CANNOT BE GRANTED WHERE ISSUES OF FACT ON REASONABLENESS AND INTENT PRONGS OF BAD FAITH STANDARDS EXIST, FOCUSING ON DECISION NOT TO TAKE A DEPOSITION OR STATEMENT UNDER OATH DURING CLAIM PROCESS (Middle District)

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In Connolly v. Progressive Northern Insurance Company, the injured insured received a $250,000 settlement from a third party tortfeasor in connection with an auto accident.  She pursued underinsured motorist coverage from her own insurer, and also alleged there were multiple policies entitling her to stacking.  The insurer’s position was that the value of the injuries fell within the $250,000, and further that there was no stacking.

The insured claimed that there is an ambiguity as to which policy controlled because the insurer never provided a “certified” copy of the policies placed in issue. She also claimed that this refusal to provide certified copies of the relevant insurance documents and the insurer’s refusal to conduct a reasonable investigation of her claim combine to demonstrate statutory bad faith.  More specifically, the insured claimed bad faith on the basis that 1) the insurer failed to communicate with the insured and her counsel regarding provision of “a certified copy of the policies” in order to clarify the issue regarding stacked coverage; and (2) the insurer failed to perform a reasonable and timely investigation of the insured’s claim as indicated by the insurer’s failure to schedule her deposition or to request her Statement Under Oath.  The court noted that there was no case law cited to support entitlement to a certified copy of the policy.

The insurer responded that because there is a genuine dispute over the claim’s value, there can be no bad faith, averring: “(1) The Plaintiff’s receipt of a $250,000.00 recovery from the tortfeasor;(2) Plaintiff’s release to “normal activity” with “no restrictions” approximately one month after the accident; (3) An orthopedic physician’s opinion that Plaintiff’s lacerations were “healed” less than two months after the accident; (4) The fact that Plaintiff last sought medical treatment for her injury [18 months after it occurred]; and (5) Plaintiff’s refusal to provide Defendant with updated information on her physical status despite Defendant’s numerous requests for such information.”

The court agreed that the insured’s failure to provide updated medical information despite numerous requests by the insurer over many months is not in dispute. However, the court still declined to grant summary judgment; rather leaving it to a jury to determine the reasonableness of the insurer’s conduct toward the insured.  The court stated:

“One may wonder why Defendant did not schedule Plaintiff’s deposition or at least solicit her SUO and see these omissions as possible evidence of an unreasonably slow investigation on Defendant’s part. On the other hand, one could conclude that Defendant reasonably considered updated medical information on Plaintiff a necessary precursor to its request for a deposition or SUO. In any event, the caselaw [governing statutory bad faith claims] will require that Plaintiff demonstrate, by clear and convincing evidence, either that Defendant unreasonably delayed its investigation of her claim or refused to make an offer with reckless disregard of medical documentation in its possession that would clearly indicate that she was due additional money under the policy in question.”

The court had “not been provided with medical documentation from which it could categorically determine that [the insured] had not received a full recovery from the tortfeasor’s carrier. Thus, it appears that the credibility of the witnesses on these points will be a key issue in the determination of the bad faith issue.”

Date of Decision:  February 4, 2015

Connolly v. Progressive N. Ins. Co., Case No. 3:13-CV-2717, 2014 U.S. Dist. LEXIS 17074 (M.D. Pa. February 4, 2015) (Conaboy, J.)

A link to the court’s decision can be found on the excellent Tort Talk blog.

 

FEBRUARY 2015 BAD FAITH CASES: COURT WOULD NOT STRIKE ALLEGATION THAT BAD FAITH EXISTED BASED UIPA VIOLATION, SINCE THE SAME CONDUCT THAT COULD VIOLATE UIPA MIGHT ALSO BE EVIDENCE TO ESTABLISH BAD FAITH, DISTINCTLY FROM BEING LABELED AS A UIPA VIOLATION (Philadelphia Federal)

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In Moore v. State Farm Fire & Cas. Co., the insurer moved to strike an averment that it violated the bad faith stated because it violated the Unfair Insurance Practices Act.  The court found that although the bad faith statute 42 Pa.C.S. § 8371 does not set forth a standard, Pennsylvania courts have uniformly adopted the Terletsky standard that an insured must prove “(1) that the insurer did not have a reasonable basis for denying benefits under the policy; and (2) that the insurer knew of or recklessly disregarded its lack of a reasonable basis in denying the claim.” Prior to Terletsky some courts had looked to the UIPA for standards, but that practice was not to be followed post-Terletsky.   “Thus, a violation of the UIPA does not per se constitute bad faith.”  On the other hand: “Nor does the fact conduct violates the UIPA prevent the conduct from also being evidence of bad faith.” “Instead, the question is whether the particular conduct (that may or may not violate the UIPA) is relevant to show that the insurer lacked a good faith basis for denying benefits and knowingly or recklessly disregarded that fact.” The court stated: “Based on these principles, the Court will not conclude at this juncture, that evidence regarding conduct that allegedly violated the UIPA ‘ha[s] no possible relation to the controversy’ or evaluate the extent to which it ‘may cause prejudice to one of the parties.’” The court thus refused to strike the averment.

Date of Decision: February 4, 2015

Moore v. State Farm Fire & Cas. Co., NO. 14-3113, 2015 U.S. Dist. LEXIS 13018 (E.D. Pa.  February 4, 2015) (Beetlestone, J.)

FEBRUARY 2015 BAD FAITH CASES: BAD FAITH CLAIM DISMISSED DUE TO LACK OF FACTUAL SUPPORT TO MAKE OUT A PLAUSIBLE CLAIM; PUTATIVE DISCOVERY VIOLATIONS DURING LITIGATION CANNOT CONSTITUTE BASIS FOR INSURANCE BAD FAITH CLAIM (Philadelphia Federal)

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In Morrissey v. State Farm Fire & Cas. Co., plaintiffs’ home was damaged by a fire, making it uninhabitable.  Their homeowners’ insurance policy provided coverage limits of $220,000 for the house, $165,000 for personal property, and the actual value of the loss of use sustained. Plaintiffs filed claims for the damage to the home, damage to their personal property, and costs for alternative housing while the home was being repaired.   The insurer filed a motion to dismiss the bad faith (and consumer protection law) count, which the court granted, without prejudice to amend, though the court noted amendment would appear to be futile.

The insurer investigated the claims and obtained sworn statements from the plaintiffs. After completing its investigation, the insurer extended coverage for the claim on damage to the home itself.  The check was made payable to plaintiffs, their attorney, and plaintiffs’ former bank.  Plaintiffs made repeated requests for the bank to endorse the check so repair work could begin on the home, but the bank refused because it no longer held the mortgage.  Eventually, plaintiffs’ counsel returned the check to the defendant and requested it be re-issued to the plaintiffs, plaintiffs’ counsel, and the plaintiffs’ current mortgage holder.  The insurer refused to do so based on an internal policy which required checks to be made to the bank that held the mortgage at the time of the loss.  Ultimately, a second settlement check was issued and processed four months after the original check was issued.  The insurer then provided notice it would only cover four more months of alternative housing.

Plaintiffs brought suit alleging the insurer violated the bad faith statute by: 1) issuing the settlement check over one year after the fire occurred; 2) delaying reissuing the check for three and a half months “for no valid reason”; 3) filing boilerplate objections to Plaintiff’s discovery to gain an advantage in the litigation; 4) arbitrarily refusing to settle their claims; and 5) breaching fiduciary duties and other state laws.  The Court, however, dismissed the claims.

Plaintiffs failed to set forth factual information to show that the defendant lacked a reasonable basis for delaying payment of their benefits, and also failed to offer information about the alleged repeated attempts to negotiate with the carrier.  They provided no facts to explain why the delay in settlement was arbitrary, or that the investigation was unwarranted or inadequate.  Rather, the insureds simply asserted the delay represented bad faith; however, a delay in payments of claims alone cannot constitute bad faith.  Finally, even if the delay was unreasonable, plaintiffs failed to show the insurer knew or disregarded a lack of a reasonable basis.

Allegations that the insurer acted in bad faith during the litigation by filing “boilerplate objections to Plaintiff’s discovery … for the purpose of preventing the drafting of a Complaint to get an advantage in this case” did not show bad faith. The court observed that “bad faith may extend to the misconduct of the insurer during the pendency of litigation.  ….  However, the defendant’s objections to the plaintiff’s request for pre-complaint discovery were not unreasonable. The plaintiffs’ allegation that these objections were meant to give the defendant an advantage are unsupported and merely conclusory. The court noted: “This is especially true given that the state court judge accepted the defendant’s argument that this request was a ‘fishing expedition’ and was unnecessary for the plaintiffs to file their complaint.” Further, boilerplate discovery objections do not constitute a basis for an insurance bad faith claim.

In sum, the court found that the insureds’ “threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice” to state a valid cause of action. …. [and that the insureds] failed to assert a plausible bad faith claim under Pennsylvania law.”

Date of Decision: December 18, 2014

Morrisey v. State Farm Fire & Cas. Co., Civil Action No. 14-05193, 2014 U.S. Dist. LEXIS 174998 (E.D.Pa. Dec. 18, 2014) (Stengel, J.).

JANUARY 2015 BAD FAITH CASES: PLAINTIFF’S UIM BAD FAITH CLAIM NARROWLY SURVIVES SUMMARY JUDGMENT BECAUSE OF MUDDLED RECORD AS TO WHAT CAUSED DELAYS (Middle District)

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In Clemens v. New York Central Mutual Fire Insurance Company, plaintiff brought a UIM bad faith case, with the chief issues focusing on the 39 month time period between the claim being asserted and the filing of suit.  There were three areas at issue on cross motions for summary judgment as to this lengthy delay and who, if any one side, bore responsibility: the content and provision of medical authorizations, efforts to arbitrate the matter, and efforts to schedule a statement under oath.  The court ultimately concluded that the record was so unclear, it could rule for neither party.

The court stated that “in each of these areas, the parties exhibited a lack of civility and an inability to move this matter forward at a reasonable pace,” and “having reviewed that record, [the court] simply cannot conclude that either party has demonstrated as a matter of law that the other side was unilaterally responsible for the long delay between Plaintiffs’ transmission of its Notice of Intent to file an underinsured motorist claim and the filing of the complaint that initiated this matter.”

Further, the court stated that it could not find “as a fact that, to the extent the long delay was attributable to the Defendant, it was or was not motivated by ‘self-interest or ill will’ as required by Terletsky….”  This statement is noteworthy as some courts have concluded that self-interest and ill will are evidence of bad faith, not elements of bad faith.

The court also stated: “The Court is compelled to note at the outset that the hallmark of this case has been petulant and even acrimonious bickering among opposing counsel. The Court is also confounded that a relatively straightforward claim for underinsured motorist benefits that could not exceed $35,000.00 in value could have produced 83 docket items and more than 7,000 pages of correspondence and medical notes. That said, we turn to the question whether either party to this lawsuit may legitimately claim that no material fact is in dispute and that either one is now entitled to judgment as a matter of law. The Court concludes that the muddled record in this case cannot support summary judgment in favor of either party.” Thus, the matter had to go to a jury “to make the ultimate determination whether Defendant’s conduct in this matter was so unreasonable as to constitute ‘bad faith’ under 42 Pa.C.S. § 8371.”  The court did observe that because (1) a plaintiff has the burden to prove its case by clear and convincing evidence, and (2) “Plaintiffs’ persistent failures to cooperate in the discovery process and a failure to observe the literal requirements of Rule 56.1 of the local rules of court, Plaintiff escaped a judicial determination that bad faith cannot be determined from this record by the narrowest of margins.”

The court had earlier stated that an insurer did not have to show its conclusions were correct, or “that its conclusion more likely than not was accurate.” “Nor is the insurance company required to show that the process by which it reached its conclusion was flawless or that the investigatory methods it employed eliminated possibilities at odds with its conclusion.”  “Instead, an insurance company must show it conducted a review or investigation sufficiently thorough to yield a reasonable foundation for its action.” As to the plaintiff’s burden under the clear and convincing evidence standard, the plaintiff has to show that “the evidence is so clear, direct, weighty and convincing as to enable a clear conviction without hesitation, about whether or not the defendants acted in bad faith.”

Date of Decision:  January 15, 2015

Clemens v. New York Cent. Mut. Fire Ins. Co., Case No. 3:13-CV-2447, 2015 U.S. Dist. LEXIS 4903 (M.D. Pa. Jan. 15, 2015) (Conaboy, J.)

 

JANUARY 2015 BAD FAITH CASES: UIM BAD FAITH PLAINTIFF ADEQUATELY PLEADS CLAIM WHERE CARRIER SWITCHES POSITIONS ON BASIS FOR DENIAL (Philadelphia Federal)

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In Lyman v. State Farm Mutual Automobile Insurance Company, plaintiffs brought breach of contract and bad faith claims against their UIM insurer.  The carrier sought to dismiss the claims, asserting they were mere boilerplate and could not stand under Twombly.  The court disagreed.

The court found that the complaint alleged specific acts of bad faith, including allegations that: the insurer asked the insured to undergo an evaluation conducted by a chiropractor selected by the insurer,  who opined in her report that the insured’s “condition was caused by the accident in question; that her condition was not going to improve into the future and had reached the maximum level of improvement; and that further medical care … was not warranted because it would not make her any better.” The complaint alleged “that, notwithstanding the report’s findings, [that chiropractor] and the defendants ignored [the insured’s] need for palliative care, i.e., care administered to relieve pain as opposed to achieving a rehabilitative cure.”

The insured also alleged that “the defendants abused and/or violated the Peer Review … by finding that medical treatment was not reasonable or necessary without following the procedures set forth in the statute.”  The insured further alleged “that the defendants refused ongoing medical care for her, which prevented ongoing medical documentation and medical proof of her injuries admittedly caused by the accident, in order to frustrate and/or limit her claim for underinsured motorist benefits.”  These allegations supported the claim that “the defendants knew of their lack of a reasonable basis to deny medical treatment and to deny underinsured motorist benefits.” Further, the complaint alleged “that while the defendants refused to change their position on the denial of benefits, they shifted their reasons for denying them,” and that in “stark contradiction to their adoption of the chiropractor’s findings, the defendants suddenly denied that the ongoing care was related to the injuries caused by the accident in question.” The assertion was that this shift occurred to deny medical care and eliminate UIM exposure.  The court stated that: “By subsequently changing their position and asserting that [the insured’s] ongoing medical condition was not caused by the accident, a position contrary to the medical conclusions and determinations of their own chiropractor, the defendants give credence to the plaintiffs’ allegation that the defendants knowingly denied underinsured motorist benefits without a reasonable basis.” Date of Decision:  December 16, 2014

Lyman v. State Farm Mut. Auto. Ins. Co., CIVIL ACTION NO. 14-6235, 2014 U.S. Dist. LEXIS 173345(E.D. Pa. December 16, 2014) (Stengel, J.)

NOVEMBER 2014 BAD FAITH CASES: INSURER EXPOSED TO BAD FAITH CLAIM BY USING INSURED IN CLAIMS HANDLING PROCESS INSTEAD OF PAYING FOR THIRD PARTY TO DO THE WORK (WHERE INSURED FELL THROUGH A ROOF) (Western District)

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In Selmek v. State Farm Fire & Cas. Co. the insurance adjuster had asked for some assistance from the insured in inspecting a damaged roof and securing it from further damage, as a result of which the insured fell through the roof.  The insured brought claims for negligence and bad faith.  The Court found that the insurer had a contractual duty of good faith to inform the insured that under the policy the insurer had to pay for a third party contractor to take on these sorts of risks in securing the property.  The insured alleged that the insurer had the insured take on these tasks to improperly save money by not hiring a contractor, as required under the policy.  This sufficiently stated a statutory bad faith claim.

Date of Decision:  September 20, 2014

Selmek v. State Farm Fire & Cas. Co., No. 14-388, 2014 U.S. Dist. LEXIS 162294 (W.D. Pa. Sept. 20, 2014) (Fischer, J.)