Archive for the 'PA – Claims Handling Procedures' Category

FEBRUARY 2016 BAD FAITH CASES: STATUTE OF LIMITATIONS CAN BE TRIGGERED BY DENIAL OF BENEFIT, OR FAILURE TO INVESTIGATE THE SAME CLAIM AFTER DENIAL, WHERE INSURER IS PROVIDED WITH NEW INFORMATION (Pennsylvania Superior Court)

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In Rancosky v. Washington National Insurance Company, the Superior Court addressed a bad faith claim in the first party context, where the insured had purchased a “Cancer Policy”.  The Superior Court ruled that the bad faith claim fell within the two year statute of limitations period based upon poor investigative practices, even when the original denial of the benefit was beyond the two year period.

The insurance policy had a contractual “suit limitations clause,” providing legal actions for benefits.  However, for purposes of the bad faith claim, the court ultimately focused on the two year statute of limitations. The policy also contained detailed waiver of premium provisions based upon a manifestation of cancer and disability therefrom.  The policy also addressed the situation where an insured ceased making direct premium payments via payroll checks, but could convert to making direct payments personally, while keeping coverage.  After going into the facts in painstaking detail, the Superior Court concluded that the waiver of premium provision should have applied; that there was no need to address conversion for future premium payments; and thus that the insurer’s denial of benefits for missing premium payments was an unreasonable position for the insurer to take.

At trial level, after a jury ruled for the insured on the breach of contract claim, the trial court ruled for the insurer on the bad faith claim.  The Superior Court reversed, and among other things in its close factual analysis, stated: “The record reflects that [the insurer] did not purport to conduct any investigation regarding [the] claim until it received [the insured’s] request for reconsideration … eighteen months after it had first received conflicting information regarding the starting date of [her] disability.” Before that time, the insured had provided 8 authorizations, all of which permitted the carrier to contact her employer and physicians “regarding the date when she first became unable, due to cancer, to perform all the substantial and material duties of [her] regular occupation.”  Instead, “despite requiring that [the insured] sign these authorizations, [the insurer] never bothered to use them to obtain the information that it needed in order to make an accurate determination as to the starting date of her disability.”

LEGAL ANALYSIS

  1. Self Interest and Ill Will are not elements of a bad faith claim.

First, the trial court effectively ruled that a bad faith plaintiff must establish the insurer had a motive of self-interest or ill will.  As the Superior Court has stated numerous times in earlier opinions, this is not an element of proof in a statutory bad faith claim. Ill will or self-interest are only evidence that can be used to establish the second element of statutory bad faith, i.e., that the insurer knowingly or recklessly disregarded the first element, that there was no reasonable basis to withhold the benefit.  While the trial court had ruled that self-interest or ill will were considered in weighing the first element, absence of a reasonable basis, the Superior Court found this was merely a back door ruling that self-interest or ill will were required elements to establish the claim.

  1. Superior Court defines bad faith expansively.

Second, as stated above, the appellate court reviewed the record and concluded that the trial court erred in finding there was a reasonable basis to deny coverage.  In reaching this decision, the court rendered an expansive view of the bad faith statute.

It began by stating that “a heightened duty of good faith was imposed on [the insurer] in this first-party claim because of the special relationship between the insurer and its insured, and the very nature of the insurance contract.”  It then stated that statutory bad faith under section 8371 “is not restricted to an insurer’s bad faith in denying a claim.” The Superior Court then cited six of its prior decisions as examples to support this point.  It did not cite or discuss the Supreme Court’s 2007 Toy decision in this context, as to what constitutes a cognizable section 8371 bad faith claim. It solely cited language from the prior Superior Court decisions on, e.g., the breadth of the statute’s aim to stop all forms of bad faith, and that section 8371 was intended to address conduct that evades “the spirit of the bargain, lack of diligence and slacking off, willful rendering of imperfect performance, abuse of a power to specify terms, and interference with or failure to cooperate in the other party’s performance.”

  1. Bad Faith statute of limitations period can be extended by conduct of investigative practices, irrespective of the time when the claim was originally denied.

Third, and most significantly, the Superior Court addressed when the statute of limitations begins to run.  It observed that “there is an important distinction between an initial act of alleged bad faith conduct and later independent and separate acts of such conduct.”  It ruled that: “When a plaintiff alleges a subsequent and separately actionable instance of bad faith, distinct from and unrelated to the initial denial of coverage, a new limitations period begins to run from the later act of bad faith.” Thus, “[a]n inadequate investigation is a separate and independent injury to the insured.”

[Note: This conclusion is measured against a prior Superior Court opinion, and does not address the Supreme Court’s Toy decision. The court cites the Supreme Court’s Ash opinion on the bad faith statute’s limitations period, though it does not reference footnote 10 of the Ash opinion on the scope of the bad faith statute (“The bad faith insurance statute, on the other hand, is concerned with ‘the duty of good faith and fair dealing in the parties’ contract and the manner by which an insurer discharge[s] its obligation of defense and indemnification in the third party claim context or its obligation to pay for a loss in the first party claim context.”)]

The court then states that “a refusal to reconsider a denial of coverage based on new evidence is a separate and independent injury to the insured. The statute of limitations for such injuries begins to run, in the first instance, when the insurer communicates to the insured the results of its inadequate investigation, and in the latter instance, when the insurer communicates to the insured its refusal to consider the new evidence that discredits the insurer’s basis for its claim denial.” The Superior Court found that had the insurer conducted a “meaningful investigation” and “good faith investigation” into the additional information, or “undertaken to ‘research’ the new information” it would have discovered that there was no reasonable factual basis to deny coverage. Thus, the insurer’s “failure to conduct an meaningful investigation of [the] claim when it undertook to do so in [8 months after its original denial of the benefit], and its refusal to reconsider its denial of coverage based on the new information provided by [the insured] in her November 30, 2006 letter [7 months after the insurer’s original denial], constituted new injuries to the insured.”

By contrast, the Dissent in this 2-1 decision would have ruled that the statute of limitations began to run when the insurer first denied the benefit was due. In response, the majority stated that the Dissent unduly focused on the denial of the benefit as the basis for the bad faith claim, “without considering [the insured’s] claim for bad faith based on [the insurer’s] lack of good faith investigation.” Once again, citing prior Superior Court case law without reference to Toy or Ash, the court observed that “a claim for bad faith may be based on an insurer’s investigative practices.” Thus, “[i]n declining to acknowledge these tenets of Pennsylvania’s bad faith law, the Dissent has failed to acknowledge [the insured’s] claims for bad faith based on a lack of good faith investigation, or identify the date(s) on which such claims accrued. Thus, we abide by our conclusion that [insured’s] bad faith claim is not time-barred.”

4.  Failure to allege bad faith based on litigation conduct waived 

The insured also sought reversal on the basis that the trial court failed to consider the insurer’s litigation conduct during the bad faith litigation and trial itself.  However, the insured had never made this argument prior to trial, and such an argument was waived.

  1. Court finds bad faith claim by a distinct insured was properly dismissed on summary judgment.

Lastly, the court affirmed a summary judgment against the foregoing insured’s husband, who likewise had developed cancer and was seeking relief from the same insurer.  The court found that the husband insured had not provided evidence as to why it was not reasonably possible for him to have given the required notice under the policy.

While upholding this later judgment, the case was reversed and remanded on the wife insured’s bad faith claim.

Date of Decision:  December 16, 2015

Rancosky v. Wash. Nat’l Ins. Co., Superior Court No. 1282 WDA 2014, 2015 Pa. Super. LEXIS 822 (Pa. Super. Ct. December 16, 2015)

JANUARY 2016 BAD FAITH CASES: COURT REFUSES TO GRANT INSUREDS’ MOTION FOR RECONSIDERATION AFTER DETERMINING THAT INSURER DID NOT ACT IN BAD FAITH BY RELYING ON UNPERSUASIVE LEGAL POSITION (Middle District)

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In Douglas v. Discover Property & Casualty Insurance Company, the court was asked to reconsider its recent decision granting summary judgment in favor of an insurer on a bad faith claim brought by insureds.

The motion arose out of the parties’ cross motions for summary judgment, in which both parties sought judgment on the insureds’ claims for bad faith. In granting summary judgment in favor of the insurer, the court originally articulated two reasons for determining that ample evidence existed to show that the insurer acted reasonably in handling the insured’s claim.

First, the court reasoned that even if the insurer’s rejection form was invalid under case law, the insurer had other justifications for denying coverage. Second, the court noted that even if the insurer relied on unavailing legal theories, no evidence existed that would indicate that the insurer raised these arguments dishonestly or in bad faith. The insureds filed the instant motion for reconsideration, arguing that the court’s two grounds for granting judgment in favor of the insurer were legally erroneous.

While the insureds did not explicitly say so, the court observed that the insureds were claiming that the court’s decision contained a clear error of law or manifest injustice. Specifically, the insureds argued that the court never set forth the justifications that the insurer had in denying coverage. However, the court stated that its prior opinion addressed how issues of fact existed as to whether the insureds had been adequately compensated, and as such, it could not be “frivolous or unfounded” for the insurer to refrain from paying the claim.

Finally, the court reiterated its original position that the insurer’s decision to litigate a reasonable but unpersuasive legal position could not amount to bad faith under the existing case law.

Date of Decision:  December 7, 2015

Douglas v. Discover Prop. & Cas. Ins. Co., 3:08-cv-01607, 2015 U.S. Dist. LEXIS 163781 (M.D. Pa. December 7, 2015) (Mariani, J.)

 

JANUARY 2016 BAD FAITH CASES: COURT DISMISSES BAD FAITH CLAIM BASED ON THIRD CIRCUIT PRECEDENT AFTER CONDUCTING CHOICE-OF-LAW ANALYSIS TO APPLY PENNSYLVANIA LAW EVEN IN THE FACE OF A NORTH CAROLINA CHOICE OF LAW PROVISION (Western District)

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In Alcantarilla v. State Farm Mutual Automobile Insurance Company, the insureds brought an action for breach of contract and bad faith arising out of a claim for underinsured motorist (“UIM”) coverage benefits filed by the insureds. The insureds had renewed their auto policy with the insurer while they were residents of North Carolina. The policy was identified as a “North Carolina” policy and contained a choice-of-law provision stating that the policy was governed by North Carolina state laws.

The insureds ultimately moved to Pennsylvania while the policy was still in force, and were involved in an accident in which one of the insureds was struck by a motor vehicle. The insured’s medical expenses exceeded the amount ultimately recovered from the driver that struck him, and the insured made a claim for UIM benefits under his insurance policy. The insurer refused to pay because the insureds’ UIM coverage did not exceed the driver’s policy limit.

The insureds filed suit, claiming that while the decision to deny coverage may be correct under North Carolina law and the terms of the policy, the more expansive definition of “underinsured” utilized by Pennsylvania should be applied, which would entitle the insureds to a greater amount of coverage. The insureds argued in the alternative that if Pennsylvania law did not apply, then the insurer misrepresented that nothing needed to be done to bring the policy into compliance with Pennsylvania law prior to the insureds’ move. The complaint set forth claims of; inter alia, breach of contract, and breach of fiduciary duty against the insurer and its agent. The claims against the agent were dismissed for lack of personal jurisdiction and the insurer moved to transfer venue from Pennsylvania to North Carolina.

After conducting a choice-of-law analysis, the court concluded that private factors weighed in favor of applying Pennsylvania law, as the insureds now reside in Pittsburgh and chose to litigate there. The court also found that public factors weighed in favor of Pennsylvania law, as no practical considerations existed that would suggest the case should be transferred.

The court ultimately decided that irrespective of the choice-of-law provision in the policy, Pennsylvania law should govern the policy terms as Pennsylvania had the most relevant contacts to the coverage dispute and the greatest interest in having its law applied. In view of that, the court refused to dismiss the breach of contract claim.

The court did dismiss the bad faith claim after noting that the Court of Appeals addressed almost identical allegations of bad faith under Pennsylvania law in another case and found that “the conduct alleged simply does not amount to bad faith.”

The breach of fiduciary duty claim that was plead in the alternative was also dismissed since the court determined that the insurer was required to provide excess coverage under the policy, and accordingly it could not be said that the insurer’s agent misrepresented the terms of the policy when the insureds contacted his office after they had moved to Pennsylvania.

Date of Decision:  December 15, 2015

Alcantarilla v. State Farm Mut. Auto. Ins. Co., No. 2:15-cv-1155, 2015 U.S. Dist. LEXIS 167623 (W.D. Pa. December 15, 2015,) (McVerry, J.)

JANUARY 2016 BAD FAITH CASES: AGENT’S INVESTIGATION AND COMMUNICATIONS WERE ADEQUATE; INSURER’S FAILURE TO COMMUNICATE EVERY 45 DAYS PER UIPA WAS NEGLIGENCE AT MOST, NOT INTENTIONAL OR RECKLESS BAD FAITH (Philadelphia Federal)

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In Smith v. State Farm Fire & Casualty Company, the insureds brought suit against their insurer for breach of contract and bad faith in dealings arising from the insurer’s partial denial of coverage of the insureds’ homeowner’s insurance policy claim. The insurer moved for summary judgment, and argued that the insureds failed to prove bad faith by clear and convincing evidence, and the court granted the motion.

The insureds originally commissioned an inspection of their house for potential water damage after learning their neighbors were having issues with water damage, even though the insureds had not observed any water damage in their home at the time. The inspection revealed numerous design flaws and installation deficiencies, along with water damage. The insureds filed an insurance claim eighteen (18) months after receiving the inspection report.

The insurer sent an agent to inspect the home. The agent observed that certain damages would not be covered, but agreed to review the request for certain water damage. Twenty minutes after this inspection, the insurer reassigned the handling of the claim to another agent, who introduced himself to the insureds that same day. The new agent attempted to contact the insureds several times before finally performing an inspection weeks after the first inspection. The agent ultimately drafted a partial denial letter which was approved by another agent and sent to the insureds.

The insureds alleged that the insurer acted in bad faith by “refusing to honor their claim to replace the exterior insulation of their home, denying coverage without reasonable basis, and knowingly or recklessly disregarding its lack of reasonable basis for denying the claim.” The insureds asserted an unreasonable delay in adjusting the claim, failing to communicate, inadequately investigation, frivolous refusal to pay, misrepresenting policy provisions, and violating proper investigation standards.

The court reasoned that the insureds provided no evidence for their assertion that the original agent assigned to the claim intended to approve coverage; nor did the insureds explain why the seven days it took the subsequent agent to record the inspection he performed was an unreasonable amount of time. While the insurer did fail to communicate with the insureds every forty-five days, the court characterized this as “mere negligence,” which does not constitute bad faith.

Finally, although the insureds alleged that the insurer unreasonably interpreted and misrepresented the policy provisions, the court found that this disagreement was a contractual dispute. In a bad faith case, the court is only tasked with determining whether the insurer’s interpretation was unreasonable, not whether its ultimate decision was correct. The court found that the insurer’s denial letter established a reasonable basis for its decision, and granted summary judgment for the insurer.

Date of Decision:  November 24, 2015

Smith v. State Farm Fire & Cas. Co., CIVIL ACTION NO. 15-670, 2015 U.S. Dist. LEXIS 159127 (E.D. Pa. November 24, 2015) (Beetlestone, J.)

 

JANUARY 2016 BAD FAITH CASES: COURT DISMISSES BAD FAITH CLAIM BASED ON MISSTATEMENT OF POLICY LIMITS AND UNREASONABLE DELAY AFTER FINDING THAT INSURED FAILED TO PROVIDE ADDITIONAL FACTUAL SUPPORT FOR ALLEGATIONS (Middle District)

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In Ridolfi v. State Farm Mutual Automobile Insurance Company, the insured brought claims for bad faith and breach of duty of good faith and fair dealing. The insurer moved to dismiss, arguing that the insured’s allegations were conclusory and boilerplate assertions.

The underlying claim arose out of a motor vehicle accident. The insured filed claims with both the insurer of the other driver, as well as her own insurer. She ultimately settled with the other insurer, and demanded policy limits from her insurer. She subsequently found a document in her legal file from her suit against the other insurer showing that the policy limits were higher than originally reported by her insurer.

The insured alleged that her insurer’s actions constituted bad faith, specifically that the insurer “knowingly and fraudulently” incorrectly reported her policy limits, and delayed its investigation into her claim.

With regard to the insured’s first contention, the court found that the insured failed to provide facts to support the assertion that the insurer acted “knowingly and fraudulently” in reporting incorrect policy limits. The court further reasoned that the insured’s allegation of a knowing and fraudulent misstatement of policy limits amounted to no more than a conclusory allegation that the information must have been sent with some motive of self-interest or ill will simply because it was inaccurate.

Similarly, with regard to the insured’s second contention, that the insurer delayed its investigation into her claim, the court found that the insured failed to allege facts allowing the court to draw a reasonable inference that the insurer acted in bad faith. Specifically, the insured alleged that the insurer made “ongoing requests for information from physicians who [the insured] was never treated by and other inquiries which are irrelevant and duplicative.” However, the court reasoned that the insured’s allegations did not identify how the requests were irrelevant, duplicative, or designed to delay settlement, and were nothing more than conclusory assertions of delay. Accordingly, the court dismissed the insured’s claim of bad faith, without prejudice to re-plead.

Date of Decision:  November 19, 2015

Ridolfi v. State Farm Mut. Auto. Ins. Co., No. 1:15-cv-00859, 2015 U.S. Dist. LEXIS 156687 (M.D. Pa. November 19, 2015,) (Kane, J.)

JANUARY 2016 BAD FAITH CASES: NO BAD FAITH WHERE INSURER AND INSURED HAVE REASONABLE BACK AND FORTH NEGOTIATIONS OVER VALUE (Middle District)

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In Williams v. Progressive Northern Insurance Coverage, the insured made a UIM claim.  The insurer increased its offer to the insured over time, after various stages of investigation; but the insured demanded policy limits and would not settle. Rather, the insured brought a bad faith claim, which the court ultimately rejected.

The court observed that some examples of bad faith could include “a frivolous or unfounded refusal to pay, failure to investigate the facts, failure to communicate with the insured, failure to engage in settlement negotiations, and unreasonable delay.”  Further: “While the insurer’s duty of good faith and fair dealing does not allow it to protect its own interests at the expense of its insured’s, an insurer also need not ‘submerge its own interests in favor of those of its insured, and investigating and litigating a claim does not constitute bad faith.’”

In this case, the court observed that the insurer did investigate the claims and did makes its offers based on its investigation at the time of that offer.  The court concluded “it appears that the [the insurer] was reasonably attempting to gather all of the information necessary to properly evaluate the claim.” Moreover, the insured could not put on clear and convincing evidence, that the insurer “was motivated by self-interest or ill will in handling” the claim.

While there is considerable case law that proving self-interest or ill will are not elements of a bad faith claim, the court’s opinion is clear that the insured could not meet the first element of any bad faith claim: an unreasonable denial of coverage where coverage is due.

Date of Decision:  December 4, 2015

Williams v. Progressive Northern Ins. Co., CIVIL ACTION NO. 3:14-1876, 2015 U.S. Dist. LEXIS 162572 (M.D. Pa. December 4, 2015) (Mannion, J.)

DECEMBER 2015 BAD FAITH CASES: (1) ISSUES OF DISPUTED FACT ON CLAIMS HANDLING AND COVERAGE SUPPORTED INSURER’S CASE THERE WAS NO BAD FAITH; (2) AN INSURER’S INVESTIGATION INTO WHETHER EXCLUSION APPLIES IS NOT BAD FAITH; AND (3) FILING A DECLARATORY JUDGMENT IS NOT THE EQUIVALENT OF DENYING COVERAGE (Middle District)

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In Bodnar v. Amco Insurance Company, the insured sought reconsideration of the court’s decision granting the insurer summary judgment on bad faith.  The insured repeated a litany of facts in arguing that the court made credibility determinations, which were inappropriate on summary judgment.

The court rejected, this argument, pointing out that the insured misconstrued the prior decision.  It was not that the court made creditability determinations on disputed issues, but that the very existence of so many disputed issues established that the insurer’s decisions were not unreasonable, and therefore the first element of any bad faith case – that there was no reasonable basis to deny coverage — could not be met.  “It was precisely because so many pieces of contradictory evidence existed that we concluded that it could not.”

The court also reiterated the bases for portions of its prior decision.  The court observed that an insurer has a duty to determine whether coverage exists.  It makes no difference whether this duty is framed positively as searching for coverage or negatively as searching for the application of exclusion.  The only issue is whether the investigation into coverage is done in good faith. “In other words, even if [insurer] ‘searched for an exclusion,’ this would not necessarily be in bad faith if the exclusion actually applied … and did in fact bar … coverage.”

The court also addressed the argument that its prior decision was based upon the insurer’s relying on advice of counsel.  There was no advice of counsel put at issue by the insurer, and the court expressly did not rely upon materials that were redacted in reaching its decision.  In this vein, the court stated that whatever the lawyer’s advice had been, it only led to a determination to file a declaratory judgment action, not to deny coverage. “[A] decision to seek a judicial determination on whether coverage existed is not indicative of bad faith or breach of contract, especially when, as here, the implications of the background facts at issue are legally ambiguous.”

Date of Decision:  December 3, 2015

Bodnar v. Amco Insurance Co., No. 3:12-CV-01337, 2015 U.S. Dist. LEXIS 162169, December 3, 2015 (M.D. Pa. December 3, 2015) (Mariani, J.)

DECEMBER 2015 BAD FAITH CASES: COURT DISMISSES INSUREDS’ CLASS-WIDE BAD FAITH CLAIMS WHILE ALLOWING INSUREDS’ INDIVIDUAL STATUTORY BAD FAITH CLAIMS TO PROCEED (Western District)

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In Papurello v. State Farm Fire & Casualty Company, the insureds brought individual and class-wide claims for breach of contract and bad faith against an insurer for paying initial amounts under homeowners’ insurance policies determined by a two-step procedure, under which the insurer made a payment under the first step equal to the amount of estimated replacement costs of materials, taxes, and labor less depreciation.

Specifically, the insureds alleged on behalf of a putative class of Pennsylvania homeowners that: “(i) the insurer breached a contractual duty imposed by the express Policy term “actual cash value”; or (ii) in the alternative, the insurer breached the implied contractual duty of good faith and fair dealing in the policy.”

In support of their argument that the insurer violated the policy’s implied duty of good faith and fair dealing, the insureds claimed that the policy did not specify whether the insurer may subtract depreciation from the estimated replacement costs, and that by subtracting depreciation, the insurer “knowingly” and “intentionally” frustrated their reasonable expectations that the actual cash value would not be altered in any way.

The court rejected this argument, and reasoned that the policy language was not confusing, misleading, or ambiguous in providing that the insureds “must first endeavor to repair or replace before receiving full replacement cost” from the insurer. In addition, the court noted that the two-step loss settlement provision was set forth conspicuously in the policy. Consequently, the insureds’ class-wide breach of contract bad faith claim was dismissed.

The court also found that the insureds failed to state plausible class-wide statutory bad faith claims, and noted that the success of the statutory bad faith claim was contingent upon a finding that the insurer’s payment procedure constituted a breach of contract with respect to putative class members.

However, the court found that the insureds did state a plausible individual statutory bad faith claim against the insurer because the parties disputed whether the insurer had a reasonable basis upon which to deny the insureds benefits under the policy.

Date of Decision:  November 16, 2015

Papurello v. State Farm Fire & Cas. Co., Civil Action No. 15-1005, 2015 U.S. Dist. LEXIS 154356 (W.D. Pa. November 16, 2015) (Conti, J.)

NOVEMBER 2015 BAD FAITH CASES: COURT GRANTS INSURER SUMMARY JUDGMENT AFTER FINDING THAT INSURER HAD REASONABLE BASIS FOR ITS CLAIM DECISIONS (Middle District)

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In Militello v. Allstate Property & Casualty Insurance Company, the insured raised claims for breach of contract and bad faith, and alleged that “his property insurance company failed to accurately assess and pay a covered loss, and made false representations for the purpose of denying the full value of the claim.” The insurer moved for summary judgment on both claims.

The insurer contended that it was entitled to summary judgment on the bad faith claim because it “had a reasonable basis for all of its claim decisions.” The court observed that “mere negligence or bad judgment is not bad faith,” and that an insured must demonstrate by “clear and convincing evidence” that an insurer acted in bad faith.

In holding that the insured could not defeat the insurer’s motion for summary judgment on the bad faith claim, the court noted that the insurer promptly began investigating the insured’s claim within five days of receiving notice and reopened the claim once the insured contended that it had learned of previously unknown facts related to the cause of the damage. Further, the insurer issued payment to the insured, and requested the parties enter an appraisal after the insured’s counsel continued to dispute the amount of the loss.

Additionally, the insurer continued negotiations even after the insured terminated the appraisal, as well as retaining an independent contractor to prepare an estimate for the property damages, and issued an additional check to the insured. The insurer also continued to negotiate after the insured retained new counsel and initiated suit. Finally, the court stated that deposition testimony of the insured’s contractors, which directly contradicted statements made by the insured in his deposition, provided an ample basis for the insurer’s withdrawal from the appraisal process. Accordingly, the court found that the insurer had a reasonable basis for its claim decisions and that the insured failed to show that the insurer acted in bad faith by clear and convincing evidence.

Date of Decision: November 18, 2015

Militello v. Allstate Prop. & Cas. Ins. Co., CIVIL ACTION No. 1:14-cv-0240, UNITED STATES DISTRICT COURT FOR THE MIDDLE DISTRICT OF PENNSYLVANIA, 2015 U.S. Dist. LEXIS 155576 (M.D. Pa. November 18, 2015) (Rambo, J.)

 

Prior decisions in this case can be found here and here.

 

NOVEMBER 2015 BAD FAITH CASES: COURT DISMISSES INSURED’S BAD FAITH CLAIM AFTER INSURER SHOWS REASONABLE BASIS FOR (1) REQUESTING INDEPENDENT MEDICAL EXAMINATION, (2) REFUSING TO PROCEED TO ARBITRATION WITHOUT AN EXAMINATION, AND (3) DENYING INSURED’S CLAIM (Third Circuit)

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In Feingold v. State Farm Mutual Automobile Insurance Company, the insured brought breach of contract and bad faith counts in a suit brought approximately thirteen years after a vehicular accident. In August 1998, the insured was involved in a motor vehicle accident and filed a personal injury protection claim with his insured. Over the next few months, the insurer made multiple attempts to schedule an independent medical examination (“IME”). Despite the fact that the policy required the insured to cooperate with the insurer by submitting to reasonable requests for medical examination, the insured failed to attend multiple scheduled appointments and refused to provide the insurer with other convenient dates.

The insurer eventually obtained peer reviews of the insured’s medical reports, which determined that the insured had reached maximum medical improvement. In contrast, the insured produced a doctor’s report that discussed additional treatment options.

Two years after the insurer’s last request for an IME, the insured filed a petition to appoint arbitrators for uninsured/underinsured motorist claims, which the insurer eventually agreed to. Nevertheless, the insured refused to submit to an IME, and the insurer warned that it would refuse to proceed to arbitration until the examination occurred. The insurer eventually informed the insured that it was closing his file because his failure to submit to an IME indicated that he did not intend to pursue a claim.

In December 2010, twelve years after the accident occurred, the insured’s newly hired counsel requested that the insurer proceed to arbitration, which the insurer refused to do and responded that the file was closed and the claim was time-barred. In October 2011, the insured filed the instant suit for breach of contract and bad faith. The District Court granted summary judgment in favor of the insurer after finding that the insured’s failure to submit to an IME constituted a material breach of the agreement that had prejudiced the insurer, and the insured appealed.

In affirming summary judgment on the insured’s bad faith claim, the Court found that the insurer had a reasonable basis for requesting an IME, refusing to proceed to arbitration without an examination, and denying the insured’s claim. Specifically, the Court reasoned that an IME was needed to determine the cause of the insured’s injuries and to clarify inconsistencies in the prognosis.

Date of Decision: October 27, 2015

Feingold v. State Farm Mut. Auto. Ins. Co., CIVIL ACTION NO. 14-1414, 2015 U.S. App. LEXIS 18700 (3d Cir. Pa. October 27, 2015) (Ambro, Roth, Scirica, JJ.)