Archive for the 'PA – Procedural Issues' Category

AUGUST 2017 BAD FAITH CASES: “A PLETHORA OF CONCLUSORY ALLEGATIONS” DOES NOT SUPPORT A CLAIM OF BAD FAITH (Philadelphia Federal)

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This case arose after a fire damaged the insured’s premises, resulting in a claim adjusted for $182,739.11, subject to a hold-back of recoverable depreciation of $58,075.29. The insurer ultimately issued a $123,663.82 payment to the insured. This amount represented the insurer’s calculation of the actual cash value of the loss, less depreciation and the insured’s deductible. The insured then filed suit for breach of contract and bad faith. The insured argued that the insurer wrongfully withheld additional funds owed to him.

The insurer filed a motion to dismiss the bad faith claim. The Court wrote that the insured’s complaint “offers a plethora of conclusory allegations regarding [insurer’s] unreasonableness, misrepresentation, and unfairness without identifying how something was done unreasonably, what specifically was misrepresented, or what circumstances made some action unfair.” As such, the Court held that the insured’s bad faith claim lacked sufficient factual detail.

Furthermore, the Court took judicial notice that the insurance policy at issued allowed for recovery of the withheld depreciation amount, if the insured repaired the damaged property within 180 days of the insurance payment. The insured failed to make the repairs within this time. Thus, the insured was not entitled to additional funds according to the terms of the policy.

The Court granted the insurer’s motion and dismissed the bad faith claim, with no reference to permitting an amended complaint on the issue.

Date of Decision: July 28, 2017

Fasano v. Allstate Indem. Co., No. 17-cv-1495, 2017 U.S. Dist. LEXIS 118558 (E.D. Pa. July 28, 2017) (Curtis Joyner, J.)

AUGUST 2017 BAD FAITH CASES: INJURED PARTY HAS NO STANDING TO BRING BAD FAITH CLAIM AGAINST TORTFEASORS’ INSURER (Middle District)

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An injured plaintiff attempted to assert bad faith claims against the tortfeasor’s insurer and its adjuster. In his Report and Recommendation, the Magistrate Judge observed that third-party claimants do not have a contractual relationship with such insurers, and thus have no standing to assert a bad faith claim. The District Court Judge agreed, and dismissed the putative bad faith failure to negotiate claim.

Dates of Decision: June 20, 2017 and August 9, 2017

Starrett v. Coe, No. 3:16-cv-02272, 2017 U.S. Dist. LEXIS 95793 (M.D. Pa. June 20, 2017) (Saporito, M.J.) (Report and Recommendation)

Starrett v. Coe, No. 3:16-cv-02272, 2017 U.S. Dist. LEXIS 126348 (M.D. Pa. August 9, 2017) (Caputo, J.)

AUGUST 2017 BAD FAITH CASES: BASIS FOR DENYING CLAIM RELEVANT TO BOTH BAD FAITH AND BREACH OF CONTRACT CLAIMS, SUPPORTING COURT’S CERTIFYING CASE FOR IMMEDIATE APPEAL (Philadelphia Commerce Court)

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In a lengthy opinion, the court ruled against the insurer on how to interpret the meaning of “actual cash value” under the policy. The issue was sufficiently significant that the Commerce Court certified its decision as a final appealable order to the Superior Court.

The case also involved a bad faith claim, which came into play when determining whether to certify the appeal. The interpretation of pertinent policy language was intertwined with the issue of whether the insurer had a reasonable basis to deny benefits and/or recklessly disregarded the potential lack of a reasonable basis to deny benefits. The “statutory bad faith analysis is quite clearly related to whether plaintiff is entitled to damages on its breach of contract claim.” Later, the court stated that “immediate appellate review promotes judicial economy because appellate analysis will provide instruction, one way or the other, on open trial level issues relating to both class certification and bad faith. Pre-trial review in the event of affirmance is expected to be extensive and should be provided only after the threshold legal question is settled.”

Date of Decision: July 21, 2017

Kurach v. Truck Insurance Exchange, July Term 2015, No. 339, 2017 Phila. Ct. Com. Pl. LEXIS 228 (C.C.P. Phila. July 21, 2017) (Djerassi, J.) (Commerce Court)

AUGUST 2017 BAD FAITH CASES: POLICYHOLDER GRANTED LEAVE TO AMEND COMPLAINT TO ALLEGE A BAD FAITH CLAIM (Philadelphia Federal)

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Plaintiff-policyholders filed suit after a dispute over a denial of coverage regarding their homeowner’s insurance policy. Initially, defendant-insurer faced claims for breach of contract and a violation of the Pennsylvania Unfair Trade Practices and Consumer Protection Law. On April 26, 2017, seeking to assert a bad faith claim, the plaintiffs filed a Motion for Leave to Amend their (already) Amended Compliant.

The case arises out of severe property damage incurred by plaintiffs due to a January 2016 snowstorm. The snowstorm damaged the interior, exterior, and roof of the main residence, and damaged the roof of plaintiffs’ detached garage. The insurer provided plaintiffs with a payment of $5,801.77, which only covered damage to the interior of the main residence, minus the deductible and depreciation. The insurer denied plaintiffs’ claim for the exterior damage to the main residence, including the roof of the main residence and the roof of the detached garage. The exterior damages totaled $54,180.76.

The insurer argued that addition of a bad faith claim is futile. “’Futility means that the complaint, as amended, would fail to state a claim upon which relief could be granted.” The Court reiterated the liberal procedural standard for the amending of pleadings, and stated that defendants have “a heavy burden” in showing that plaintiffs’ amendment would be futile.

The Court ultimately granted the insureds leave to amend, because they argued that the insurer acted in bad faith by failing to provide reasons for its denial of coverage and failing to conduct a proper investigation of the claim. In support of its futility argument, the insurer attempted to have the Court review letters which included detailed and specific reasons for claim denial, along with proof that it offered to reinvestigate the claim. Nevertheless, the Court could not consider these documents at this stage because they were not attached to the amended complaint, nor were they matters of public record.

Date of Decision: July 18, 2017

Mitchell v. State Farm Fire & Cas. Ins. Co., No. 17-0737, 2017 U.S. Dist. LEXIS 111088 (E.D. Pa. July 18, 2017) (Surrick, J.)

JULY 2017 BAD FAITH CASES: STATUTE OF LIMITATIONS NOT TOLLED BY SETTLEMENT NEGOTIATIONS (Philadelphia Common Pleas)

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In this case, the Philadelphia Court of Common Pleas Judge stated that the two year bad faith statute of limitations began to run with the date of loss. Settlement negotiations did not toll the running of the statute of limitations. Under those principles, the claims in this case were time-barred.

Date of Decision: July 3, 2017

Dutton v. American Bankers Insurance Company, September Term 2016, No. 1412, 2017 Phila. Ct. Com. Pl. LEXIS 181 (C.C.P. Phila. July 3, 2017) (Anders, J.)

JULY 2017 BAD FAITH CASES: COURT DECLINES TO CONSIDER MERITS OF ASSIGNED BAD FAITH CLAIM BECAUSE STATUTE OF LIMITATIONS HAD RUN (Western District)

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In 2007, the insured was involved in a motor vehicle accident, injuring another driver. The injured party filed a negligence action against the insured. The insurer sent a 2007 letter declining to defend or indemnify the insured. In 2008, the insurer filed a declaratory judgment action, claiming that it did not have a duty to defend or indemnify the insured. The court entered a consent order that the insurer owed no duty to defend or indemnify.

Around the same time-period, the injured party separately filed her own declaratory judgment against the insurer, arguing that the insurer was obligated to defend and indemnify the insured. This second declaratory judgment action did not assert claims for breach of contract or bad faith, and there was no assignment of such claims by the insured to the injured plaintiff. In February 2009, the injured party was given leave to withdraw this second declaratory judgment action, without prejudice.

The insured passed away in 2015. In 2016, after trial, the court entered judgment in favor of the injured party in the original 2007 negligence action, for a sum in excess of $1 Million. The estate assigned the injured party any and all of its rights, claims, demands, and causes of action against the insurer, including claims for breach of contract and bad faith.

The injured party subsequently filed an action against the insurer. The claims included breach of contract and statutory bad faith claim, as well as a request for declaratory relief. The court granted summary judgment on the assigned breach of contract and bad faith claims, though not as to the injured party’s own declaratory judgment count.

An assignee stands in the assignor shoes. Any causes of action the insured had for breach of contract and bad faith accrued when the insurer conveyed a letter denying any duty to defend and indemnify the 2007 negligence action (or, at the latest, in 2008, when the court entered the consent order). The court stated that any bad faith claim had to be raised no later than 2009 (under the two year statute of limitations governing statutory bad faith claims) or by 2011 for the breach of contract claim.

The court concluded: “In order to advance timely claims for breach of contract/bad faith, under the facts here, [the insured] would had to have filed suit and challenged that coverage denial in the 2008 ‘second’ declaratory judgment suit by seeking an assignment to include the breach of contract/bad faith claims at that time. Instead, [the insured] brought only a declaratory judgment action.”

As the bad faith claim was not filed within two years after the initial denial of coverage, the court found that the claim was time-barred.

Date of Decision: May 22, 2017

Falo v. Travelers Personal Insurance Co., No. 17cv0143, 2017 U.S. Dist. LEXIS 77425 (W.D. Pa. May 22, 2017) (Schwab, J.)

 

JUNE 2017 BAD FAITH CASES: UIM MOTION TO BIFURCATE DENIED

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The excellent Tort Talk Blog has updated its reporting on post-Koken UIM case law on motions to bifurcate, this most recent case being a denial of such motion.

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MAY 2017 BAD FAITH CASES: PUNITIVE DAMAGES CLAIM PROVIDES BASIS FOR FINDING JURISDICTIONAL MINIMUM MET, AND REMAND DENIED (Middle District)

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The federal court refused to remand this UIM case, which had been removed by the insurer from Pike County Common Pleas. Among other things, the federal court found the diversity minimum met because the complaint sought punitive damages for bad faith. “Pennsylvania’s Bad Faith statute makes punitive damages available to Plaintiff and, in theory, makes the amount in controversy in excess of $75,000. Therefore, federal court jurisdiction is proper irrespective of the amount of uninsured motorist coverage in Plaintiff’s insurance policy and the precise amount of coverage is not relevant to the removal/remand question at hand.”

Date of Decision: May 18, 2017

Koerner v. Geico Casualty Co., No. 17-455, 2017 U.S. Dist. LEXIS 75856 (M.D. Pa. May 18, 2017) (Conaboy, J.)
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MAY 2017 BAD FAITH CASES: MOTION TO STAY DISCOVERY IN UIM CASE DENIED; SEVERANCE AT TRIAL GRANTED WITH A TWIST

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In its leading work on keeping up with post-Koken motions to stay discovery and/or sever bad faith claims, the Tort Talk blog has an interesting post where the insured brings common law bad faith claims as well as statutory bad faith claims.

MAY 2017 BAD FAITH CASES: COURT EXPLAINS HOW BAD FAITH MUST BE PLEADED (Philadelphia Federal)

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In this case, the court outlines the general law concerning both statutory bad faith and contractual bad faith, and how to plead bad faith to survive a motion to dismiss.

Some points of note on the legal overview: (1) The court states that statutory bad faith requires showing some motive of self-interest or ill will. This runs contrary to the case law in Pennsylvania’s Superior Court, and the issue of whether this is an element of bad faith is now pending before Pennsylvania’s Supreme Court in Rancosky.

(2) The court observes case law that “Pennsylvania law … does not recognize a separate breach of contractual duty of good faith and fair dealing where that claim is subsumed by a separately pled breach of contract claim.” The court states (in this uninsured/underinsured motorist case) that, “several courts have held that where the plaintiff alleges that the defendant breached its duty of good faith and fair dealing by denying first party benefits under an insurance policy, the claim is subsumed by the plaintiff’s breach of contract claim premised on the same conduct.”

The court next examines the insured’s complaint to determine the adequacy of the insured’s bad faith claims. The complaint was not clear as to whether the plaintiff was pleading statutory bad faith, contract based bad faith, or both. However, the pleadings were inadequate under any circumstances.

Plaintiff generally described the underlying accident, and then attempted to plead bad faith. The insured only made conclusory allegations that the insurer “acted in bad faith by failing to conduct an adequate and fair investigation, engaging in dilatory claims handling and refusing to pay for losses once its liability became reasonably clear.” No specific facts were alleged to support these generalities. The court instructed that a plaintiff “must ‘describe who, what, where, when, and how the alleged bad faith conduct occurred.’”

The complaint was dismissed without prejudice, giving the plaintiff leave to plead an adequate claim with sufficient factual details by way of an amended complaint.

Date of Decision: April 10, 2017

Mittman v. Nationwide Affinity Ins. Co., No. 16-4658, 2017 U.S. Dist. LEXIS 54220 (E.D. Pa. Apr. 10, 2017) (Pappert, J.)