Archive for the 'PA – Procedural Issues' Category

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.)

 

APRIL 2017 BAD FAITH CASES: BIFURCATION OF UIM BAD FAITH AND BREACH OF CONTRACT CLAIMS DENIED WHERE INSURER UNABLE TO DEMONSTRATE PREJUDICE (Philadelphia Federal)

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The court denied an insurer’s motion to bifurcate, and stay, the plaintiff’s bad faith claim that was brought alongside a breach of contract claim. The plaintiff’s complaint alleged that he had been a passenger in a co-worker’s car when they were involved in automobile accident. The Plaintiff filed a UIM claim with his insurance carrier because the benefits he recovered under his co-worker’s policy were not enough to cover the extent of his injuries. The insurer denied plaintiff’s claim on three separate occasions before the plaintiff brought suit.

The insurer put forth three arguments in support of its motion to bifurcate and stay. First, the insurer argued that evidence and testimony regarding the bad faith claim would be irrelevant to the breach of contract claim and would unnecessarily confuse the jury. Next, the insurer argued that allowing the jury to hear evidence presented on the bad faith claim would “undoubtedly bias” the jury and influence the jury’s decision on the breach of contract claim. Finally, the insurer noted that if the breach of contract claim was resolved in its favor then the bad faith claim would be rendered moot. Plaintiff’s rebuttal was simply that bifurcation would be inefficient because “the insurer’s conduct evincing the bad faith is the very same conduct evincing the breach of contract.”

The court determined that the insurer had not met its burden in demonstrating that the prejudice it would face from trying both claims together would outweigh the detrimental effects of bifurcation. The court first explained that bifurcation would be an inefficient manner of proceeding with the case and would unnecessarily prolong the case. The court further explained that while the two claims were distinct, the evidence related to both claims would be similar and that presenting the same evidence to two juries would constitute a “waste of resources.” The court also rejected the insurer’s position that a finding for the insurer on the breach of contract claim would automatically render the bad faith claim moot, noting that “Pennsylvania law allows for recovery due to undue delay in processing claims which is not contingent on a breach of contract.”

The court then turned to the insurer’s argument that it would be prejudiced if forced to litigate the claims together. The court rejected the insurer’s argument that combining the two discovery phases would allow plaintiff to obtain documents reflecting the insurer’s assessment of the case.   The court explained that the “work product doctrine does not disappear just because two claims are tried simultaneously,” and that the insurer would have to “provide its entitlement to work product protection as needed.”

The court also observed that plaintiff, by opposing bifurcation, was taking “a risk of more discovery disputes and a greater likelihood that defendant will be unwilling to produce certain documents” but that this was plaintiff’s choice and “not defendant’s argument to make.” Finally, the court opined that “a concern that a jury would be unable to disregard certain evidence” was not a reason to bifurcate the two claims. The court reasoned that there were other adequate procedures available in federal court if this concern was deemed valid as trial approached.

Date of Decision: April 11, 2017

Reeves v. Travelers Cos., No. 16-6448, 2017 U.S. Dist. LEXIS 54932 (E.D. Pa. Apr. 11, 2017) (Baylson, J.)

APRIL 2017 BAD FAITH CASES: CONCLUSORY ALLEGATIONS DO NOT GIVE RISE TO A BAD FAITH CLAIM (Philadelphia Federal)

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The court granted an insurer’s 12(b)(6) motion on a bad faith claim related to the handling of an insured’s motorcycle accident. The insured’s complaint contained nineteen separate general allegations of conduct that purportedly demonstrated the insurer’s bad faith in handling the insured’s claim. The allegations were broadly worded and included assertions, among others, that the insurer had failed to “properly investigate” the insured’s claim and had “adopted a company practice of intentionally undervaluing uninsured motorist claims and delaying paying said claims for an unreasonable period of time.” The complaint, however, was devoid of any specific facts that the court could reasonably rely on to support a plausible claim for liability toward the insurer.

The court explained that “plaintiff had not alleged sufficient or specific facts to support his claim that [the insurer] had acted in bad faith . . ..” The court further observed that the insured had actually “not set forth any factual allegations to support his general legal claims.” Thus, the court dismissed the insured’s bad faith count, but without prejudice.

Date of Decision: December 5, 2016

Talotta v. State Farm Mut. Auto. Ins. Co., No. 16-55557, 2016 U.S. Dist. LEXIS 167248 (E.D. Pa. Dec. 5, 2016) (Ditter, J.)

MARCH 2017 BAD FAITH CASES: COURT WOULD NOT BIFURCATE BAD FAITH CLAIMS FROM THE COVERAGE ACTION (Philadelphia Federal)

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The insurer sought to bifurcate the insured’s bad faith claim from its coverage claim. The crux of the insurer’s argument was that the bad faith claims were dependent on a finding of breach of contract and that it would impose unnecessary discovery burdens for claims that might be resolved through a finding of no coverage.

In denying the insurer’s motion, the court refused to find that the insured’s bad faith claim was dependent on the insurer’s coverage claim. Instead, the court held that bad faith claims can extend beyond a plain breach of contract. For example, an unreasonable delay in evaluating a claim may provide an independent basis for bad faith, even where the insurer’s assessment ultimately proves correct.

Further, the court also noted that judicial economy would best be served by litigating the two claims together, as bifurcation would essentially double the life of the action – requiring a second discovery period, more motions, and a completely separate trial.

Date of Decision: January 18, 2017

Eizen Fineburg & McCarthy, P.C. v. Ironshore Specialty Ins. Co., No. 16-2461, 2017 U.S. Dist. LEXIS 6985 (E.D. Pa. Jan. 18, 2017) (Slomsky, J.)

MARCH 2017 BAD FAITH CASES: A DIFFERENCE BETWEEN THE INSURER’S AND INSURED’S LOSS VALUATION CANNOT BE A BASIS PER SE TO ESTABLISH BAD FAITH (Western District)

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This case involves a dispute over repair estimates. The insured’s estimate was over $100,000 greater than the insurer’s, and the insurer based its payment to the insured on its own estimate, less depreciation. The insured alleged a bad faith claim on the basis that the insurer’s estimate bearing “no reasonable relationship to [his] actual loss because it is more than $100,000.00 lower than the true replacement cost price quotation obtained by Plaintiff pursuant to the open market.” The insured also argued that the insurer further lowered what it would pay by picking a depreciation percentage “out of the air”. The court rejected these bad faith claims, and granted the insurer’s motion to dismiss, with prejudice.

The court first looked at prior Western District case law, Seto v. State Farm, which had a similar issue concerning fire lost estimate differentials. “Pennsylvania law does not treat as bad faith an insurer’s low but reasonable estimate of an insured’s losses.” “Rather, the insured must demonstrate that the insurer’s estimate bore no reasonable relationship to the actual damage loss, either because the insurer breached its duty of good faith through some motive of self-interest or ill-will or because the insurer failed to conduct[] a review or investigation sufficiently thorough to yield a reasonable foundation for its action.” The court also looked at the actual fact analysis in the leading Terletsky case for guidance.

In the case at hand, the insured failed to allege facts that the insurer’s “settlement offer lacked a reasonable basis or was not supported by a thorough and even-handed investigation.” There were no allegations that the insurer was dilatory, failed to communicate, performed an unsatisfactory or biased investigation or unreasonably delayed in considering his claim. The insured’s argument was characterized as being a claim that the insurer “was per se unreasonable for no other reason than that it differed from [the insured’s] own” estimate. Absent discovery, the court could not “ascertain with any degree of accuracy whether there is any reasonable basis whatsoever for [the] alleged Replacement Cost.”

The court looked at depreciation similarly. The court originally states: “40% Depreciation sure is a nice round number, but why not 20%, or 60%? It appears to be an arbitrarily selected percentage. Again, [the insured] has not even been afforded the opportunity to question [the insurer], through discovery, as to the selection of this percentage amount. Was it a thorough and even-handed investigation by [the insurer]?” However, this inability to decide on lack of information did not ultimately help the insured/plaintiff. The court rather concludes that absent “any supporting facts from which it might be inferred that the company’s investigation was biased or unreasonable, this type of disagreement in an insurance case is not unusual, and cannot, without more, amount to bad faith.” To the contrary, the court found the pleadings favored the view that the insurer did an adequate investigation, vitiating the bad faith claim.

Finally, in light of these failings, and the insured’s having been previously allowed to cure the pleading deficiencies in the original complaint, no further amendment was allowed and the amended complaint was dismissed with prejudice.

Gowton v. State Farm Fire & Cas. Co., No. 15-1164, 2017 U.S. Dist. LEXIS 29390 (W.D. Pa. Mar. 2, 2017) (Bissoon, J.)

MARCH 2017 BAD FAITH CASES: IN INSURANCE CHOICE OF LAW ANALYSIS, LOCATION OF INSURED IS MOST IMPORTANT FACTOR (Western District)

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This insurance bad faith case involved: (1) a physical loss in West Virginia; (2) an Illinois insurer; (3) an insured with its principal place of business in Pennsylvania and place of incorporation in Delaware; and (4) an insurance policy with a New Jersey choice of law provision. The issue before the Court was which state’s bad faith law to apply. The insured had pleaded statutory and common law bad faith under West Virginia law, as well as a New Jersey bad faith claim. The West Virginia law conflicted with Pennsylvania bad faith law.

In conducting its choice of law analysis, the Court looked to the Third Circuit’s decision in Hammersmith v. TIG Ins. Co., 480 F.3d 220 (3d Cir. 2007), on how to apply Pennsylvania choice of law principles in the insurance context. Pennsylvania law has a flexible approach combining the Restatement (Second) of Conflicts of Laws, and a government interest analysis. Courts look at factors in Restatement sections 188 and 193 (which focuses on the location of the risk). However, this court concluded that the law has evolved to the point where the dominant factor in determining which state’s law applies in insurance actions is the insured’s location. This is because the public policy goal is to protect the insured’s interests.

Applying these principles, the Court rejected application of West Virginia and New Jersey law, and gave the insured’s leave to amend their complaint to plead bad faith claims under Pennsylvania law.

Dates of Decision: January 26, 2017 (Report and Recommendation), February 27, 2017 (adopted by District Court).

Kvaerner N. Am. Constr. Inc. v. Allianz Global Risks US Ins. Co., No 15-460, 2017 U.S. Dist. LEXIS 11635 (W.D. Pa. Jan. 26, 2017) (Mitchell, M.J.) (Report and Recommendation)

Kvaerner North Am. Constr., Inc. v. Allianz Global Risks US Ins. Co., No. 15-460, 2017 U.S. Dist. LEXIS 26757 (W.D. Pa. Feb. 27, 2017) (Bissoon, J.) (adopting Report and Recommendation as decision of the Court)

 

MARCH 2017 BAD FAITH CASES: NO FIDUCIARY DUTY OWED IN UIM CONTEXT; BAD FAITH CLAIMS WERE NOT SUPPORTED BY SUFFICIENT FACTUAL ALLEGATIONS (Middle District)

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In this uninsured motorist case, the court struck all references in the insured’s complaint concerning breach of fiduciary duty. “Under Pennsylvania law, an insurer owes a duty of good faith and fair dealing toward their insureds. It is well-established, however, that there is no fiduciary duty owed to an insured in the context of an underinsured/uninsured motorist benefits.”

In analyzing the motion to dismiss the insured’s bad faith claims, which included a long list of alleged bad faith acts, the court first separated out the factual and legal elements. In looking at the factual allegations, it first found that allegations of failure to communicate and ignoring communications were unsupported. There was also no evidence to support allegations that the insurer had not fairly and objectively evaluated the claim, or that the settlement offer was so inadequate as to constitute bad faith. Nor was there evidence to support that the insurer’s requests for four medical examinations were made in bad faith.

The court dismissed the bad faith claims, but gave the insured leave to amend if sufficient supporting facts could be pleaded.

Date of Decision: January 27, 2017

Meyers v. Protective Ins. Co., No. 16-1821, 2017 U.S. Dist. LEXIS 11338 (M.D. Pa. Jan. 27, 2017) (Caputo, J.)