Archive for the 'PA – Procedural Issues' Category

DECEMBER 2017 BAD FAITH CASES: REMAND DENIED WHERE AMOUNT IN CONTROVERSY MET; THE COURT NOTING THAT FEDERAL COURTS ROUTINELY HEAR UIM CONTRACT AND BAD FAITH CLAIMS (Western District)

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This is a report and recommendation authored by a U.S. Magistrate Judge, subject to final review and decision by the District Court Judge.

The insured sued his insurer for breach of contract and bad faith surrounding a UIM claim in the Fayette County Court of Common Pleas. The insurer removed the action to federal court based upon diversity jurisdiction. Thereafter, the insured filed a motion to remand, arguing that the case should not proceed in federal court because it involves questions of Pennsylvania law.

The Court stated “the party asserting jurisdiction bears the burden of showing that at all stages of the litigation the case is properly before the federal court.” As such, the insurer “bears the burden of demonstrating that . . . removal . . . [is] proper in all respects.”

The insured cited case law referencing the Declaratory Judgment Act, but the insured’s complaint did not seek a declaratory judgment. Consequently, the Court found that the insured’s brief was largely irrelevant. The Court further found that the amount in controversy requirement was satisfied because the insured sought damages of $60,000, plus additional damages of attorneys’ fees, costs, and more, likely reaching the $75,000 threshold. Because “[f]ederal courts routinely resolve issues of state law relating to insurance, including UIM benefits and bad faith[,]” the Court denied the insured’s motion to remand.

Date of Decision: December 12, 2017

Carney v. GEICO, Civil Action No. 17-1486, (W.D. Pa. Dec. 12, 2017) (Mitchell, M.J.)

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

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

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

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

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

Date of Decision: December 6, 2017

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

IF YOU HAVE A BAD FAITH CASE IN FEDERAL COURT, READ THIS COURT’S OPENING PARAGRAPH ON BAD FAITH CLAIMS AND PLEADING (Philadelphia Federal)

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We let the Court’s opening paragraph speak for itself in describing the law and result of failure to plead plausible bad faith claims:

“Pennsylvanians suing their automobile insurer for failing to pay their insurance claim may allege breach of the insurance policy and bad faith under a Pennsylvania statute. They are not the same claim. Alleging bad faith requires facts showing how the insurer acted unreasonably both in denying the policy benefits and later ignoring its unreasonable denial. When, as today, the insured pleads facts from over two years ago which detail the insurer’s responsive steps but then fail to allege a single fact thereafter to describe why the claim is not paid other than concluding the claim is not paid, we are left without a basis to understand if the insurer acted in bad faith. Failure to pay a claim may be a breach of contract but is not bad faith without pleading specific facts as to the insurer’s responses to the claim. The insured also cannot allege a breach of an implied covenant of good faith in the insurance policy when suing for breach of the same undisputed policy. Nor can the insured obtain attorney’s fees for the remaining breach of contract claim. In the accompanying Order, we grant the insurer’s motion to dismiss without prejudice to allow the insured to possibly plead facts supporting a bad faith claim under Fed.R.Civ.P. 11.”

Date of Decision: November 17, 2017

Sherman v. State Farm Ins. Co., CIVIL ACTION NO. 17-4822, 2017 U.S. Dist. LEXIS 190363 (E.D. Pa. Nov. 17, 2017) (Kearney, J.)

NOVEMBER 2017 BAD FAITH CASES: NO CLAIM SEVERANCE BECAUSE (1) EXTRA LITIGATION STEPS PREJUDICE INSURED AND BURDEN COURT; (2) LOSING UIM COVERAGE CLAIM DOES NOT AUTOMATICALLY RESOLVE BAD FAITH CLAIM; (3) AND DISCOVERY AND EVIDENTIARY ISSUES COULD BE HANDLED DURING DISCOVERY PROCESS AND/OR AT TRIAL (Middle District)

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The Court denied a motion to sever and stay in this UIM bad faith case.

The tortfeasor’s insurer had paid its policy limits, the insured sought her $300,000 UIM limit, but her carrier offered $40,000 to settle. The insured brought breach of contract and bad faith claims. The insurer sought to sever and stay the insured’s bad faith claim.

The federal court found under the Federal Rules that “both the convenience of the parties and judicial economy weigh against severance.” Specifically, the court found that “if the bad faith claim is severed, Plaintiff would have to bear the costs of two trials and the resolution of both claims would be delayed.” Further, “although Defendant argues that resolution of the breach of contract action will greatly impact and potentially moot the bad faith claim, it is sufficient to note that ‘litigation on the bad faith claim is not contingent upon the success of the breach of contract claim.’” The court stated that an insured could “’simultaneously prevail on a bad faith claim and lose on a UIM claim.’”

The court went on that “severance would hinder judicial economy by requiring separate cases and separate trials instead of handling these claims in a single action.” The court did not “see how [bifurcation] is reasonable given the circumstances. Discovery, dispositive motions, pre-trial motions, and trial place a substantial burden on any party. Bifurcation would essentially double the life of this action requiring a second discovery period, more dispositive motions, more pre-trial motions, and a completely separate second trial.’” Any potential prejudice from simultaneous litigation of contract and bad faith claims did not outweigh “countervailing interests of judicial economy and the prompt resolution of this entire matter.”

“Additionally, the potential evidentiary problems identified by Defendant do not provide a sufficient basis for severing the claims in this matter.” Under the Federal Rules of Evidence, “documents and testimony to be entered for narrow purposes[, and at] this point it is premature to determine whether specific pieces of evidence would be admissible wholly or on a limited basis. The best way to make that determination is to keep the matters joined, allow discovery to proceed, and bring both claims to trial as quickly as possible. Any discovery disputes or questions of privilege can be handled through the discovery dispute procedures employed by the court.” The insurer’s “proffer of prejudice does not outweigh the interests of convenience and judicial economy, nor does it justify the severance and stay of Plaintiff’s bad faith claim.”

Date of Decision: October 11, 2017

Mulgrew v. Government Employees Insurance Co., No. 3:16-CV-02217, 2017 U.S. Dist. LEXIS 167770 (M.D. Pa. Oct. 11, 2017) (Caputo, J.)

OCTOBER 2017 BAD FAITH CASES: CASE REMANDED AFTER BAD FAITH CLAIM DISMISSED AS REMAINING $50,000 POLICY LIMIT WAS LESS THAN JURISDICTIONAL MINIMUM (Philadelphia Federal)

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This UIM breach of contract and bad faith case was removed to federal court. The potential contract policy based recovery was limited to $50,000, but the bad faith claim was sufficient to take the potential claim above the $75,000 federal jurisdictional minimum.

The court dismissed the bad faith claim without prejudice. An amended complaint was filed, but without the bad faith claim. As the claim was now limited to the $50,000 policy amount, the court sua sponte raised the issue of federal jurisdiction. The parties recognized the court was correct that jurisdiction no longer existed because the claim was limited to $50,000, and the case was remanded to state court.

Date of Decision: October 5, 2017

Jones v. Allstate Ins. Co., CIVIL ACTION NO. 17-648, 2017 U.S. Dist. LEXIS 164949 (E.D. Pa. Oct. 5, 2017) (Hey, M.J.)

OCTOBER 2017 BAD FAITH CASES: BREACH OF DUTY OF GOOD FAITH CLAIM SUBSUMED IN BREACH OF CONTRACT CLAIM; NO BAD FAITH WHERE PARTIES SIMPLY DISAGREE OVER AMOUNT OF RECOVERABLE DAMAGES (Middle District)

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The insured filed a UIM action against her insurer. Initially, the insured settled with the tortfeasor’s insurer for $85,000.

At the beginning of the litigation, the parties disputed the UIM coverage limits. The insured requested and paid for a policy of $50,000 per person and $100,000 per accident, yet some of the insurer’s documents indicated coverage limits of $100,000/$300,000. The insured’s counsel demanded $700,000 and threatened to bring a statutory bad faith claim against the insurer.

The insurer declined to settle, but clarified that the UIM coverage limits for the insured were $100,000 per person or $300,000 per accident. The parties then engaged in several efforts to clarify the coverage limits, and the insured produced requested medical records. The insured contended that material gaps existed in the disclosed medical records, however, and the insurer further attempted to obtain complete records. The insured sued for breach of contract and statutory bad faith.

The insurer successfully brought a partial summary judgment motion on the statutory bad faith claim. Nevertheless, the insured argued that the facts of the case allow her to bring a claim for breach of the common law contractual duty of good faith and fair dealing.

The insurer argued that such a claim is improper, and the Court agreed. “Pennsylvania law does not recognize a separate breach of contractual duty of good faith and fair dealing where said claim is subsumed by a separately pled breach of contract claim.” The Court reasoned that, for first-party claims of insurance benefits, a claim for breach of the duty of good faith and fair dealing merges with a separately pled breach of contract claim, where both claims arise out of the same facts.

Furthermore, the Court stated that the insured’s argument would lose on the merits. The insurer reasonably investigated the claim and offered coverage in excess of premiums charged to the insured. A disagreement between the parties on the amount of recoverable damages does not constituted bad faith. “[The] bad faith claim should be dismissed because the uncontested facts simply do not permit a reasonable inference of bad faith on the part of [the insurer] in this case.”

As such, the Court ruled that the insurer did not breach its contractual duty of good faith in a way that would support an independent contractual bad faith claim.

Date of Decision: October 5, 2017

Ridolfi v. State Farm Mut. Auto. Ins. Co., 2017 U.S. Dist. LEXIS 165013 (M.D. Pa. Oct. 5, 2017) (Carlson, J.)

 

OCTOBER 2017 BAD FAITH CASES: AN INSURED MUST “SHOW” ITS ENTITLEMENT TO RELIEF FOR BAD FAITH WITH FACTS (Philadelphia Federal)

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In this UIM action, the insured sustained serious and permanent injuries. After recovering $15,000 from the underinsured tortfeasor’s insurer, the instant insurer offered the insured $500 for his UIM claim. The insured rejected this offer, and sued for bad faith and breach of contract. The insurer moved to dismiss the bad faith claim. In its complaint, the insured enumerated several allegations of the insurer’s bad faith conduct. The insured alleges the insurer acted unreasonably and unfairly, failed to advance a reason for its denial of the full value of the claim, intentionally and/or recklessly disregarded the insured’s injuries, and refused to pay benefits owed under the policy.

The Court stated “[a] complaint must do more than allege a plaintiff’s entitlement to relief, it must ‘show’ such an entitlement with its facts.” The Court held that the undisputed facts only show a disagreement between the parties to negotiate and settle the UIM claim. Furthermore, “[t]hese facts do not show that [the insured] has a plausible claim for bad faith because they do not shed light on the reasonableness of [the insurer’s] actions.”

The Court reasoned that the insured’s allegations are merely conclusory and are thus insufficient to state a claim for bad faith. The Court then dismissed the bad faith claim, but gave the insured twenty days leave to amend its complaint.

Date of Decision: October 4, 2017

Irving v. State Farm Mut. Auto. Ins. Co., No. 17-1124, 2017 U.S. Dist. LEXIS 164390 (E.D. Pa. Oct. 4, 2017) (Slomsky, J.)

 

OCTOBER 2017 BAD FAITH CASES: BIFURCATION AND STAY OF BAD FAITH CLAIM DENIED ON ALL FOUR CRITERIA, INCLUDING SIMILARITY OF ISSUES, COMMON EVIDENCE, UNDUE EXPENSE TO THE INSURED, AND ABSENCE OF PREJUDICE (Middle District of Pennsylvania)

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An underinsured motorist injured the insureds. The tortfeasor’s insurer ultimately tendered $15,000 to the insureds. The insureds’ own UIM policy contained maximum benefits of $100,000, or $200,000 with stacking. The insureds demanded full benefits under the policy.

After investigation, the insurer offered $10,000 to settle the UIM claim. The insureds filed suit in the Court of Common Pleas. The insurer removed the action to federal district court and filed a motion to dismiss. The Court denied the insurer’s motion to dismiss. The insurer then filed a motion to bifurcate the bad faith claim pursuant to Federal Rule of Civil Procedure 42.

In considering a party’s bifurcation motion, courts are careful to consider whether a stay would damage a party. Specifically, courts consider four factors in deciding a Rule 42 motion: “(1) whether the issues are significantly different from each other; (2) whether they require separate witnesses and documents; (3) whether the nonmoving party would be prejudiced by bifurcation; and (4) whether the moving party would be prejudiced if bifurcation is not granted.” The movant bears the burden to show that bifurcation is appropriate.

  1. First, the Court found that the claims are not “so profoundly different” as to justify bifurcation.
  2. The Court ruled that “both claims would utilize similar documents, such as the [insurer’s] claim file, relevant medical evidence . . ., and the [insurer’s] settlement attempts.” In addressing the insurer’s concerns on privileged materials pursuant to the attorney work-product doctrine, the Court ruled that the insurer failed to identify specific documents that enjoy such privilege. Furthermore, the Court reasoned that the insurer is free to file such motions going forward in order to assert its privilege at any time.
  3. The Court held that the insured would suffer economically if the bad faith claim was stayed, because the insured would have to pay its attorney to do twice the work. “Bifurcation would require two discovery periods, double the dispositive motions, and double pre-trial motions.”
  4. Lastly, the Court held that the insurer would not be prejudiced were its motion to bifurcate be denied, because the insurer could simply defeat the bad faith claim by showing a reasonable basis for its settlement offer and investigatory conduct.

In conclusion, none of the four factors weighed in favor of bifurcation and the Court denied the motion to sever and stay the bad faith claim.

Date of Decision: September 18, 2017

Newhouse v. GEICO Cas. Co., No. 4:17-CV-00477, 2017 U.S. Dist. LEXIS 150793 (M.D. Pa. Sept. 18, 2017) (Brann, J.)

OCTOBER 2017 BAD FAITH CASES: PLEADING UIPA VIOLATIONS NOT FATAL WHERE THEY ARE NOT THE SOLE BASIS FOR STATUTORY BAD FAITH CLAIMS; COMPENSATORY AND CONSEQUENTIAL DAMAGES NOT WITHIN BAD FAITH STATUTE (Middle District of Pennsylvania)

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This bad faith case asserting common law and statutory bad faith, as well as regulatory violations, alleged the following.

The insured owned property covered under a homeowner’s insurance policy. In June of 2014, the insured entered into a listing contract with a real estate agent for the sale of the property. The insured relocated out of state two months later. In October of 2014, the insured accepted an offer to sell the property for $275,000. Before the sale, the real estate agent discovered that water pipes had burst, causing significant damage.

It was alleged that an adjuster for the insurer estimated the damage at $80,000, and suggested that the insured may have sabotaged the property. The insured asserted there was no reason to sabotage the property because the $275,000 sale price far exceeded the amount left on the mortgage, and the buyer remained willing to purchase the property so long as repairs were made. The insurer wrote to the insured regarding coverage obligations and requesting further documentation. The insured timely responded to insurer’s request and provided the requested information.

The insurer referred the claim to its fraud unit. The insured provided requested information to the fraud unit, and sat for multiple examinations under oath. The insurer also requested phone records, financial information, and utility records.

The sale of the property fell through, and the property entered foreclosure proceedings. Counsel for the insured requested documentation from the insurer. The insurer allegedly failed to provide all of the requested documentation, but maintained its request for the insured’s cell phone records and financial information.

The insurer ultimately forwarded benefits totaling $110,510.20 to the insured. However, the insured estimated her damages at $155,785, and filed suit for breach of contract and bad faith, among other claims.

The insurer responded by filing a motion to dismiss the insured’s breach of contract claim. The Court refused to dismiss this claim, holding that the complaint “sufficiently sets forth the damages [the insured] purportedly suffered as a result of [the insurer’s] conduct.”

The insurer also filed a motion to strike the insured’s allegations of violations of the Unfair Insurance Practices Act (“UIPA”) and of Unfair Claims Settlement Practices Regulations (“UCSP”), arguing that these alleged violations cannot serve as the basis for private statutory bad faith claims. The Court stated that violations of the UIPA or UCSP are not per se violations of the bad faith statute, and added that the “Third Circuit and this Court have held that alleged violations of the Unfair Insurance Practices Act do not, in and of themselves, constitute bad faith….” The Court refused to strike those allegations, however, because the insured’s “bad faith claim does not rest solely on alleged UIPA or UCSP violations.”

The insured’s breach of contract claim included an alleged a breach of the implied covenant of good faith and fair dealing. The insurer also moved to strike this claim, arguing that the breach of contract claim subsumed it. The Court ruled that “as [the insured] has not pled a separate breach of contract claim, [the reference] may properly remain in the Complaint.”

Lastly, the Court struck the insured’s claims for compensatory and consequential damages, holding that such damages are not available under the Pennsylvania bad faith statute.

Date of Decision: September 19, 2017

Pratts v. State Farm Fire & Cas. Co., No. 16-2385, 2017 U.S. Dist. LEXIS 151650 (M.D. Pa. Sept. 19, 2017) (Caputo, J.)

SEPTEMBER 2017 BAD FAITH CASES: BAD FAITH CLAIM DISMISSED DUE TO A LACK OF FACT SPECIFIC ALLEGATIONS, INSURED GIVEN LEAVE TO AMEND (Philadelphia Federal)

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The insured filed a UIM claim with her insurer after sustaining injuries in an auto accident. The insurer denied the claim. The insured then sued the insurer and alleged breach of contract and bad faith. The insurer moved to dismiss the bad faith claim pursuant to Federal Rule of Civil Procedure 12(b)(6).

The Court stated that in order “[t]o survive a motion to dismiss, [the insured’s] complaint must include factual allegations from which the Court may plausibly infer the unreasonable and intentional or reckless denial of benefits.” The insured alleged that the insurer failed to act with reasonable promptness in evaluating and responding to the insured’s claim; that the insurer failed to act with reasonable fairness; and that the insurer failed to conduct a proper investigation.

The Court found that complaint only asserted legal conclusions. The insured did not specifically allege how the insurer failed to properly investigate the claim or how the insurer acted unreasonably. Furthermore, the insured failed to cite any date of correspondence or other contact with the insurer.

Even accepting the insured’s complaint as true, the Court stated that it is unable to “plausibly infer from those facts that [insurer] acted unreasonably and intentionally or recklessly in denying benefits to [the insured].” The Court granted the insurer’s motion to dismiss the bad faith claim without prejudice, and granted the insured leave to amend her complaint.

Date of Decision: September 6, 2017

Myers v. State Farm Mutual Automobile Insurance Co., No. 17-3509, 2017 U.S. Dist. LEXIS 143794 (E.D. Pa. Sept. 6, 2017) (Surrick, J.)

Thanks to Dan Cummins of the excellent Tort Talk Blog for bringing this case to our attention.