Archive for the 'PA – Punitive Damages' Category

Welcome Spring 2014

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Our first post of the Spring finds a rainy day, but it all looks like bright sunshine now that the snow has gone.  We at the Pennsylvania and New Jersey Insurance Bad Faith Insurance Blog wish you bright days ahead.

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HAPPY ST. PATRICK'S DAY, AND MAY WE HAVE SEEN THE END OF WINTER SNOWS IN 2014

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Back from Winter Break

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We are back from a brief winter hiatus, and hope you are finding some sun and warmth on these cold winter days.Sun and Sky

HAPPY HOLIDAYS AND ALL THE BEST FOR THE NEW YEAR

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We thank you for visiting our Blog, and look forward to seeing you again (and again) in 2014.

May it be a good year for all,

FINEMAN KREKSTEIN & HARRIS

 

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NOVEMBER 2013 BAD FAITH CASES: SUPERIOR COURT AFFIRMS BAD FAITH FINDING BASED ON ADJUSTER’S FAILURE TO PERFORM INDEPENDENT EVALUATION ON UIM CLAIM; PERMITS EXPERT TESTIMONY ON CLAIMS HANDLING; UPHOLDS PUNITIVE DAMAGE AWARD; AND DOES NOT PERMIT EXPERT FEES, INVESTIGATIVE FEES, ARBITRATION FEES AND TRIAL PREPARATION EXPENSES WITHIN THE TERM “COURT COSTS” (Pennsylvania Superior Court)

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In Grossi v. Travelers Personal Ins. Co., plaintiff brought suit against his insurer for bad faith handling of his UIM claim after he was awarded $4M at arbitration despite the insurer’s refusal to settle for more than its $1,000 reserve.  Plaintiff won at the trial level on his bad faith claim, and the insurer appealed to the Superior Court.  The Superior Court affirmed on most issues, in a divided 2-1 panel decision with a vigorous dissent.

The insurer presented six questions on appeal, including a question as to whether the trial court erred as a matter of law in concluding plaintiff had proven by clear and convincing evidence the insurer acted in bad faith in its handling of the underinsured claim. The insurer argued the trial court should have granted its post-verdict motion for judgment notwithstanding the verdict or a new trial. The Superior Court, however, concluded the trial court did not abuse its discretion in finding the insurer had breached its good faith duty. The trial court based its decision on the adjuster’s affidavit, as well as plaintiff’s expert’s testimony.

Much of the majority’s opinion is focused on setting and never changing a loss reserve, and failures to follow the carrier’s manual in evaluating the loss reserve.  As found in the majority opinion, in her affidavit, the original adjuster admitted she conducted no individual assessment of the future earnings loss before setting a $1,000 reserve on the claim, despite plaintiff submitting evidence that his loss far exceeded the $300,000 policy limit. Plaintiff’s expert testified this was an unreasonable practice, particularly given the $4M arbitration award so far exceeded the policy limits. The insurer argued it is not required to pay out claims without the opportunity to fully investigate the same.  However, the court found that the investigation was unduly delayed and or carried out in connection with defending an arbitration rather than making an evaluation of the claim, and distinguished the case law on which the carrier relied.

As to the evaluation, the majority characterized the carrier’s positionas being that the insured’s expert’s number was speculative, and could be rejected on that basis alone.  The found that such an argument would justify rejection of any UIM claim on the basis of an inherent uncertainty in estimating damages, and would take away any responsibility for a carrier’s doing its own analysis and evaluation.  This could not fulfill an insurer’s duty of good faith and fair dealing.

The insurer also appealed the trial court’s finding that its delay in investigating and processing the claim constituted bad faith, however, the appellate court found the trial court’s determinations to be factual in nature and therefore subject to the trial court’s determination of credibility, and did not disturb the findings.  Of note were the majority’s looking to standards in the Unfair Insurance Practices Act governing the time for investigation and reporting.  The court recognized that length of time alone cannot create a per se bad faith case, but time in the context of other conduct is to be considered.

It is further noteworthy that the trial and appellate court placed great reliance on plaintiff’s expert in reaching the bad faith decision concerning the claims handling process.

Next, the insurer argued the trial court erred in awarding punitive damages in the case because the insurer did not act with malice or dishonest purpose. Pennsylvania law, however, requires no showing beyond establishing bad faith conduct under the statute to permit an award of punitive damages. Therefore, despite the insurer’s secondary argument, that the award was too high, the court found no error in awarding the damages or any constitutional impropriety in the amount of the award.  As the punitive damages award was 5-6 times the compensatory damages award, and over $1.2 Million by itself, the court’s lengthiest analysis is on the punitive damages award; looking at its own prior decision in Hollock, and the U.S. Supreme Court case law focusing around State Farm v. Campbell.

Finally, the insurer argued the trial court improperly included expert witness fees, arbitration fees, investigation fees, and other trial preparation expenses and fees in its award of court costs under the statute. The appellate court found in the insurer’s favor on this issue, as court costs is commonly defined, and supported by Pennsylvania case law, as only including ‘docket costs.’

Date of Decision: November 1, 2013

Grossi v. Travelers Personal Ins. Co., Civil Action Nos. 769 WDA 2012, 828 WDA 2012, 2013 Pa. Super. LEXIS 3144 (Pa. Super. Ct. Nov. 1, 2013) (Mundy, J.).

NOVEMBER 2013 BAD FAITH CASES: COURT HOLDS “EXTREME DELAY” IN PROCESSING OF CLAIM AND TENDER OF PAYMENT CAN CONSTITUTE BAD FAITH UNDER THE STATUTE; ENTERS $2M JUDGMENT AGAINST INSURER, INCLUDING PUNITIVE DAMAGES AND ATTORNEYS’ FEES (Lackawanna County)

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In Davis v. Fidelity Nat’l Ins. Co., plaintiffs brought suit against the insurer alleging breach of contract and bad faith for the insurer’s failure to settle its claim under a title insurance policy for five years. Plaintiffs owned a parcel of land on which they intended to build townhomes. When they applied for the appropriate zoning and construction permits, it became obvious that the parcel of land was actually part of a neighboring title due to service defect in an earlier quiet title action. The insurer took two years to investigate the claim and accept coverage, despite the plaintiffs’ consistent inquiries as to the status of their claim. After an additional year, plaintiffs filed suit, but a settlement was not reached for two more years, resulting in a total of five years from the date of filing of the claim and the settlement.

The court found that the insurer had consistently delayed the claims review and adjustment process, and found no reasonable basis for resolution of the claim to require five years. First, the insurer took 20 months to complete its investigation and notify plaintiffs the claim was covered. Then, it took another three years for the insurer to tender what the court viewed as an inadequate offer, and such a tender was only made after suit was filed. Furthermore, the insurer was unresponsive to plaintiffs’ consistent inquiries regarding the status of their claim.

The court found the insurer knew of and was recklessly indifferent to its lack of a reasonable basis for failing to resolve plaintiffs’ claim. Although the insurer argued a lack of ill will as required by the bad faith statute, the court found the insurer’s inquiry into the true landowner’s finances and ability to defend against a meritless quiet title action, rather than settling the claim with plaintiffs, sufficient to establish ill will, improper motive, dishonesty, and self-interest. Therefore, the court held “such an extreme delay” constituted bad faith under the statute because the insurer’s actions were outrageous and recklessly indifferent to the rights of its insured. The court also found evidence of bad faith through the insurer’s failure to: make a timely offer of settlement, manage and supervise the handling of plaintiffs’ claim, elevating its own interest above that of its insured and its failure to follow its own internal claims handling guidelines, and through violations of the UIPA.

Plaintiffs were awarded $393,227.21 in compensatory damages for their breach of contract claim, as well as $1,572,909.24 in punitive damages under the bad faith statute. Plaintiff was also awarded $168,467.00 in legal fees and $96,610.04 in interest, both of which are permitted by the bad faith statute. This resulted in a total judgment of $2,062,746.59.

Date of Decision: August 15, 2013

Davis v. Fidelity Nat’l Ins. Co., Civil Action No. 2009-CV-6154 (C.C.P. Lackawanna August 15, 2013) (Minora, J.).

OCTOBER 2013 BAD FAITH CASES: NO FIDUCIARY DUTY EXISTED WHERE INSURER DID NOT ASSERT RIGHT TO HANDLE CLAIMS; STATUTORY BAD FAITH CLAIM DOES NOT PROVIDE FOR ACTUAL OR CONSEQUENTIAL DAMAGES (Philadelphia Federal)

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In Bare v. State Auto Group, the court dismissed the common law breach of fiduciary duty claims because a fiduciary duty higher than the duty of good faith and fair dealing does not arise out of an insurance contract until an insurer asserts a stated right under the policy to handle all claims asserted against the insured, which situation did not exist in that case.  The Court also found the claim inapplicable to the first party aspect of this UIM case.

As to the statutory bad faith claim, the court dismissed plaintiff’s claims for actual damages, consequential damages, and costs to the extent that the statute only provides for interest, punitive damages and attorney’s fees.

Date of Decision:  July 26, 2013

Bare v. State Auto Group, CIVIL ACTION NO. 13-2812, 2013 U.S. Dist. LEXIS 105335 (E.D. Pa.  July 26, 2013) (McLaughlin, J.)

JULY 2013 BAD FAITH CASES: COURT GRANTS MOTION IN LIMINE BARRING EXPERT TESTIMONY REGARDING BAD FAITH CLAIM AS TO BOTH PARTIES; RULES ON OTHER MOTIONS. (Western District)

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In Schifino v. Geico Gen. Ins. Co., both parties brought motions in limine before the court, seeking to have evidence excluded at the approaching trial.

The court first ruled on the carrier’s motion to preclude the proposed testimony of plaintiff’s expert witness on bad faith. The carrier alleged the concept of bad faith is readily understandable by a lay person, and therefore, expert testimony was not necessary. Conversely, even if expert testimony was necessary, plaintiff’s expert report was objectionable because it merely stated legal conclusions, supported only by the expert’s personal legal interpretation of insurance law and industry standards. Furthermore, the carrier believed the expert’s testimony would opine on the ultimate issue, usurping the jury’s function.  Following the precedent set in Smith v. Allstate Ins. Co., the court ruled that expert testimony was not necessary because the bad faith issue (supported with evidence of the carrier’s claim handling procedures, insurance industry practices and standards, and UIPA compliance) was neither “complex nor scientific such that an expert was necessary.” Furthermore, whether or not the insurer had a reasonable basis for the manner in which it handled plaintiff’s claim was “an issue within the providence of the jury as its role as factfinder.”

Plaintiff also sought to preclude the carrier’s expert witness from testifying on the issue of bad faith. Based on the same reasoning it used to grant the carrier’s motion, plaintiff’s motion was granted.

In the third motion, plaintiff sought to preclude the carrier from introducing any evidence of plaintiff’s previous alcoholism and occasional drug use, alleging it would be highly prejudicial. The carrier opposed the motion, believing plaintiff sought the wrong standard for admissibility, that a medical report reflected fairly recent and serious drug use, which could potentially impeach plaintiff’s prior testimony that he used drugs “a couple of times,” and third, that the probative value of the evidence outweighed the prejudice given plaintiff’s claim for damages for permanent injuries, and the fact individuals with such a history have shorter lifespans than the average person. Alternatively, the carrier requested the court admit the evidence with a limiting instruction to the jury. Given the evidence in support of both positions, the court chose to defer the motion until properly raised at trial following the carrier laying the proper foundation.

Finally, plaintiff sought to exclude evidence of two prior criminal convictions of the driver of the automobile in which plaintiff was a passenger when the crash took place. Following no objection from the carrier, the court granted plaintiff’s motion.

Date of Decision: May 31, 2013

Schifino v. Geico Gen. Ins. Co., 2:11-cv-1094, 2013 U.S. Dist. LEXIS 76532 (W.D. Pa. May 31, 2013) (McVerry, J.).

This case was dicussed previously on this Blog.

JUNE 2013 BAD FAITH CASES: COURT DISMISSES STAND-ALONE COMMON LAW BAD FAITH CLAIM (Philadelphia Federal)

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In Tubman v. USAA Cas. Ins. Co., the plaintiff suffered severe injuries after a car crash in which she was ejected from the vehicle. The opposing driver had a policy with a limit of $15,000, which were tendered to the plaintiff. Plaintiff’s insurer (the “carrier”) approved the settlement, and the carrier agreed to allow plaintiff to file a claim for UIM coverage under her father’s policy with whom she was living at the time of the accident. Her father’s policy included $300,000 in stacked UIM coverage. The carrier made an offer to the plaintiff, who found the amount to be insufficient to cover her injuries. She then filed suit alleging breach of contract, statutory bad faith, breach of fiduciary duty, common law bad faith, and violation of the Unfair Trade Practices and Consumer Protection Law.

The carrier filed a motion to dismiss, including a motion to dismiss a stand-alone count alleging common law bad faith; though the carrier did not seek to dismiss the statutory bad faith claim.

On the common law bad faith issue, the court noted an independent cause of action for breach of a duty of good faith and fair dealing is only available in very limited circumstances. In circumstances where a plaintiff brings a claim for a breach of contract, they are precluded from also bringing a claim for common law bad faith because “the actions forming the basis of the breach of contract claim are essentially the same actions forming the basis of the bad faith claim.” In plaintiff’s first count, she brought a breach of contract claim that also alleges a breach of common law duty of good faith and fair dealing; and her fourth count was a stand-alone common law bad faith claim. The court dismissed the common law bad faith claim, stating the plaintiff would be pursuing the same cause of action under the breach of contract claim.

Date of Opinion: April 30, 2013

Tubman v. USAA Cas. Ins. Co., CIVIL ACTION NO. 12-cv-7121, 2013 U.S. Dist. LEXIS 61022 (E.D.Pa. April 30, 2013) (Brody, J.)

NOVEMBER 2012 BAD FAITH CASES: COURT STRIKES BAD FAITH CLAIM AND PREVENTS IT FROM MOVING TO A DE NOVO TRIAL BECAUSE THE INSURED FAILED TO MEANINGFULLY PARTICIPATE IN ARBITRATION PROCEEDINGS AS TO THAT COUNT OF ITS COMPLAINT; DENIES DISMISSAL FOR SPOLIATION ON REMAINING CLAIM (Philadelphia Federal)

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In Rogers v. Allstate Ins. Co., the court heard a carrier’s motion to strike its insured’s request for Trial De Novo. The case was originally assigned for arbitration pursuant to Local Rule 53.2(3)(A) because it involved less than $150,000. However, during the arbitration, the insured’s attorney only presented evidence with respect to the breach of contract count.
Under Local Rule 53.2(5)(B), a party is required to meaningfully participate in such an arbitration proceeding. The carrier’s motion argued that the insured’s violation of this rule warranted striking the bad faith count. The court agreed, permitting only the breach of contract claim to proceed to a de novo trial.
The court also addressed the carrier’s motion to dismiss for spoliation of evidence. The insured allegedly disposed of a computer that should have been preserved as evidence. However, the court declined the motion because dismissal for spoliation is an extreme remedy and it cannot be proven that the insured should have foreseen the computer’s relevance to potential litigation.
Date of Decision: October 22, 2012
Rogers v. Allstate Ins. Co., No.: 11-cv-7776, 2012 U.S. Dist. LEXIS 151818, U.S. District Court for the Eastern District of Pennsylvania (E.D. Pa. Oct. 22, 2012) (Sitarski, J.)