DECEMBER 2017 BAD FAITH CASES: NO BAD FAITH WHERE INSURER FOLLOWED INDUSTRY PRACTICES, PROPERLY DEDUCTED SUM FROM PAYMENT DUE, AND TREATED ELECTRONIC SIGNATURE AS BINDING FOR PURPOSES OF A KNOWING WAIVER (Philadelphia Federal)

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The insured was involved in a motor vehicle accident. The insured’s policy provided for first party medical benefits up to $50,000, income loss protection benefits up to $5,000, and UIM coverage up to $100,000. The insurer happened to insure both the insured plaintiff and the tortfeasor, on two different policies. The insurer opened a first-party claim file and a third-party claim file.

The insured gave notice of her intent to make a lost-income claim, and forwarded partial information supporting this claim to the insurer. Several months later, the insurer submitted the medical file to a peer review organization (“PRO”) pursuant to the Pennsylvania Motor Vehicle Financial Responsibility law. Five months later, the insured’s counsel requested that the insurer open a UIM claim under the existing first-party claim. The insurer did so, but also denied coverage for the third-party claim on the basis the insured selected a limited-tort option, which, with some exceptions, restricts the right of a plaintiff to recover noneconomic damages unless the injury is sufficiently serious.

$5,400 in first-party medical benefits were paid to the insured. The insurer continued to request full documentation regarding the lost wage claim. The insurer credited $15,000 toward its policy under the UIM claim.

The insured sued for breach of contract and bad faith in state court, and the action was removed to federal court. The insurer moved for summary judgment on the bad faith claim, arguing that a valid dispute over the value of the insured’s claim does not rise to bad faith. While the insured did not contest the legitimate dispute as to the value of her claim, she argued that the insurer’s means and methods in handling the claim amounted to bad faith.

Specifically, the insured argued (1) that the insurer was not entitled to a $15,000 credit against its own policy; (2) the insurer failed to meet its burden to show that the insured was bound by limited tort; (3) the insurer, in bad faith, attempted to stop the insured’s medical treatment or force the insured to rely on a lack of ongoing treatment; and (4) the insurer’s failure to review its own file is not a sufficient basis to claim it did not have complete documentation for the wage loss claim.

The Court rejected all of the insured’s arguments. First, the Court stated “Pennsylvania courts have . . . held that UIM awards are properly reduced by the full amount of the tortfeasor’s policy limits . . . .” Thus, the $15,000 credit was proper. Second, the Court found that full tort insurance was waived under the policy terms, because the insured’s electronic signature on the policy sufficed to show that the waiver was knowing and intelligent. Third, the insurer sending its claim file to a PRO is consistent with industry practice and in no way “amounts to bad faith.” The Court rejected the final argument as well. While the insurer did have wage loss information regarding the insured’s part-time job, it did not have this information regarding the insured’s full-time position.

The Court granted the insurer’s motion for summary judgment, and dismissed the bad faith claim with prejudice.

Date of Decision: December 11, 2017

Jallad v. Progressive Advanced Ins. Co., Civil Action No. 16-4795, (E.D. Pa. Dec. 11, 2017) (Kelly, Sr. J.)

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