JULY 2012 BAD FAITH CASES: COURT DENIES LEAVE TO AMEND PLEADINGS BECAUSE ATTORNEY THAT ALLEGEDLY ACTED IN BAD FAITH WAS NOT AN “INSURER” (Philadelphia Federal)

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In Zenith Ins. Co. v. Wells Fargo Ins. Servs. of Pa., Inc., the court heard a motion by the insured party, co-defendant Glasbern, Inc., for leave to file an amended answer and counterclaim against its workers’ compensation policy carrier, the original claimant. This motion arose within a suit filed by the carrier against the named defendant, a bank and insurance broker, for its alleged negligence and indemnification for benefits paid to the moving co-defendant under the insurance policy issued by the carrier.

The insured co-defendant originally filed an answer and bad faith counterclaim against the carrier in September 2011. However, during discovery in March 2012, an attorney that works with the carrier’s attorney allegedly made several derogatory comments directed towards the insured. The insured claimed that this was an effort by the carrier to intimidate and deprive its insured of “zealous representation” and sought to amend its pleadings to include these factual allegations in support of its bad faith counterclaim.

The court disagreed, citing Rule 15(c) for the proposition that leave to amend pleadings will only be granted “when justice so requires” unless “undue prejudice would occur.” In the instant case, discovery was to close two weeks after the insured filed its motion for leave to amend. Because amending the insured’s complaint would cause a delay in discovery and require the depositions of several individuals, the court found that granting the motion would cause the carrier “delay and expense.”

Moreover, the court reasoned that, even if the carrier would not be unduly prejudiced, the insured’s motion was futile. Under Pennsylvania’s bad faith statute, bad faith is only actionable if conducted by an “insurer.” However, the attorney that allegedly made derogatory comments did not represent the carrier, but merely worked for the firm that represented the carrier. Moreover, there was no evidence to suggest that the carrier authorized or directed the attorney to make such comments. The court therefore denied the insureds’ motion for leave to amend.

Date of Decision: June 7, 2012

Zenith Ins. Co. v. Wells Fargo Ins. Servs. of Pa., Inc., No. 10-5433, 2012 U.S. Dist. LEXIS 79183, U.S. District Court for the Eastern District of Pennsylvania (E.D. Pa. June 7, 2012) (Bartle, J.)

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