JULY 2013 BAD FAITH CASES: LARGE ARBITRATION AWARD IN EXCESS OF DE MINIMIS SETTLEMENT OFFER DOES NOT ESTABLISH BAD FAITH CONDUCT BY CARRIER WHERE OFFER BASED ON REASONABLE INVESTIGATION (Philadelphia Federal)

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Plaintiff brought suit for bad faith following an arbitration award in extreme excess of the carrier’s settlement offers for plaintiff’s UIM claim. Plaintiff was in a low-impact crash on October of 2006. Following the crash, plaintiff required back treatments including therapy, injections, and ultimately surgery. Plaintiff’s medical bills exceeded $57,000, and a worker’s compensation lien accrued in excess of $114,000. Plaintiff’s expected future medical costs totaled $680,000. The at-fault driver’s policy had a $50,000 policy limit, which was tendered based on the value of the worker’s compensation lien. Plaintiff then brought an underinsured motorist claim under her own policy, which carried a $1,000,000 limit.

Prior to the low-impact crash, plaintiff suffered from chronic back pain. Plaintiff was receiving various treatments, including therapy and injections, had been classified as a candidate for surgery, and was on ‘light duty’ at work due to her existing back problems. At the scene of the crash, plaintiff told the first responder she had suffered from chronic back pain since 2006.

Based on this medical history and the low impact nature of the crash, the adjuster determined the crash was not the cause of the injuries, and the carrier was not responsible for the work lien because it pre-dated the crash and plaintiff’s work status did not change following the crash. Furthermore, based on plaintiff’s medical records and a report from an IME, the adjuster determined the surgery was necessary prior to the crash, and thus should be excluded from the medical expenses.

Based on these findings, the carrier determined the at-fault driver was not underinsured, but made an offer to settle the case for $5,000.

Plaintiff refused to settle the case for that amount, and when the case went to arbitration, plaintiff was awarded $675,000 which was reduced to $625,000 to reflect the $50,000 received from the tortfeasor. Plaintiff then brought suit against the carrier alleging its $5,000 settlement offer “was unreasonable, made in bad faith, and showed a reckless disregard for the carrier’s contractual obligations and duties of good faith and fair dealing.”

The court denied plaintiff’s motion for summary judgment, finding the plaintiff failed to meet her burden of demonstrating the carrier’s actions were not reasonable. Specifically, it was reasonable for the carrier to conclude the crash was a “minor impact” accident based the police report which indicated no damage occurred to plaintiff’s vehicle. Furthermore, plaintiff testified the first responders did not want to take her to the emergency room because they felt the crash did not warrant such treatment.

The court also found plaintiff’s argument that the carrier acted unreasonably by failing to schedule her IME for two years was without merit because plaintiff’s counsel partially caused the delay by failing to provide plaintiff’s medical records for over a year. Finally, plaintiff’s argument that the carrier failed to properly investigate the claim did not provide clear and convincing evidence of bad faith.

The court found the carrier used all information available to it, evaluated the claim based on that evidence, and came to a reasonable conclusion. As such, the judge denied the motion because plaintiff failed to demonstrate that a jury could find by clear and convincing evidence the carrier’s denial of benefits was unreasonable.

Date of decision:  May 30, 2013

Richardson v. United Fin. Cas. Co., Civil Case No. 11-7688, 2013 U.S. Dist. LEXIS 75713 (E.D. Pa. May 30, 2013) (O’Neill, J.).

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