MAY 2011 BAD FAITH CASES
BAD FAITH CLAIM SURVIVES MOTION TO DISMISS WHEN INSUREDS’ ALLEGED FACTS, IF PROVEN TRUE, SUPPORT A FINDING OF BAD FAITH (Western District)

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The insureds were driving when another automobile collided with them in a head-on collision.  They both suffered significant injuries that required surgeries, and they lost their jobs due to the accident.  The driver of the other automobile’s insurer paid the insureds $200,000 (the full amount available to them under its policy), but the insureds did not feel that it was enough to cover their losses from the accident.  The insureds then demanded an additional $400,000 from their insurer for underinsured motorist (“UIM”) benefits.

After not hearing a definitive response from the insurer for four years, the insureds filed suit in state court against the insurer for breach of contract and bad faith.  The insurer then removed the action to federal court and filed a motion to dismiss the bad faith claim.

Before addressing the bad faith claim, the court ruled on the insureds’ motion to remand the case back to state court.  They alleged that the insurer had waived its right to remove by including a clause in its policy that permitted the insureds to file an action in state or federal court.  The court, however, determined that this was not a waiver of the right to remove a case to federal court, as the language of the policy did not force the insurer to agree to submit to the jurisdiction of any specific court, so it denied this motion.

Concerning the bad faith claim, the insurer had filed a motion to dismiss for failure to plead sufficient facts.  The court first noted that to survive a motion to dismiss, “a Complaint must contain sufficient facts that, if accepted as true, state a claim to relief that is plausible on its face.”  Under Iqbal and Twombly, the facts alleged in the insured’s Complaint must be accepted as true and all reasonable inferences must be drawn in favor of the insureds.  The facts pled by the insureds in this case, if true, supported a finding of bad faith, as the insurer allegedly had refused to pay the insureds $400,000 for four years despite the insureds providing documentation of their injuries and losses and timely notifying the insurer of their demand.  The court therefore determined that the case should proceed to discovery, and it denied the insurer’s motion to dismiss the bad faith claim.

Date of Decision:  May 2, 2011

Craker v. State Farm Mut. Auto. Ins. Co., Civil Action No. 11-0225, United States District Court for the Western District of Pennsylvania, 2011 U.S. Dist. LEXIS 47342, (May 2, 2011) (Lancaster, J.)

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BAD FAITH CLAIM SURVIVES MOTION TO DISMISS WHEN INSUREDS’ ALLEGED FACTS, IF PROVEN TRUE, SUPPORT A FINDING OF BAD FAITH (Western District)”


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