MAY 2015 BAD FAITH CASES: INSURED PLEADS PLAUSIBLE CLAIM FOR BAD FAITH CLAIMS HANDLING AND LOW SETTLEMENT OFFER AS TO BOTH STATUTORY AND CONTRACTUAL BAD FAITH; CONSEQUENTIAL DAMAGES THEORETICALLY AVAILABLE ON CONTRACTUAL BAD FAITH CLAIM (Middle District)

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In Lane v. State Farm Mutual Automobile Insurance Company, the insured was injured in an accident with an uninsured motorist. The insured sought the $100,000 limit from his carrier, and the carrier offered well below that figure.  The insured brought breach of contract, contractual bad faith, and statutory bad faith claims.  The carrier moved to dismiss the bad faith claims.

On the statutory bad faith claim, there were some boilerplate allegations, but there were also specific factual allegations supporting plaintiff’s claim to make it plausible under Twombly/Iqbal, and the motion to dismiss was denied. The court recited the 7 month period before any offer was made, which supported the claim of delay; that an offer was made only after being threatened with bad faith, and even then was unreasonably low; that the carrier did not act on medical information provided to it for months; and the allegation that the insurer subjected the plaintiff to what may be interpreted as needlessly duplicative procedures that did not further advance the disposition of the insurance claim.

The court rejected the insurer’s argument that its investigation methods fell within those generally permitted under the insurance policy, as an abstraction that did not provide an absolute defense; as the implementation of those methods in fact could still have been carried out through a dishonest purpose or breach of a known duty.

The court refused to dismiss the contractual bad faith claims for similar reasons, and it cited the Pennsylvania Supreme Court’s Birth Center decision for the proposition that contractual bad faith can exist “where an insurer refuses to settle a claim without a good faith basis to do so.”  The court further cited to Birth Center in rejecting the insurer’s motion to strike plaintiff’s claim for consequential damages as a matter of law: “the insurer is liable for the known and/or foreseeable compensatory damages of its insured that reasonably flow from the insurer’s bad faith conduct.”

Date of Decision:  May 7, 2015

Lane v. State Farm Mut. Auto. Ins. Co., 3:14-CV-01045, 2015 U.S. Dist. LEXIS 60064 (M.D. Pa. May 7, 2015) (Mariani, J.)

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