MAY 2015 BAD FAITH CASES: THERE CAN BE NO BAD FAITH WITHOUT THE DENIAL OF A BENEFIT; STATUTE OF LIMITATIONS APPLIED; DISCOVERY CONDUCT NOT A BASIS OF BAD FAITH CLAIM (Philadelphia Federal)

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In Duda v. Standard Insurance Company, the court found the statutory bad faith claimed barred by the 2 year statute of limitations.  The statute of limitations begins to run when “an insurer clearly and unequivocally puts an insured on notice that he or she will not be covered under a particular policy for a particular occurrence.” Thus, for “purposes of applying Section 8371, one must look to the date on which the defendant insurance company first denied the insured’s claim in bad faith.”

The court would have ruled for the insurer on the merits, even if the claim were not time barred.  Among other things, “discovery misconduct cannot, as a matter of law, establish bad faith.” The court found that reliance on Hollock v. Erie Ins. Exchange, 842 A.2d 409 (Pa. Super. Ct. 2004), was misplaced because Hollock permits a claim under § 8371 in connection with bad-faith conduct at trial, not during discovery.”  If an insured wants a sanction for bad faith during discovery, that should be pursued as a sanction under the Rules of Civil Procedure.

On another part of the claim, the court found that there was never actually the denial of the insured’s claim.

The court stated: “Pennsylvania law makes clear that claim denial is essential to a bad faith claim.” Thus,  “’the essence of a bad faith claim must be the unreasonable and intentional (or reckless) denial of benefits’ and there is no bad faith under 42 Pa. C.S. § 8371 without a denial of benefits.’” In this case, there was no actual denial, rather the insured stated: “’We are unable to approve Residual Disability benefits at this time due to our concerns outlined above about the medical certification and there does not appear to be a loss of income or duties at this time.’” (emphasis added in original). Thus, the court ruled, “given the implicit invitation to supplement the submission by way of additional information, and the insurer’s acknowledgement of those possibilities, the undisputed evidence in the record shows that [the insurer] never made a final claim decision regarding … eligibility for residual disability benefits and it cannot be the case that his claim was denied in bad faith.”

Date of Decision:  April 30, 2015

Duda v. Std. Ins. Co., No. 12-1082, 2015 U.S. Dist. LEXIS 56606 (E.D. Pa. April 30, 2015) (Pratter, J.)

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