In Selective Way Insurance Company v. Servpro of King of Prussia, an insurance carrier filed a breach of contract and fraud action against a policy holder arising out of a fire.  The United States District Court for the Eastern District of Pennsylvania was presented with several Motions in Limine regarding the admissibility of evidence gathered after the alleged denial of coverage.  The policy holder sought to exclude evidence gathered from post-denial-of-coverage investigations conducted by the insurer, law enforcement agencies, and third parties at the insurer’s request.  The carrier wanted to use the evidence to show that the policy holder was responsible for the fire, thereby demonstrating that there was a sufficient and reasonable basis to deny coverage.  The Court ruled that the evidence could be used to establish that the insured were responsible for the fire to support the insurer’s breach of contract, fraud and material misrepresentation claims only.  That evidence could not be used to defend against the insured’s statutory bad faith counterclaim.  The Court reasoned that only the information which was part of the insurer’s investigation prior to its denial of coverage may factor in the jury's determination of the statutory bad faith counterclaim.  To implement the Court’s Order, the jury charge would contain a limiting instruction.

Date of Decision:  January 31, 2006

Selective Way Ins. Co. v. Servpro of King of Prussia, United States District Court, Eastern District of PA, Civil Action No. 99-CV-956, 2006 U.S. Dist. LEXIS 4028  (E.D. Pa. Jan. 31, 2006) (Pollak, J.)

 

In Harris v. Lumberman's Mutual Casualty Company, an injured motorist sought first-party medical benefits and lost wages from her automobile insurance carrier.  The Federal District Court was presented with a Motion to Dismiss from the defendant/carrier, based on the assertion that the bad faith statute, 42 Pa. C.S.A. § 8371, and the Motor Vehicle Financial Responsibility Law (“MVFRL”), 75 Pa. C.S.A. §§ 1716, 1797, are in conflict as to the remedies available, and the MVFRL, the more specific statute, preempts the bad faith statute.  The Court granted the Motion as to the motorist’s claim for first-party medical benefits, and denied the motion with respect to the claim for lost wages.  The Federal Court reasoned that since both statutes punish similar conduct for denial of first-party medical benefits (i.e., wanton conduct under the MVFRL and bad faith conduct under the bad faith statute), yet provide different remedies, the MVFRL, as the more specific statute, preempts the bad faith statute.  The Court therefore dismissed the motorist’s bad faith claim for denial of first-party medical benefits.  Conversely, the statutory bad faith claim was not preempted by the lost wages claim since the bad faith statute imposes different remedies for different degrees of culpable conduct (i.e., unreasonable conduct under the MVFRL and bad faith conduct under the bad faith statute).  The statutes are not in conflict and effect may be given to both.  This result is consistent with other courts’ interpretations of the MVFRL prior to recent amendments.

Date of Decision: January 23, 2006

Harris v. Lumberman's Mut. Cas. Co., United States District Court for the Eastern District of PA, No. 05-CV-5228, 409 F. Supp. 2d 618 (Robreno, J.)

This Opinion also relied upon the Superior Court’s decision in Barnum v. State Farm Mut. Auto. Ins. Co., 430 Pa. Super. 488, 635 A.2d 155 (Pa. Super. Ct. 1993), reversed on other grounds by, 539 Pa. 673, 652 A.2d 1319 (Pa. 1994)(where the Supreme Court reversed and remanded the Superior Court’s decision only due to recent changes in procedure under the MVFRL), and Gemini Physical Therapy & Rehabilitation v. State Farm Mut. Auto. Ins. Co., 40 F.3d 63 (3d Cir. 1994).

In Saldi v. Paul Revere Life, plaintiff sought leave to amend the complaint to add various averments of material fact, as well as claims for post-litigation bad faith conduct.  Specifically, plaintiff sought to add a post-litigation bad faith claim based upon the fact that defendants paid his benefits but continued to “maintain a reservation of rights until Saldi’s death, even after defendants knew and/or recklessly disregarded that they lacked any medically supported reasonable basis for reservation of rights.”  The U.S. District Court for the Eastern District of Pennsylvania would not allow the additional post-litigation bad faith claims, noting that the reservation of rights is itself a means of preventing a bad faith claim by the insured, as it allows an insurer to make payments to an insured while maintaining the right to seek reimbursement if it later becomes clear that the insured was not entitled to the payments.  The court also found defendants presented a reasonable basis for making such reservation of rights, on the grounds that defendants reviewed new documentation from plaintiff’s medical providers in making their decision.

Date of Decision:  January 13, 2006

Saldi v. Paul Revere Life, United States District Court of the Eastern District of PA, Civil Action No. 99-CV-6563, 2006 U.S. Dist. LEXIS 1315 (D. Pa. 2006) (Surrick, J.)