Date of Decision: November 13, 2008

Aquila v. Nationwide Mut. Ins. Co., CIVIL ACTION No. 07-2696, 2008 U.S. Dist. LEXIS 93823 (E.D. Pa. Nov. 13, 2008)(Strawbridge, J.)

 

J.M.A.

In Jeffrey K. Kohn v. Unumprovident Corporation,  a bad faith claim arose based on the handling and investigation of the insured’s disability insurance claim.  The insured was a practicing psychiatrist who was attacked by one of his patients.  Several months after the attack, the insured ended his psychiatry practice. The insured filed for benefits arising out of three disability insurance policies issued to him by the insurer.  The insured submitted the claim to the insurer after closing his practice claiming that he suffered post traumatic stress disorder and other ailments which prohibited him from  effectively providing treatment to his patients. 

The insurer began processing the claim and started an investigation into the insured’s claim. After the insured told the insurer he was also engaged in an antiques business the insurer became suspicious of the insured’s disability claim and engaged in an extensive investigation of the insured’s lifestyle. The insured contacted a separate firm, Insight Investigations, to conduct surveillance of the insured to determine how the disability has affected his daily life.  During the course of Insight’s investigation into the insured’s background, a list of phone numbers that the insured dialed on his cellular phone was obtained by the insurer. 

On March 31, 2000 the insurer denied the insured’s claim for disability benefits.  The insurer alleged that the denial of the claim was based on the failure to provide the psychiatrist’s treatment records.  The insurer and the insured eventually came to an agreement where the insured would accept the psychiatrist’s narrative report.  After the report was received and reviewed by the insurer, the insurer decided to begin the disability payments to the insured eight months after the insured filed his claim. 

By 2002, another individual assumed responsibility for handling the insured’s claim. The insurer began ongoing investigations into the status of the insured’s disability. The insurer notified the insured that it intended to conduct an independent medical examination (IME) , which the insured challenged.  After several communications between the parties, the insurer suspended disability payments to the insured. 

In response to this suspension the insured filed a lawsuit against the insurer in state court.  During the course of discovery in that action, the insured came across the telephone list that the insurer had obtained. After that point, the insurer reinstated the insured’s benefits.  The insured’s payments were suspended for 3 weeks but eventually the insured was paid for all the benefits that were suspended during that period.  Once the parties decided on a psychiatrist to perform the IME, the psychiatrist determined that there were several issues with the insured’s disability status.  Many of these issues were the same as had been identified by the insurer in the months following the filing of the initial claim.  Even though there was concern with the insured’s disability status, the insurer continued to pay for the insured’s disability payments. 

The insured then filed a bad faith and invasion of privacy complaint against the insurer in the United States District Court for the Eastern District of Pennsylvania.  The insured alleged that during the handling of his claim the insurer acted in bad faith.  The insurer filed a motion for summary judgment.  The insurer argued that the bad faith claim must be dismissed because it is undisputed that the insurer paid all benefits to which the insured was entitled under the policy. The insurer claimed that there could be no bad faith under the statute unless benefits have been denied. 

The Superior Court has indicated that the Pennsylvania bad faith statute is not restricted to an insurer’s bad faith in denying a claim. An action for bad faith may also extend to the insurer’s investigative practices.  Even though the insurer has now paid all benefits to which the insured was entitled, the insurer did initially deny and later suspend his payments.  There is significant dispute that still exists as to whether this was done in good faith or bad faith.  Also the investigative tactics used by the insurer may lead a jury to conclude that the insurer’s suspension of benefits and general handling of the insured’s claim was conducted in bad faith, including the acquisition of the phone records.  Therefore the court held that it was improper to grant summary judgment to the insured and that the insurer’s conduct should be considered on the basis of a full factual record developed at a trial.  Therefore the insurer’s motion for summary judgment on the bad faith claim was denied.

Date of Decision: October 31, 2008

Kohn v. Unumprovident, Corp., No. 2:04-cv-4929, 2008 U.S. Dist. LEXIS 101658 (E.D. Pa. Oct. 31, 2008)(Baylson, J.). 

 

J.M.A.

In Derocher v. Zurich American Insurance Company,  a bad faith claim arose after an employee of the insured  (“plaintiff”) was injured in an automobile accident while driving a vehicle owned by her employer, the insured.  The insured employer had  an auto insurance policy with  Universal.  This policy provided for underinsured or uninsured motorist benefits in the amount of one million dollars. The insurer also provided workers compensation coverage for the insured.  Sometime after the execution of this policy, Zurich (“insurer”) assumed control of Universal and began adjusting claims under Universal’s policies. 

The plaintiff was injured in an automobile accident  while driving a vehicle owned by her employer, the insured. The plaintiff suffered back injuries and had undergone numerous medical procedures in an effort to correct her injuries.  The other vehicle and driver  involved in the accident was uninsured.  The plaintiff pursued uninsured motorist benefits in accordance with the insured’s policy.

Following the accident, the insurer conducted an investigation of the plaintiff’s claims.  On September 2, 2004, the plaintiff proposed settlement of her claim for $375,000.  The insurer made no offer in return until October 30, 2006, when they offered $150,000.  In November 2006, the parties proceeded to arbitration and on November 10, 2006, the arbitrators entered a decision awarding $600,000 to the plaintiff.  The insurer withheld payment of this award when the plaintiff  refused to sign and return a waiver releasing the insurer from any future claims

The plaintiff filed a breach of contract and bad faith complaint and then an amended complaint against the insurer.  The plaintiff alleged that due to the insurer’s conduct, she was deprived the use of funds from the time she presented her claim until December 21, 2006 and that she incurred significant expenses when obtaining counsel, naming an arbitrator, and otherwise pursing her claim against the insurer. The insurer filed a motion to dismiss the plaintiff’s complaint.  The insurer moved to dismiss plaintiff’s bad faith claim on the basis that no insurance contract existed between the plaintiff and the insurer.  The court found that allegations in the Plaintiff’s amended complaint along with Disclosure statements filed by the insurer presented a reasonable expectation that discovery would reveal evidence of an insurance contract between the plaintiff and the insurer.  Therefore the court denied the insurer’s motion to dismiss the plaintiff’s bad faith claim. 

Date of Decision : October 16, 2008

Derocher v. Zurich Am. Ins. Co., No. 3:08-CV-0797, 2008 U.S. Dist. LEXIS 83481 (M.D. Pa. Oct. 16, 2008)( Caputo, J.). 

 

J.M.A.