In Blaylock v. Allstate Insurance Company, the United Stated District Court for the Middle District of Pennsylvania was confronted with cross motions for summary judgment stemming from Blaylock’s Complaint alleging bad faith claims handling.  Blaylock was injured in an automobile accident with an uninsured driver.  Blaylock submitted a claim to its insurer, Allstate, for uninsured motorist benefits.  Allstate denied the claim, citing to a form, allegedly executed by Blaylock, refusing coverage for uninsured motorist benefits (the “Rejection Form”).  Blaylock disputed the signature on the Rejection Form; asserted that it had been forged; and continued to request uninsured benefits.  The case was arbitrated and  Blaylock won a split decision awarding coverage.  Subsequently, Blaylock filed a Complaint for bad faith claims handling.

Blaylock filed a motion for summary judgment alleging that Allstate had acted in bad faith because it had arbitrated the uninsured motorist coverage issue with no reasonable basis for so doing.  In addition, Blaylock argued that she had presented evidence, including a sworn statement, that the signature on the UM Form was not hers and an opinion from a handwriting expert stating that the signature was not authentic. 

Allstate filed a motion for summary judgment asserting that it had a reasonable basis for denying Blaylock’s uninsured motorist claim.  Allstate argued that its decision was reasonable because it had the Rejection Form signed by Blaylock and it produced an expert report asserting that the authenticity of the signature could not be verified one way or the other.

The Court opined that the question was not whether the signature on the Rejection Form was authentic, but whether Allstate had acted in bad faith in denying the claim.  The Court found that, under Pennsylvania law, to prevail on a bad faith claim Blaylock had to show that Allstate “did not have a reasonable basis for denying benefits under the policy” and that it “knew or recklessly disregarded its lack of a reasonable basis in denying the claim.”  See Greene v. United Services Auto Ass’n, summarized in December 2007 archives on this blog.  After reviewing all the evidence, the Court denied Blaylock’s motion for summary judgment and granted summary judgment in favor of Allstate.  Significantly, the Court found, inter alia, that: (1) Blaylock’s claim had presented credibility questions; (2) Blaylock had a high burden of proof demonstrating that her signature was forged and;  (3) Allstate’s handwriting expert had negated some of Blaylock’s evidence.  As such, the Court dismissed Blaylock’s bad faith claim.

Blaylock v. Allstate Insurance Co., United States District Court for the Middle District of PA, No. 1:CV-06-1456, 2008 U.S. Dist. LEXIS 1098 (M.D. Pa. Jan. 7, 2008) (Caldwell, J.)

J.T.L.

In Intercon Construction, Inc. v. The Williamsport Municipal Water Authority, the plaintiff filed a complaint alleging the defendant breached a contract between the two parties in which plaintiff would construct a water line under a river for the defendant.  The defendant filed a counterclaim alleging the plaintiff breached its contract.  The defendant also filed a third party complaint against Safeco Insurance Company of America (“Safeco”) who provided a performance bond on the contract on behalf of the plaintiff.  The third party complaint alleged that Safeco breached its contract under the performance bond and violated Pennsylvania’s bad faith insurance statute.  With regards to the bad faith count, the defendant alleged Safeco acted in bad faith in the manner that it investigated and denied the defendant’s coverage under the bond and acted in bad faith by withholding certain information from the defendant while encouraging it to reach an assignment agreement with a drilling contractor who placed a bid for completion of the outstanding work.  Safeco filed a partial motion to dismiss the count for bad faith because the statute does not apply to providers of surety bonds.  The court noted the differences between an insurance agreement and a surety bond.  An insurance agreement is an agreement by which one for a consideration agrees to pay money to another on the death, destruction, loss, or injury of someone or something while a contract for suretyship is one to answer for the debt, default or miscarriage of another.  The insurer and insured share a direct contractual relationship for the said payment while a surety does not have a direct contractual relationship with a party such as defendant and has simply agreed to answer for the debt of the plaintiff to the extent he fails to pay them.  The court stated that the Pennsylvania legislature did not intend to include surety bonds within the purview of the Pennsylvania bad faith statue, and if they have, they would have stated explicitly.  As a result, the court granted Safeco’s partial motion to dismiss the bad faith count of defendant’s third party complaint.    

Date of decision:  January 28, 2008

Intercon Construction, Inc. v. The Williamsport Municipal Water Authority, United States District Court for the Middle District of Pennsylvania, Civil Action No. 4:07-CV-1360, 2008 U.S. Dist. LEXIS 6022, (M.D. Pa. 2008) (McClure, J.). 

R.E.M.

In Celebration Caterers, Inc. v. The Netherlands Insurance Co., the Plaintiff submitted a claim to its insurer for damage that occurred at the Plaintiff’s property as a result of a fire.  The fire damaged Plaintiff’s property, as well as leasehold improvements owned by the tenant.  Plaintiff alleges that after the fire, it submitted  benefit claims under the policy; however, the insurer failed and refused to pay.  The insurer claimed that it issued advanced payments to Plaintiff immediately after the fire.  However, pursuant to an appraisal provision in the policy, Plaintiff demanded an appraisal and an appraisal award was entered. 

The appraisal award included costs associated with rebuilding the property, as well as payment for losses sustained by the Plaintiff during the “period of restoration”, which is defined by the policy as the time the business would need to close to allow for the repairs.  Defendant paid the balance owed for the property loss pursuant to the appraisal award, but did not pay the monies awarded to Plaintiff for the period of restoration.  The insurer argued that the Plaintiff’s losses for the period of restoration were not yet actually sustained pursuant to the policy language, since no repairs had been made. Therefore, Defendant refused to pay the period of restoration loss until the actual loss is sustained.  Based on this refusal, Plaintiff filed claims for bad faith and breach of contract.  In support of it’s bad faith claims, Plaintiff argued that Defendant failed to make payments in a timely manner.

In considering both Plaintiff and Defendant’s cross motions for summary judgment, the court held that although the appraisal award is binding upon both parties and conclusively establishes the amount of loss, Defendant is not liable for payment to Plaintiff until the actual loss is sustained.  Therefore, once the repairs are made, Defendant will be liable for payment, but is not liable until such repairs are made.  The court also held that Plaintiff’s claim that Defendant acted in bad faith by making bald allegation of untimely payments were not enough to sustain it’s claim for bad faith and therefore Defendants’ motion for summary judgment was granted.

Date of decision:  February 1, 2008

Celebrations Caterers, Inc., et. al. v. The Netherlands Insurance Co., et. al., United States District Court for the Eastern District of Pennsylvania, Case No. 06-1341, 2008 U.S. Dist. LEXIS 7477, (E.D. Pa. 2008) (Tucker, J.). 

 

C.L.C.