In Condio v. Erie Insurance Exchange, plaintiff decedent’s car drove over an embankment with decedent and his friend inside.  Decedent was found dead in the passenger’s seat, while the friend was found alive on top of the decedent.  The applicable insurance policy would only cover decedent if he was the passenger.  The carrier continued pursuing the investigation and took the position that the decedent was the driver.  The Superior Court of Pennsylvania held the insurer did not act in bad faith.  The court noted that in the context of Pennsylvania’s bad faith statutes, in the absence of evidence of a dishonest purpose or ill-will, it is not bad faith to take a stand with a reasonable basis. In describing the balance, the court stated:  “While the legal relationship of the parties may change in the context of a U-claim, i.e., become adversarial, the insurer’s duty does not change … an insurance company’s duty to its insured is one of good faith and fair dealing. It goes without saying that this duty does not allow an insurer to protect its own interests at the expense of its insured’s interests. Nor does it require an insurer to sacrifice its own interests by blindly paying each and every claim submitted by an insured in order to avoid a bad faith lawsuit.”

Also, there was no bad faith in allegedly failing to take action in response to the estate’s initial letter, as the letter did not make a firm claim or demand for coverage, instead using the terminology that there was the “potential for the underinsured/uninsured claim.”  The Superior Court reasoned that common sense dictates that a claim cannot be denied until it has been made, and a claim is a demand for payment by a claimant and not an inquiry concerning coverage.  Thus, where the insurer’s claims adjuster wrote a letter to the estate’s attorney stating that the insurer was taking the position that the decedent was the operator of his own vehicle, this did not constitute a bad faith denial since, at that point, no claim had been made so no denial could have been made.

Date of Decision:  April 25, 2006

Condio v. Erie Ins. Exch., Superior Court of PA, Nos. No. 841 WDA 2004, 1032 WDA 2004, 2006 PA Super. 92 (Pa. Super. Ct. 2006) (Hudock, J.) (reargument denied).

 

 

 

In Gallatin Fuels v. Westchester Fire Insurance Company, defendant filed a Motion for Stay of Execution of Judgment in response to the earlier judgment in favor of Plaintiff in the amount of $1.325 million on plaintiff’s breach of contract claim and $4.5 million in the form of punitive damages on plaintiff’s bad faith claim.  The U.S. District Court for the Western District of Pennsylvania granted the motion in part and denied it in part. Defendant moved under the proper vehicle for a stay of execution of the judgment, Rule 62(b) of the Federal Rules of Civil Procedure, which requires the court to take into account “the security of the adverse party.” After due consideration, the court found that it would be unfair to plaintiff to grant a stay of execution without requiring defendant to post a bond; therefore, defendant’s motion for stay was granted on the condition that defendant post a bond in the amount of $5.825 million, the amount of the judgment, within two days, while the motion was denied in all other respects.

Date of Decision:  April 12, 2006

Gallatin Fuels v. Westchester Fire Ins. Co., United States District Court of the Western District of Pennsylvania, Civil Action No. 02CV2116, 2006 U.S. Dist. LEXIS 22144 (W.D. Pa. April 12, 2006) (Ambrose, C.J.)

 

This case was affirmed in part and reversed in part on appeal by the U. S. Court of Appeal for the Third Circuit.  See also September 2007 cases on this blog.    

In USX Corp. v. Liberty Mutual Insurance Company, after determining that there was no coverage, the U. S. Court of Appeals for the Third Circuit rejected the bad faith claim against a carrier, which had correctly concluded that its employer's liability coverage was not invoked under the circumstances of that case.  The Court cited its prior case law for the proposition that “’bad faith claims cannot survive a determination that there was no duty to defend, because the court’s determination that there was no potential coverage means that the insurer had good cause to refuse to defend.’” While recognizing that the duty to defend may be broader than the duty to indemnify, such a duty ends when the insurer can confine the claim to recoveries outside the scope of the insurance coverage.  Liberty Mutual had denied coverage under a WC/EL policy, where non-workers' compensation claims were asserted by USX Corp. employees on the basis of asbestos exposure, and the employer’s liability portion of the policy did not cover claims for bodily injury by disease unless there was a written claim or suit filed within 36 months of the policy period’s end.

Date of Decision:  April 10, 2006

USX Corp. v. Liberty Mutual Insurance Company, 444 F.3d 192 (3d Cir. 2006) (Greenberg, J.)