In L.R. Costanzo Company, Inc. v. Ohio Casualty Insurance Company, the insured was a construction company that served as the general contractor for a building erected for the Pocono Mountain Regional Police Commission (“PMRPC”).  The building suffered water leakage problems, and the PMRPC filed suit against the insured, alleging claims of negligence, breach of contract, and breach of the duty of good faith on the part of the insured.

The insured claimed that the insurer provided it with a general liability insurance policy, and that when it requested that the insurer retain counsel and appear in court to defend the PMRPC’s lawsuit against it, the insurer refused to do so.  The insured then filed its own suit against the insurer, alleging bad faith and breach of contract in failing to conduct a reasonable investigation of the claims at issue and unreasonably failing to defend the insured in the lawsuit against it.

The insurer had claimed that no insurance contract ever existed between the parties.  However, the court held that the insured had sufficiently alleged that a contract of insurance existed between the parties, as evidence indicated that the insurer was listed as the “serving office” on the insurance policy, and the insurer’s logo headed each page of the policy.  The court therefore denied the insurer’s Motion to Dismiss with respect to both the breach of contract and bad faith claims.

Date of Decision:  June 11, 2010

L.R. Costanzo Co. v. Ohio Cas. Ins. Co., No. 3:10cv774, United States District Court for the Middle District of Pennsylvania, 2010 U.S. Dist. LEXIS 57697 (M.D. Pa. June 11, 2010) (Munley, J.)

In Nazario v. Nationwide Mutual Insurance Company, one insured was killed in an automobile accident in which he was not at fault and the driver at fault was uninsured.  The deceased insured and his wife held a policy of insurance by the insurer that included an uninsured motorist benefit of $25,000 per each person, and $50,000 for each occurrence.  The insurer failed to pay the surviving insured her $25,000 uninsured motorist benefit for 32 months after the accident.  The insured filed a Complaint alleging that the insurer acted in bad faith by delaying the payment for 32 months and breached the contract in the process.  In asserting the bad faith claim, the insurer asserted that the delay in awarding the $25,000 was attributable to mere negligence, and therefore the company did not exhibit bad faith.

While it dismissed the breach of contract claim because the Complaint did not state a specific theory of a breach of contract, the court agreed that the insured had pled a bad faith cause of action, and it denied the insurer’s Motion for Summary Judgment with respect to the bad faith claim.  The court stated that “it would be a reasonable inference for a jury to draw that a 32 month delay in paying the insurance benefit to the plaintiff to which the plaintiff was entitled is an unreasonable delay and is the result of bad faith . . . A 32 month delay by an insurer in paying a benefit under the insurance policy supports a finding made by a fact finder using a clear and convincing filter that the insurer failed to process the claim in good faith.”

Date of Decision:  United States Magistrate Judge Smyser’s May 17, 2010 Report and Recommendation was adopted by the United States District Court on June 7, 2010

Nazario v. Nationwide Mut. Ins. Co., Civil No. 1:09-CV-1187, United States District Court for the Middle District of Pennsylvania, 2010 U.S. Dist. LEXIS 55467 (M.D. Pa. May 17, 2010) (Smyser. U.S.M.J.),

adopted in Nazario v. Nationwide Mut. Ins. Co., Civil Action No. 1:09-CV-01187, United States District Court for the Middle District of Pennsylvania, 2010 U.S. Dist. LEXIS 55469 (M.D. Pa. June 7, 2010) (Conner, J.)

In Baer v. Union Security Life Insurance Company, the insured applied for credit life insurance in conjunction with a loan.  When applying for insurance, he answered that he had never been medically advised that he had, or had been treated for, heart disease.  The insured passed away approximately two years after applying for the insurance, and the administratrix of his estate made a request for insurance proceeds.  When the insurer obtained medical records, it learned that the insured had been treated for heart disease on several occasions before the insured filled out the insurance application.

The insurer denied the request for insurance proceeds because the insurer incorrectly answered the question on the application, and the administratrix proceeded to file a Complaint that included Counts for breach of contract, negligence, fraud and deceit, and violations of the Pennsylvania Unfair Trade Practices and Consumer Protection Law (UTPCPL).

The Magistrate Judge recommended that the insurer’s Motion for Summary Judgment be granted with respect to all counts, ruling that the insured acted in bad faith and deceived the insurer when he wrote that he had not been treated for heart disease on his insurance application.  The Magistrate stated that all evidence demonstrated that the insured had heart disease and was being treated for it, and that his condition did not deteriorate during the relevant time period did not change these facts.  Therefore, because the insurer demonstrated that the insured knowingly made a false statement that was material to the policy on the application, the policy was void, and the insurer had no responsibility to pay the estate of the insured under the policy.

Date of Decision:  September 16, 2008

Baer v. Union Sec. Life Ins. Co., Civil Action No. 07-473, United States District Court for the Western District of Pennsylvania, 2008 U.S. Dist. LEXIS 115420 (Sept.16, 2008) (Mitchell, U.S.M.J.).