In Bercosky v. Township of Cumberland, the defendant purchased an annuity policy for Mr. Carter, now deceased, the defendant’s sole police officer.  At the time, Mr. Carter was designated the beneficiary of the policy.  Years later, a second police officer was hired.  A portion of the value of Mr. Carter’s annuity was rolled into a policy benefiting this second police officer.  Mr. Carter filed this action claiming that defendant had no right to transfer money and that the insurance company that issued the policy acted in bad faith because it offered misleading statements and failed to answer questions regarding the pension. 

Regarding the bad faith claim, the trial court observed that bad faith in the insurance context means failure to pay a claim when there is no reasonable basis for doing so.  The legislature provided an incentive to counter an insurer’s urge to delay payment with § 8371 by providing for interest, fees and punitive damages where bad faith conduct is shown.  The court determined, however, that this bad faith analysis did not apply in this annuity situation, where there were allegations that the insurer failed to answer inquiries and made misleading statements; not that it failed to pay a claim.

Date of Decision: July 9, 2007.

Bercosky v. Township of Cumberland, Commonwealth Court of Pennsylvania, No. 1759 C.D. 2006, 2007 Pa. Commw. LEXIS 371 (Pa. Commw. July 9, 2007) (Smith-Ribner, J.)

 

In Davidson v. Brethren Mutual Ins. Co., the insured filed a claim for benefits under her insurance policy after her home was destroyed by a fire.  The insured alleged that the insurer did not provide her with appropriate temporary housing or shelter, as per her insurance agreement, for a period of 309 days.  The insurer ultimately denied the insured’s claims ten months after the loss.  The insurer had continued to accept the insured’s premiums after the fire, until her claim was ultimately denied.  The insured obtained counsel and requested a copy of the policy within twelve months of the fire.  The insurer allegedly withheld the documents, however, until after twelve months of the date of loss.  The insured brought the instant action setting forth a declaratory judgment seeking recovery of policy benefits seventeen months after the fire loss.  The insurer then filed a motion for summary judgment, arguing that the insured’s claims are barred by a one-year suit limitation clause in the insurance policy which requires that any suit be filed within one year of the date of loss.

In response to the motion for summary judgment, the insured argued that the insurer waived its right to assert this defense by its conduct and that the insurer’s actions in denying her claim were in bad faith.  The court, however, sided with the insurer.  Because the insurer was under no duty to affirmatively inform the insured of the one-year limitations provision and because the insured had sufficient time to initiate an action prior to the expiration of the limitations period, the court granted the insurer’s motion for summary judgment.  While the court sympathized with the insured, it determined that even if the insurer acted in bad faith in denying the claim, it would not change the legally required result.

Date of Decision: July 5, 2007.

Davidson v. Brethren Mutual Insurance Company, United States District Court for the Middle District of Pennsylvania, No. 3:05-1929, 2007 U.S. Dist. LEXIS 48525 (M.D. Pa. July 5, 2007) (Mannion, J.).

In Novinger Group, Inc. v. Hartford Ins., Inc., the insureds filed suit against the insurer because they alleged that they were “baited and switched” into purchasing the policies by insurer’s salesperson.  The salesperson executed insureds’ insurance applications during which time insureds alleged that they were misled and misinformed regarding the salesperson’s expertise and advising abilities.  The insureds further alleged that the salesperson “created a false sense of urgency.” 

The insureds commenced the instant action raising claims of a violation of Pennsylvania’s Insurance Bad Faith Statute among others.  The insurer then filed a motion to dismiss the complaint.  The court decided that the motion will be granted in part and denied in part.  The court granted the insurer’s motion to dismiss with respect to the claims of insurance bad faith.  Because the insureds’ allegations of bad faith relate to alleged misrepresentations and omissions that occurred prior to formation of the insurance contract and because the insureds did not allege that the salesperson denied them benefits under the policy, the court held that the insureds failed to state a claim for insurance bad faith.  As a result, the insurer’s motion to dismiss was granted with respect to this claim.

Date of Decision: May 16, 2007.

Novinger Group, Inc. v. Hartford Insurance, Inc., United States District Court for the Middle District of Pennsylvania, No. 1:06-CV-0188, 2007 U.S. Dist. LEXIS 35779 (M.D. Pa. May 16, 2007) (Connor, J.).