NOVEMBER 2013 BAD FAITH CASES: AMBIGUITY IN RECORDED CONVERSATION WITH INSURED DEFEATS BAD FAITH CLAIM (Philadelphia Federal)

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Plaintiffs filed suit seeking a retroactive change to full tort coverage, and alleging bad faith for the insurer’s failure to change the coverage prior to plaintiffs’ request. One month before the expiration of their current auto policy, plaintiffs contacted their insurer and requested their coverage be changed from limited tort to full tort. The insurance representative initially informed plaintiffs such a change had to be made by written request, but later in the recorded conversation stated she could make the change over the phone. Six days after the conversation, plaintiffs sent the insurer a check in the amount of the premium increase.

Two weeks later, one of the plaintiffs was injured in an accident. When plaintiffs sought reimbursement from the other driver’s insurance, she was refused compensation because of her limited tort coverage. Plaintiffs sought a declaration of insurance from their insurer reflecting the change in coverage, but the insurer denied the full coverage took effect immediately, and instead claimed the full tort coverage would begin with the new policy.

Plaintiffs brought suit alleging breach of contract and bad faith against their insurer. Following discovery, the insurer filed a motion for summary judgment arguing plaintiffs failed to demonstrate a breach of contract, and that its conduct did not rise to the level of bad faith.

The court held plaintiffs were unable to establish the insurer lacked a reasonable basis for denying coverage, and granted defendant’s motion for summary judgment on the bad faith claim. Although plaintiffs alleged they intended for the change to full-tort coverage to take effect immediately, the recorded conversation suggested otherwise. The insurer reviewed the recording and determined, based on the conversation, the change in the policy’s coverage was to take effect upon the renewal date, and thus after the underlying accident. This created a reasonable basis for denying payment to plaintiffs, defeating plaintiff’s claim under the bad faith statute.

Date of Decision: October 25, 2013

Lites v. Trumbull Ins. Co., Civil Action No. 12-4167, 2013 U.S. Dist. LEXIS 153346 (E.D. Pa. Oct. 25, 2013) (Restrepo, J.).

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