SEPTEMBER 2018 BAD FAITH CASES: BAD FAITH LAW DOES NOT APPLY TO CLAIM THAT INSURER TOOK EXCESSIVE PREMIUMS; BAD FAITH MUST BE PREDICATED ON CLAIM UNDER THE POLICY (Philadelphia Federal)

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The insureds alleged the insurer took excessive premiums. The court found such claims were not subject to Pennsylvania’s Bad Faith Statute since there was no denial of any benefit, a prerequisite to any bad faith claim. The court stated its legal reasoning as follows:

“Defendants argue that Plaintiffs’ claims do not arise from an insurer’s failure to pay a claim pursuant to the terms of an insurance policy, and therefore, Plaintiffs have not stated a claim for bad faith. Courts have interpreted “bad faith” to include an insurer’s conduct other than an unreasonable denial of benefits. See, e.g., Davis v. Fid. Nat. Title Ins. Co., 120 A.3d 1058, 2015 WL 7356286, at *15 (Pa. Super. 2015) (recognizing that bad faith claim can arise from a delay in making payment); O’Donnell ex rel. Mitro v. Allstate Ins. Co., 1999 PA Super 161, 734 A.2d 901, 906 (Pa. Super. Ct. 1999) (holding that an action for bad faith may also extend to the insurer’s investigative practices and misconduct during litigation).”

“However, the insured must have made a claim under the policy to state a claim for bad faith. In Toy v. Metro Life Ins. Co., the Pennsylvania Supreme Court evaluated whether the plaintiff insured stated a bad faith claim based on allegations that an insurer resorted to unfair or deceptive practices to convince the insured to purchase a policy. 593 Pa. 20, 928 A.2d 186, 199-200 (Pa. 2007). Interpreting the meaning of ‘bad faith,’ the court determined that “the term captured those actions an insurer took when called upon to perform its contractual obligations of defense and indemnification or payment of a loss that failed to satisfy the duty of good faith and fair dealing implied in the parties’ insurance contract.”

The court concluded that the legislature intended not to give relief under the bad faith statute to an insured who alleges that his insurer solicited the purchase of the policy unfairly. It cited Ash v. Cont’l Ins. Co., 593 Pa. 523, 932 A.2d 877, 882 (Pa. 2007) (“[Section 8371] applies only in limited circumstances—i.e., where the insured first has filed ‘an action arising under an insurance policy’ against his insurer.”); and Aquila v. Nationwide Mut. Ins. Co., No. CIV.A. 07-2696, 2008 U.S. Dist. LEXIS 93823, 2008 WL 4899359, at *6 (E.D. Pa. Nov. 13, 2008) (holding that a plaintiff who did not bring claim under insurance policy could not state a bad faith claim because § 8371 presupposes a claim made of the insurer) (citing Toy and Ash).

Date of Decision: August 31, 2018

Yandrisovitz v. Ohio State Life Ins. Co., U. S. District Court Eastern District of Pennsylvania No. 5:18-cv-1036, 2018 U.S. Dist. LEXIS 149673 (E.D. Pa. Aug. 31, 2018) (Leeson, J.)

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