INSURER’S COVERAGE DENIAL OBJECTIVELY REASONABLE AND THUS NO BAD FAITH IS POSSIBLE (Western District)

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Western District Judge Hornak adopted Magistrate Judge Kelly’s Report and Recommendation to grant the insurer summary judgment, in this underinsured motorist coverage breach of contract and bad faith case.

First, the breach of contract claim hinged on whether the insurer’s underinsured motorist coverage rejection form comported with Pennsylvania’s Motor Vehicle Financial Responsibility Law (MVFRL).  The insured signed a form rejecting UIM coverage, but argued the form he signed did not meet the MVFRL’s requirements, and therefore should be deemed void.

The court rejected this argument, and found no UIM coverage due.  The court also found that the failure to include a proper renewal notice regarding the rejection of UIM coverage was a violation of the MVFRL. Renewal notice MVFRL violations, however, have long been held not to provide a private remedy in the courts.  Rather, any failure in the renewal form was solely for administrative review by the insurance department.

Thus, the insurer obtained summary judgment on the coverage claim.

In light of this ruling, the bad faith claim necessarily failed because there was an objectively reasonable basis to deny UIM coverage, since the insured himself had rejected UIM coverage.  While there were some flaws in the claim adjuster’s manner of denying coverage, the fact is that the adjuster reached the correct conclusion that no coverage was due; and the carrier consistently took that position throughout, including an independent analysis by coverage counsel after the adjuster’s initial denial that no coverage was due.

Dates of Decision:  July 12, 2021 (Report and Recommendation), August 2, 2021 (Order adopting Report and Recommendation)

Keeler v. Esurance Insurance Services, U.S. District Court Western District of Pennsylvania No. 20-271 (W.D.Pa. July 12, 2021) (Kelly, M.J.) (Report and Recommendation), adopted by Order of the District Court (Aug. 2, 2021) (Hornak, J.)

Our thanks to Attorney Daniel Cummins, author of the excellent TortTalk Blog, for bringing this case to our attention.

WESTERN DISTRICT JUDGE STICKMAN ISSUES TWO BAD FAITH OPINIONS: (1) DIFFERENCE IN VALUATION ALONE IS NOT BAD FAITH; (2) BAD FAITH CANNOT BE PURSUED AGAINST CARRIER’S CLAIM ADJUSTER (Western District)

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On July 19th, Judge Stickman held in Stegena v. Nationwide, that simply pleading the insured’s injuries are worth significantly more than the carrier’s valuation of the same injuries cannot, by itself, constitute bad faith.  One week later, Judge Stickman opined in the Alexander v. Mid-Century, that an insured could not bring breach of contract or bad faith claims against a carrier’s claim adjuster.

Valuation dispute alone cannot constitute bad faith

In this undersinsured motorist breach of contract and bad faith case, the insured’s “argument in support of her statutory bad faith claim consists almost entirely of nothing more than a bare recitation of the materials and evidence submitted in support of her claim, together with monetary valuations included in the opinions of experts procured after the initiation of this litigation….”

Judge Stickman found the complaint alleged a claim handling history that did not make out a plausible bad faith claim, with the insured trying to meet her clear and convincing evidence burden by simply emphasizing the amount of damages her experts found due to compensate her damages, which the carrier would not pay. Judge Stickman states: “The problem with [the insured’s] argument is that, although she provides sizeable dollar amounts, which her experts claim represent prospective lost wages and medical expenses, her argument fails to address the present issues before the Court—why there was an absence of a reasonable basis, or how [the insurer] knew or recklessly disregarded that absence.”

He recognizes that “under the right circumstances, an unsupported low-ball offer may support a claim for insurance bad faith … [but] it remains [the insured’s] burden to scrutinize the relationship between [the insurer’s] considerations and determinations.” Here, the insured’s failure to “identify, with any specificity, factual deficiencies illustrating the unreasonableness of [the insurer’s] conduct, demonstrates that her claim is more properly characterized as an inappropriate, generalized grievance over the monetary valuation of her claim.” Moreover, the record showed the carrier’s “investigation and determinations, and, more specifically, the process that he used to evaluate and value the claim … cannot be characterized as anything other than reasonable, as that term applies in the bad faith context.”

Judge Stickman cites Judge Caputo’s 2019 Moran decision in support, summarized here, where the Middle District court collected cases on valuation discrepancies and bad faith.

Finally, in reciting case law detailing Pennsylvania’s statutory bad faith standards, we observe that Judge Stickman quoted the long-standing principle that “an insurance company is not required to demonstrate its investigation yielded the correct conclusion or even that its conclusion more likely than not was accurate. The insurance company also is not required to show the process by which it reached its conclusion was flawless or that the investigatory methods it employed eliminated possibilities at odds with its conclusion. Rather, an insurance company simply must show it conducted a review or investigation sufficiently thorough to yield a reasonable foundation for its action.”

Date of Decision:  July 19, 2021

Stegena v. Nationwide Property & Casualty Insurance Company, U.S. District Court Western District of Pennsylvania No. 2:20-CV-428, 2021 WL 3038800 (W.D. Pa. July 19, 2021) (Stickman, J.)

No viable breach of contract or bad faith claim against individual adjuster

The insured brought  breach of contract and bad faith claims against both his insurer and its claim adjuster.  The defendants moved to dismiss, arguing there was no viable claim against the adjuster, and that the adjuster was joined to improperly destroy diversity jurisdiction and prevent removal to federal court.

Judge Stickman found Pennsylvania case law made clear that neither a breach of insurance contract or insurance bad faith claim could be pursued against an individual claim adjuster working for the insured’s carrier.  He cites the 2017 Pennsylvania Superior Court decision in Brown v. Everett, summarized here, holding that “a statutory action for bad faith can only be brought against the insurer,” and not an adjuster.

Judge Stickman rejected the argument that the adjuster could be sued under the “participation theory,” finding that theory inapposite to the context of an insurance adjuster handling a claim for an insurance company.  Thus, he dismissed the claims against the adjuster with prejudice, which further resulted in jurisdiction over the remaining claims against the insurer being proper in federal court.

Date of Decision:  July 26, 2021

Alexander v. Mid-Century Insurance Company, No. 2:21-CV-392, U.S. District Court Western District of Pennsylvania 2021 WL 3173621 (W.D. Pa. July 26, 2021) (Stickman, J.)

NO BAD FAITH POSSIBLE WHERE NO COVERAGE DUE IN THIS COVID-19 CASE (New Jersey Federal)

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New Jersey Federal Judge Wolfson denied plaintiff coverage in this Covid-19 business loss case.  Judge Wolfson found the policy’s virus exclusion unambiguously applied, denied the insured’s motion for summary judgment, and granted the carrier judgment on the pleadings.

[For those interested in the detailed reasoning behind this Covid-19 coverage decision, a copy of Judge Wolfson’s opinion can be found here.  We are only focusing on the bad faith claim.]

In a closing footnote, Judge Wolfson observed:

Neither party includes in its briefing any argument with respect to Plaintiff’s bad faith claim. Nevertheless, it is well-established that under New Jersey law, “a claimant must be able to establish a right to summary judgment, as a matter of law, for coverage before asserting a bad faith claim against an insurer for their refusal to pay a claim.” Mitra v. Principal Ins. Co., No. 15-1259, 2015 WL 4139015, at *3 (D.N.J. July 7, 2015) (citing Polizzi Meats v. Aetna Life & Cas. Co., 931 F. Supp. 328, 339 (D.N.J. 1996). In other words, where the plaintiff cannot “establish a right to summary judgment, the bad faith claim fails.” Id. Accordingly, because Plaintiff has not established a right to summary judgment on its coverage claim, its bad faith claim must also be dismissed.

Date of Decision:  July 29, 2021

Metuchen Center, Inc. v. Liberty Mutual Insurance Company, U.S. District Court District of New Jersey No. CV2012584FLWTJB, 2021 WL 3206827 (D.N.J. July 29, 2021) (Wolfson, C.J.)

ALLEGED “RED FLAGS” NOT ENOUGH TO DEFEAT BAD FAITH CLAIM; MOTION TO BIFURCATE DENIED (Philadelphia Federal)

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Eastern District Judge Younge denied the insurer’s summary judgment motion on bad faith, and its motion to bifurcate the bad faith claim.

Plaintiff sought coverage based on auto theft and damage to the vehicle. The carrier investigated the claim, and took the vehicle into its custody during the investigation.  The carrier never paid on the claim.  Rather, it assigned the claim to its Special Investigation Unit (SIU) because of “red flags” it allegedly uncovered. The carrier argued these red flags supported its decision to further investigate the claim and then to deny coverage, making the process reasonable and thus beyond the scope of a bad faith claim.

Summary Judgment Denied on the Merits

Judge Younge gives a thorough exposition of bad faith law, and specifically the law concerning the reasonableness of investigations and red flags.  Despite the carrier’s arguments that its investigation, and denial based thereon, were reasonable, Judge Younge ruled that the carrier’s arguments were insufficient to get summary judgment under this case law.  The insured adduced “several holes” in the carrier’s investigation that could be indicia of an unreasonable investigation, despite the putative red flags.  Further, the record was lacking in evidence that the insured “had any motive to damage, destroy or fake the theft of her Vehicle.”

[Judge Younge cited legal principles from the April 2021 Fuentes case, summarized here, which cited the 2019 Merrone case, summarized here, where “red flags” were sufficient to make to carrier’s investigation reasonable.  For those litigating “red flag” cases, it will be useful to compare and contrast Judge Younge’s Bermudez opinion with these two cases.]

Motion to Bifurcate Denied

In denying the motion to bifurcate, Judge Younge found:

  1. The insurer “failed to establish the level of prejudice necessary to warrant bifurcation.”

  2. “[I]t would appear that the evidence related to Plaintiff’s breach of contract claim will overlap evidence presented in relationship to Plaintiff’s insurance bad faith claim.”  “For example, both claims will focus on whether Plaintiff was involved in the theft of her own Vehicle and/or whether Plaintiff made a material misrepresentation to her insurance company in connection with her claim.”

  3. “Defendant’s investigatory process, its interpretation of the evidence and impression of witnesses which would ordinarily be relevant to an insurance bad faith claim will be equally relevant to the breach of contract claim under the facts of this case. Defendant’s reason for refusing to provide coverage for the Vehicle will be at issue in the breach of contract claim.”

  4. “From the perspective of judicial economy, bifurcation of trial on separate claims could prove inefficient and inconvenient.”

  5. “Bifurcation could result in the unnecessary need to call the same witnesses twice to testify before the same jury on two separate occasions which would extend the amount of time necessary for the jury to resolve this litigation.”

Judge Younge did recognize the insurer had some legitimate concerns, and stated: “Based on overlapping evidence and the intertwined nature of the two claims, the prejudice that Defendant will suffer from trying these two claims together remains to be seen. However, to mitigate any potential concerns, the Court could provide curative instructions and/or implement a staged verdict sheet that would ask the jury to resolve the breach of contract claim prior to reaching the insurance bad faith claim. The varying burdens of proof for breach of contract and insurance bad faith could be explained to the jury and described on the verdict sheet. Potentially, evidence related to damages under insurance bad faith, and specifically punitive damages, could be presented to the jury after it resolves issues related to liability. These issues can be fairly addressed at a pretrial conference prior to jury selection.”

Date of Decision:  July 19, 2021

Bermudez v. Progressive Insurance Co., U.S. District Court Eastern District of Pennsylvania No. 19-CV-4085-JMY, 2021 WL 3033757 (E.D. Pa. July 19, 2021) (Younge, J.)

COURT DENIES REMAND BASED ON POTENTIAL PUNITIVE DAMAGE AND ATTORNEY’S FEE AWARDS (Middle District)

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Middle District Judge Mannion denied the insurer’s motion to remand this UIM bad faith case.  The plaintiff had $15,000 in UIM coverage, which was eventually paid in full, but continued to pursue a bad faith claim for a sum in excess of $50,000, including attorney’s fees and punitive damages.  The insured refused to stipulate that the claim was worth no more than $74,999.

Judge Mannion found that the punitive damages and attorney’s fees pursued under the bad faith statute could exceed the jurisdictional minimum, $75,000.  He looked to cases that had awarded punitive damages in 4:1 and 5:1 ratios, and a case upholding a 10:1 ratio. Moreover, “[s]ubstantial attorney’s fees awards, too, have been granted for insurance bad faith claims.”

Judge Mannion then states:

Because Plaintiff does not specifically limit his amended complaint to $75,000, and because no factual dispute is raised by the parties, the court proceeds to the legal certainty test. In light of the reasonable possibility that punitive damages and attorney’s fees may exceed $75,000, and considering Plaintiff’s refusal to cap damages at $75,000, the court finds that it does not appear to a legal certainty that Plaintiff’s claim is for less than the jurisdictional minimum. Therefore, Plaintiff’s Motion to Remand will be denied.

Date of Decision: July 19, 2021

Barbato v. Progressive Specialty Insurance Company, U.S. District Court Middle District of Pennsylvania No. CV 3:21-0732, 2021 WL 3033863 (M.D. Pa. July 19, 2021) (Mannion, J.)

COURT ADDRESSES (1) COMMON LAW VS. STATUTORY BAD FAITH STANDARDS; (2) LACK OF CLARITY IN THE LAW AND BAD FAITH; (3) DELAYS IN CLAIM HANDLING AND SETTLEMENT OFFERS; (4) APPLYING THE UNFAIR INSURANCE PRACTICES ACT IN BAD FAITH CASES; (5) AGGRESSIVE DISCOVERY/CLAIM HANDLING DURING LITIGATION; and (6) LOW RANGE SETTLEMENT OFFERS (Philadelphia Federal)

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Eastern District Judge Tucker explains the similarities and differences between common law and statutory bad faith, in granting the insurer summary judgment on the statutory bad faith claim, but rejecting dismissal of the common law bad faith claims.  She observes both types of bad faith are subject to the clear and convincing evidence standard. However, common law bad faith only requires proof of negligent claim handling, while statutory bad faith requires a knowingly or recklessly unreasonable claim denial.

Judge Tucker cites Judge McLaughlin’s 2007 Dewalt case as authority on the negligence standard.  Judge Tucker does focus on the Cowden type of common law bad faith in discussing these standards, i.e., an insurer can avoid a common law bad faith claim for failure to settle within policy limits by showing “a bona fide belief … predicated on all the circumstances of the case, that it has a good possibility of winning the suit.”  This kind of third party insurance bad faith claim was not before the court.  Rather, the facts involved an underinsured motorist claim.

In an earlier decision, Judge Tucker entered judgment for the insurer on the basis the plaintiff did not qualify as an insured under the policy.  The Third Circuit reversed her decision.  While true the policy language did not provide the plaintiff UIM coverage, the Third Circuit found this limitation violated Pennsylvania’s Motor Vehicle Financial Responsibility Law (MVFRL).

On remand, the insured argued that the policy was issued in bad faith because it included language violating the MVFRL.  Judge Tucker rejected the common law bad faith claim on this point.  There was no precedent or binding authority on point before the Third Circuit’s decision, and the carrier’s position, while ultimately incorrect, was not unreasonable. “This matters because an insurer making a reasonable judgment as to coverage in a situation where the law is not clear cannot be liable for bad faith.”

This did not end the common law bad faith inquiry. Once the Third Circuit ruled, making the law applied to the policy crystal clear, this changed the measure of the insurer’s behavior, i.e., at that point the carrier knew it had an obligation to provide UIM coverage. In determining the common law bad faith claim, Judge Tucker stated:

  1. Conduct that postdates the start of litigation can form the basis for a proper bad faith claim.

  2. After the Third Circuit ruled that the Nationwide policy violated the MVFRL, Nationwide did not extend a settlement offer for ten months after the decision.

  3. When Nationwide did present an offer … it was for just $500,000 of the UIM benefits—in exchange for releasing the bad faith and class action claims.

  4. This offer was doubled a week later to $1 million, but it was contingent on a broader release of all disputes related to coverage.

  5. A failure to “promptly settle claims, where liability has become reasonably clear, under one portion of the insurance policy coverage in order to influence settlements under other portions of the insurance policy” is considered an unfair insurance practice under Pennsylvania law. 40 Pa. Stat. Ann. § 1171.5(a)(10)(xiii).

  6. The [UIPA] also singles out a refusal to “effectuate prompt, fair and equitable settlements of claims in which the company’s liability under the policy has become reasonably clear” as a similarly unfair insurance practice.

  7. While a violation of the Unfair Insurance Practice Act (UIPA) does not constitute a per se violation of the bad faith statute, it does point to a material fact that could support a common law bad faith claim. [Judge Tucker observes apparently contrasting case law on this point, quoting some cases to the effect that UIPA violations are not bad faith per se, and another that “the rules of statutory construction permit a trial court to consider … the alleged conduct constituting violations of the UIPA or the regulations in determining whether an insurer, like Nationwide, acted in ‘bad faith.”]

  8. Again citing Dewalt, Judge Tucker states: The fact that Nationwide offered a settlement is also not a safe harbor from a bad faith claim. “Although most Pennsylvania cases finding bad faith do so in situations where an insurer refuses to settle, no case suggests that such a refusal is a pre-requisite for a bad faith claim.”

  9. Judge Tucker concludes that: Given the resolution of the disputed terms in the Nationwide policy by the Third Circuit, Defendant’s refusal to provide an unconditioned settlement for a claim under those terms is enough evidence that a reasonable jury could find in favor of Plaintiff on the common law bad faith claim.

Thus, the common law bad faith was allowed to proceed. The statutory bad faith claim was not.

The pre-suit conduct, i.e., drafting the policy with a clause violating the MVFRL, certainly could not be bad faith under the higher statutory standards if it did not constitute negligence under the common law standard.  Plaintiff could not show by clear and convincing evidence that the policy language and the carrier’s conduct in following that language was objectively unreasonable at the time, much less in knowing or reckless disregard of some unreasonable conduct.

As to litigation conduct after the Third Circuit had ruled, the insurer pursued aggressive discovery.  [This discovery was essentially the insurer’s claim handling at this point.]  Judge Tucker laid out the details of the insurer’s discovery/claim handling and specific events over the course of discovery/claim handling.  This included the insurer’s making a number of reasonable requests for information and the insured’s creating delays.  The carrier’s zealous, and maybe at times questionable, defense tactics did not equate to bad faith.

Judge Tucker also observed that offers on the low end of a settlement range for subjective damages such as pain and suffering do not constitute clear and convincing evidence that the insurer’s action were unreasonable, knowing or reckless.  These sorts of claims require investigation, and the carrier’s discovery on these issues amounted to standard claim handling.

Judge Tucker next stated that the insurer’s 10 month delay in making a settlement offer, absent other aggravating factors, was “well under periods of time that have been deemed acceptable for statutory bad faith purposes.”

Judge Tucker also found it significant that the insurer “communicated with Plaintiff during discovery, sending multiple document requests and communicating with Plaintiff’s counsel, which is arguably more responsive than the amount of communication Defendant received in response. This too weighs against whether a reasonable jury could rule that Nationwide had knowing or reckless disregard for the deficiency of its position.”

Thus, summary judgment was denied on the statutory bad faith claim.

Date of Decision:  July 14, 2021

Slupski v. Nationwide Mutual Insurance Company, U. S. District Court Eastern District Pennsylvania No. CV 18-3999, 2021 WL 2948829 (E.D. Pa. July 14, 2021) (Tucker, J.)

PLAINTIFF FAILS TO PLEAD FACTS SETTING OUT A PLAUSIBLE BAD FAITH CLAIM (Middle District)

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This is a first party property damage breach of contract and bad faith case.  The insurer denied coverage on the basis that the loss was not covered under the policy.  The insurer moved to dismiss the bad faith claim only.

Middle District Judge Brann gives a lengthy history of the plausibility federal pleading standards announced via Twombly and Iqbal.  This is a prelude to his describing the flaws in plaintiff’s pleading, which Judge Brann ultimate gave leave to amend after granting a motion to dismiss, without prejudice.

Plaintiff’s pleading problems are two-fold: (1) conclusory allegations are meaningless under the federal pleading standards and (2) factual pleadings do not state a claim where the facts, even taken as true, do not make out a plausible bad faith case against the defendant insurer.

To quote Judge Brann:

“The claim [plaintiff] brings for bad faith cannot survive as pled. Almost half of the allegations in the complaint are conclusory and receive no pleading presumption of truthfulness. The other half do not establish any bad faith. The well-pled facts span from paragraphs 1-17. Those facts establish the breach of contract claim – which State Farm has not disputed – but the remaining facts are either irrelevant to the issue of bad faith, not well pled, or simply legal conclusions.”

Thus, the bad faith claim was dismissed without prejudice, and with leave to amend if plaintiff could meet these very clearly explained pleading standards.

Date of Decision:  July 16, 2021

Marks v. State Farm Fire and Casualty Company, U.S. District Court Middle District of Pennsylvania No. 4:21-CV-00307, 2021 WL 3022637 (M.D. Pa. July 16, 2021) (Brann, J.)

NO BAD FAITH CLAIM HANDLING OR DELAY IN UIM BAD FAITH CASE (C.C.P. Monroe)

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The excellent, and important, TortTalk blog has posted a summary of Monroe County Judge Williamson’s decision in Sabajo v. Allstate, granting summary judgment to the insurer on a UIM bad faith claim.  After reviewing the record, Judge Williamson could not find clear and convincing evidence of bad faith conduct in claim handling, or any delay that amounted to bad faith.  A copy of the opinion can be found here, Sabajo v. Allstate Fire and Casualty Insurance Co., Court of Common Pleas Monroe County, No. 7703 Civil 2019 (June 22, 2021) (Williamson, J.)

Our thanks to Attorney Daniel Cummins for bringing this case to our attention.

TWO SHORT EASTERN DISTRICT SUMMARIES: TAKING CONTRARY POSITIONS IN SUBROGATION AND UIM CLAIMS NOT BAD FAITH; ESTATE HAS STANDING TO PURSUE BAD FAITH CLAIM (Philadelphia Federal)

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Here are quick summaries of two recent Pennsylvania Eastern District bad faith cases.

TAKING CONTRARY POSITIONS IN SUBROGATION AND UNINSURED MOTORIST CASES ON INSURED’S CULPABILITY NOT BAD FAITH PER SE

The carrier denied the insured’s uninsured motorist claim on the basis that the insured was at fault.  However, the carrier brought a property damage subrogation action against the other driver, claiming the other driver was solely at fault.

The insured brought breach of contract and bad faith claims on the basis the carrier admitted or conceded via the subrogation action that the other driver was wholly at fault, and could not now argue its insured was at fault. The insured moved for summary judgment on this basis.  Eastern District Judge Younge denied the motion.

Judge Younge rejected the idea that either judicial estoppel or collateral estoppel applied to bind the carrier to its legal assertions in the subrogation action.  Absent their application, he found summary judgment inappropriate as the insured had not met the clear and convincing evidence standard of proof for bad faith.

Finally, Judge Younge rejected the argument that the carrier breached its contract or acted in bad faith by not making a partial payment. “Plaintiff also failed to establish that he is entitled to an advance of proceeds under policy provisions. Under Pennsylvania law, the Court is not aware of any duty on the part of an insurer to make a partial payment on a UIM claim in the absence of a contractual provision requiring a partial payment or an agreement between the parties as to the value of a UIM claim.”

Date of Decision:  June 29, 2021

Marrone v. Geico Insurance Company, U.S. District Court Eastern District of Pennsylvania No. 20-CV-4405-JMY, 2021 WL 2681388 (E.D. Pa. June 29, 2021) (Younge, J.)

ESTATE HAS STANDING TO PURSUE LIFE INSURANCE BAD FAITH CLAIM

In this life insurance bad faith case, Eastern District Judge Surrick held that the estate has standing to bring the bad faith claim, even though the decedent was not a beneficiary.

Date of Decision:  July 6, 2021

Hudson v. Columbia Life Insurance Company, U.S. District Court Eastern District of Pennsylvania No. CV 20-5252, 2021 WL 2823074 (E.D. Pa. July 6, 2021) (Surrick, J.)

NO COVID-19 LOSS COVERAGE DUE, NO COMMON LAW BAD FAITH POSSIBLE (Philadelphia Federal)

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The court found no coverage due for the insured’s business interruption losses resulting from the Covid-19 pandemic.  For those interested in the court’s reasoning on this hotly litigated issue, the opinion can be found here. Today, we limit ourselves to insurance bad faith law issues only.

The insured did not pursue a statutory bad faith claim, but only a common law claim for breach of the duty of good faith and fair dealing.  Having found no coverage due, Judge Gallagher, rejected the common law bad faith claim, stating:

‘[T]o recover under a claim of bad faith,’ the insured must show that the insurer ‘did not have a reasonable basis for denying benefits under the policy and that the insurer knew of or recklessly disregarded its lack of reasonable basis in denying the claim.’ ” Amica Mut. Ins. Co. v. Fogel, … (quoting Terletsky v. Prudential Prop. & Cas. Ins. Co., 649 A.2d 680, 688 (Pa. Super. Ct. 1994)); see also Treadways LLC v. Travelers Indem. Co., 467 F. App’x 143, 147 (3d Cir. 2012) (“Though we have held that bad faith may be found in circumstances other than an insured’s refusal to pay, ‘[a] reasonable basis is all that is required to defeat a claim of bad faith.’ ” (quoting J.C. Penney Life Ins. Co. v. Pilosi, 393 F.3d 356, 367 (3d Cir. 2004))).

“Pennsylvania courts have held that if the insurer properly denied a claim, the policyholder is unable to state a bad faith claim.” Kahn, … (citing Cresswell v. Pa. Nat’l Cas. Ins. Co., 820 A.2d 172, 179 (Pa. Super. Ct. 2003)). AGLIC properly denied Boscov’s insurance claims, so it did not act in bad faith. AGLIC’s alleged “failure to investigate” the matter also does not amount to bad faith. … Simply put, there was “nothing to investigate: coverage d[id] not exist on the face of [Boscov’s] claim[s].” Clear Hearing Sols., LLC v. Cont’l Cas. Co., … (rejecting bad faith claim premised on insurer’s denial of insurance coverage “without conducting any investigation”); Ultimate Hearing Sols. II, LLC v. Twin City Fire Ins. Co., … (same).

Date of Decision:  June 30, 2021

Boscov’s Department Store, Inc. v. American Guarantee and Liability Insurance Co., No. 5:20-CV-03672-JMG, 2021 WL 2681591 (E.D. Pa. June 30, 2021) (Gallagher, J.)