(1) BAD FAITH CLAIMS AGAINST INDIVIDUAL ADJUSTERS IMPERMISSIBLE; (2) BENEFIT DENIAL NOT BASIS FOR UTPCPL CLAIMS; (3) STATUTORY BAD FAITH CLAIM PROCEEDS BASED ON ALLEGEDLY EXCESSIVE PEER REVIEWS, AND BENEFIT DENIALS; (4) COMMON LAW BAD FAITH SUBSUMED IN CONTRACT CLAIMS (Philadelphia Federal)
This case involves claims against a carrier for two distinct auto accidents, as well as against two of its individual claim adjusters. The insured husband alleged serious injuries in the first incident that were exacerbated in the second. He alleges he was underpaid on the first loss for medical benefits, and raised a UIM claim on the second loss, claiming the same insurer failed to pay benefits due.
The insureds brought breach of contract claims for UIM and first party medical benefits, common law and statutory bad faith claims on the UIM and first party benefits claims, breaches of the Motor Vehicle Financial Responsibility Law (MVFRL), and Unfair Trade Practices and Consumer Protection Law (UTPCPL) claims.
Plaintiffs also brought UTPCPL claims against the two individuals, as well as common law and statutory bad faith claims, and a breach of contract claim against one of them.
The defendants moved to dismiss the bad faith and UTPCPL claims as to all of them, and all claims against the individual defendants.
ALL CLAIMS AGAINST THE INDIVIDUAL ADJUSTERS FAIL
As to the breach of contract claim against the one insurance adjuster, the court observed that “while insurance adjusters have a duty to their principals and should conduct investigations with propriety, this duty does not create a contractual obligation between the adjuster and the insured.” Thus, only the principal, i.e., the insurer, could have contractual liability.
As to the UTPCPL claims, there were no facts pleaded to support any sort of deceptive or fraudulent conduct. Moreover the failure to pay a benefit is not actionable under the UTPCPL. Finally, statutory bad faith claims against insurance adjusters are impermissible because an adjuster is not party to the insurance contract. The same reasoning makes common law bad faith claims impermissible.
In sum, as to both adjusters, the court dismissed the claims against these individuals with prejudice. Judge Tucker states they both “worked as claims adjusters … and followed the company’s policies and practices. Plaintiffs fail to plead sufficient facts to allege personal misconduct that established reliance between themselves and the Individual Defendants, despite the lack of a contractual relationship between Plaintiffs and the Individual Defendants, and accordingly, those claims must fail.”
COURT FINDS FRAUDULENT JOINDER AND DENIES MOTION TO REMAND
As it was only the presence of one of the individual adjusters that prevented complete diversity, his dismissal from the case created complete diversity, and plaintiff’s motion to remand was denied. Although courts use the term “fraudulent joinder”, this does not mean what one would typically think of as fraudulent conduct. Rather, “[j]oinder is fraudulent ‘where there is no reasonable basis in fact or colorable ground supporting the claim against the joined defendant, or no real intention in good faith to prosecute the action against the defendants or seek a joint judgment.’” In this case, the court simply held that there were no viable claims stated against the non-diverse party, i.e., no colorable ground supporting a claim.
STATUTORY BAD FAITH CLAIM STATED AGAINST INSURER
As to the substance of the statutory bad faith claims against the insurer, Judge Tucker found a plausible cause of action stated in the Complaint’s allegations. The Complaint alleges the insurer and one of the adjusters “conducted seven Peer Reviews with respect to … treatment in order to challenge causation and deny benefits … which is at odds with the intended use of the procedure and can factually support a claim of bad faith. Plaintiffs’ bad faith claims survive summary judgment because Defendants administratively closed Plaintiff’s first-collision-benefits-claim, despite acknowledging and having medical support that his initial injuries were exacerbated by the second collision, and then denied benefits under Plaintiffs’ second-collision-benefits-claim.” Thus, she denied the motion to dismiss.
COMMON LAW BAD FAITH CLAIMS DISMISSED
The common law bad faith claims were dismissed, as the court found them subsumed in the breach of contract claims.
Date of Decision: September 27, 2021
Holohan v. Mid-Century Insurance Company, U.S. District Court Eastern District of Pennsylvania No. CV 20-5903, 2021 WL 4399659 (E.D. Pa. Sept. 27, 2021) (Tucker, J.)
Our thanks to attorney Susan J. French for bringing this case to our attention.
