Monthly Archive for October, 2008
The insured brought a breach of contract and bad faith claim against a moving company and her insurer arising out of the insured’s alleged loss of her jewelry collection. The insured hired a moving company to move her belongings from a one bedroom apartment she shared with three other women to a new home. The insured had a valuable jewelry collection, which she packed inside a wooden box and in a case kept in her dresser in the bedroom of her apartment.
The insured held an insurance policy with the insurer providing itemized coverage in the total amount of $82,425 for 64 listed items of jewelry. Four days after the move and before she reported the jewelry missing to the police, the insured reported a claim for loss of scheduled jewelry under the policy. The insured indicated the jewelry was stolen by the moving company and claims the policy limit.
Under the policy the insurer reserved the right to take an examination under oath of the policyholder, along with family members and any other members of the policyholder’s household. The policy also stated that in the event of concealment or fraud, coverage will not be provided if the policyholder or any covered person has “intentionally concealed or misrepresented any material fact relating to this policy before or after a loss.”
The insured made various recorded statements and gave testimony that was inconsistent with regard to various material issues. As a result, the insurer disclaimed coverage under the concealment or fraud provision of the policy.
The insured then filed a complaint for breach of contract against the moving company and a breach of contract and bad faith claim against the insurer. The insurer moved for summary judgment.
With regard to the bad faith claim, the court found that the insurer had a reasonable basis for denying benefits under the concealment provision of the insurance policy. The insured’s version of the loss was implausible and lacked support.
The insured’s testimony failed to tell a consistent story as to several material issues leading up to the disappearance of her jewelry. For example, the insured gave several conflicting reports concerning when she asked the movers about the jewelry and whether or not she went back to the apartment to search for it. At one point, the insured even admitted that her earlier testimony was not true.
The insured did not show bad faith by a clear and convincing standard and therefore the court granted the insurer’s summary judgment motion on the bad faith claim.
Date of Decision: August 28, 2008
Barrie v. Great Northern Ins. Co., United States District Court for the Eastern District of Pennsylvania , No. 06-5320, 2008 U.S. Dist. LEXIS 66029 (E.D. Pa. August 28, 2008) (Stengel, J.),
J.M.A.
Third party plaintiffs brought a bad faith claim against the defendant insurer. The insurer issued an insurance policy to a woman. Subsequently, the insured’s automobile, driven by another individual, struck the plaintiff’s daughter’s vehicle causing her death. The insurer did not accept any claim brought by the third party plaintiffs against the insured’s insurance policy.
The third parties then filed suit against the insurer and alleged that the insurer’s failure to accept their claim contravenes the language of the policy and is in bad faith. The insurer filed a motion to dismiss this claim arguing that the court does not have subject matter jurisdiction over this case because the amount in controversy is less than $75,000.
The insurer argues that the maximum amount that the plaintiffs can recover from them is $50,000 because the Auto Policy at issue, which the third party plaintiffs attached to their complaint, has a liability limit of $50,000 for each person. The insurer acknowledges that the complaint alleges bad faith but they argue that the third party plaintiffs do not have standing to assert a bad faith claim against the insurer under state law because there is no privity between the third parties and the insurer. The bad faith issues were governed by North Carolina law.
The court found that nothing in Plaintiff’s complaint asserts that there is any privity between plaintiffs and the insurer and plaintiffs do not have a judgment against the insured which is required by law in order for a third party to assert a bad faith claim.
The court also found that the plaintiffs’ complaint does not state a claim of bad faith and there is no federal jurisdiction because the amount in controversy is not met. Therefore the court must grant the insurer’s motion to dismiss.
Date of Decision: August 21, 2008
Rose v. Allstate Ins. Co., United States District Court for the Eastern District of Pennsylvania, No. 08-2620, 2008 U.S. Dist. LEXIS 63953 (E.D. Pa. August, 21, 2008) (Giles, J.)
J.M.A.
In 2000, the Philadelphia Court of Common Pleas established the Commerce Case Management Program, as a specialized track within its civil division. Known as the “Commerce Court,” it was created to hear business to business disputes, at a time when litigants and lawyers had lost faith in the ability of Philadelphia’s existing judicial procedures to efficiently and knowledgeably address these kinds of disputes. The key component was the assignment of specific judges (first two, and later three) to handle all Commerce Court cases, with each individual case being assigned to one of those specialist judges from beginning to end.
The Philadelphia Commerce Court’s jurisdiction is set out in a detailed list of specifically defined categories of cases. Bad faith insurance disputes between insured businesses and their carriers, or between insurers, fall within that jurisdiction.
Since its inception, insurance related disputes have constituted one of the largest segments of cases heard in the Commerce Court. The following is a list, with links to opinions and the date of decision, of some Commerce Court opinions issued on insurance bad faith issues:
Erie Insurance Exchange v. Sze (August 4, 2008)
Prime Medica Associates v. Valley Forge Insurance Company (April 26, 2007)
Koken v. Scott Specialty Gases, Inc. (March 14, 2007)
Executive Risk Indemnity Inc. v. Cigna Corp. (August 18, 2006)
Aetna, Inc. v. Lexington Insurance Company (October 27, 2005)
Silverman v. Rutgers Casualty Ins. Co.(March 31, 2005)
Ferrick Construction Co. v. OneBeacon Ins. Co. (December 27, 2004)
Resource America, Inc. v. Certain Underwriting Members of Lloyds (November 12, 2004)
26 E. Oregon Avenue L.P. v. Fidelity National Title Ins. Co. (September 18, 2004)
Staples v. Assurance Company of America (June 14, 2004)
Freedom Medical Supply, Inc. v. Nationwide Mutual Ins. Co. (April 23, 2004)
Chau v. RCA Insurance Group (March 23, 2004)
Egger v. Gulf Ins. Co. (March 10, 2004)
Universal Teleservices Arizona, LLC v. Zurich Ins. Co. (March 4, 2004)
Ace American Insurance Co. v. Columbia Casualty Co. (November 26, 2002)
M&M High, Inc. v. Essex Ins. Co. (November 18, 2002)
TJS Brokerage & Co. v. Hartford Cas. Ins. Co. (July 26, 2002)
Foultz v. Erie Ins. Co. (March 13, 2002)
Pennsylvania Chiropractic Association v. Independence Blue Cross (July 16, 2001)
United States Fire Ins. Co. v. American National Fire Ins. Co. (April 6, 2001)
Terra Equities v. First Am. Title Ins. Co. (March 16, 2001)
Brickman Group Ltd. v. CGU Ins. Co. (January 8, 2001)
Miltenberg & Samton, Inc. v. Assicurazioni Generali, S.p.A. (October 10, 2000)
L.A.
In Levin v. Transamerica Occidental Life Insurance Company, the insured made claims that the carrier wrongfully paid his sister the full proceeds of their parents life insurance policy, instead of paying him 50%. There was a fairly incredible history of purported changes to the beneficiaries of the policy. Two of the change forms, which would benefit plaintiff, were allegedly forged.
There were cross motions for summary judgment, and the court found that the evidence permitted a conclusion that the forms were not authentic. Thus, there was no breach of contract in failing to pay him. The court further found that even if there were somehow a contract, there was no fiduciary duty owed to him, and even if there were such a duty, there was no breach as the carrier undertook a proper investigation of the claims. He could not bring a consumer protection law claim because he had no standing as a non-party to the contract.
On the statutory bad faith claim, the plaintiff asserted that the carrier’s investigation into the proper owner and beneficiary of the insurance Policy was reckless and its decision to allocate the life insurance benefit to the sister lacked a reasonable basis. It is worth quoting the court on how to handle a claim of bad faith investigation:
“In order to determine whether an insurer acted in bad faith in conducting an investigation into whether an insured was entitled to benefits, courts have looked to the following: Judges of this court have held that an insurance company’s substantial and thorough investigation of an insurance claim, forming the basis of a company’s refusal to make or continue making benefit payments, establishes a reasonable basis that defeats a bad faith claim…To defeat a bad faith claim, the insurance company need not show that the process used to reach its conclusion was flawless or that its investigatory methods eliminated possibilities at odds with its conclusion. Rather, an insurance company simply must show that it conducted a review or investigation sufficiently thorough to yield a reasonable foundation for its action.” (citing Mann v. Unum Life Ins. Co.)
Here the carrier took reasonable steps to investigate the claim, including hiring a handwriting expert to determine whether there was a forgery or not. The court also recognized the significance of the fact that the insurer did not refuse to pay on that claim, or attempt to show any self-interest; rather it paid the sister the full $1,000,000. Thus, the carrier and the sister were granted summary judgment.
Date of Decision: August 20, 2008
Levin v. Transamerica Occidental Life Ins. Co., United States District Court for the Eastern District of Pennsylvania, No. 05-5172, 2008 U.S. Dist. LEXIS 66243 (E.D. Pa. August 20, 2008) (Joyner, J.)
L.A.
The court was faced with a motion to remand an action to state court, the issue being whether the claim could exceed $75,000. In making that determination, the court had to evaluate the potential damage claims under plaintiff’s bad faith count. The court first focused on the statutory interest, i.e. prime rate plus 3%. It observed that the statute does not provide a date from which the interest begins to accrue or how to calculate it.
The court projected that it might begin to accrue prior to suit, when the plaintiff’s UIM claim was made to the carrier, and that simple interest applied, although Pennsylvania courts have used compound interest on statutory bad faith claims, citing Colyer v. Nat’l Grange Mut. Ins. Co., 62 Pa. D.&C. 4th 565, 575 (C.C.P. Centre County 2001). The court then projected that the statutory punitive damages could be at least double the breach of contract claim, and that the statutory attorneys’ fees permitted could be in the thousands or tens of thousands.
Thus, the claim exceeded $75,000 and the motion was denied. In applying some of its analyses, it was clear the court was attempting to err on the low side, and if the issue were what interest calculation actually applied and when it started to run to a judgment amount, the analysis could have differed.
Date of Decision: August 18, 2008
Hook v. Progressive Cas. Ins. Co., United States District Court for the Middle District of Pennsylvania, No. 08-738, 2008 U.S. Dist. LEXIS 68985 (M.D.Pa. Aug. 18, 2008)
L.A.
The corporate insured brought a bad faith counterclaim against its insurer. The corporate insured’s agent, who was authorized to acquire insurance policies on behalf of the insured, went to the insurer and applied for two commercial policies. In two different places, the insurance applications asked whether the applicant was ever arrested for any reason and the agent answered no to this question.
The insurer relied upon the agent’s representations and issued two commercial policies to the insured. Subsequently the insured placed the insurer on notice of a claim arising out of an alleged break in and theft that occurred. As a result, the insurer completed a Proof of Loss alleging damages. The insurer conducted an investigation, part of which was an examination of the insured’s agent under oath. During his examination, the agent testified that he had been arrested on at least three or four prior occasions.
The insurer then filed suit against the insured and its agent and sought a declaration of the rights and obligations of the parties under the two commercial policies.
The insured and its agent responded by filing three counterclaims one of which was a bad faith claim against the insurer. The insurer then filed preliminary objections to the counterclaims. The insured and its agent alleged that the insurer acted in bad faith by permitting six months to elapse without exercising due diligence and investigation relative to the accuracy of their applications for commercial insurance.
Specifically the insured alleged that in denying their claim, the insurer acted with reckless disregard and without a reasonable basis because it accepted insurance premiums under both policies and denied coverage immediately upon learning that a claim was made by the insured.
The Philadelphia Commerce Court found that based on these facts, the insured and its agent may be able to prove by clear and convincing evidence that the insurer denied their claim knowing that it lacked a reasonable basis. The court had previously ruled that the insured had pleaded a claim that the insurer failed to actually cancel the policies because it failed to send a letter of cancellation.
Date of Decision: August 4, 2008
Erie Ins. Exch. v. Sze, Court of Common Pleas of Philadelphia, January Term 2008, No. 4100, 2008 Phila. Ct. Com. Pl. LEXIS 197 (2008) (Abramson, J.)
J.M.A.
The plaintiffs brought a UIM claim and a bad faith claim for defendant’s unreasonable evaluation of plaintiffs claim and defendant’s unreasonable offer of settlement. The insurer removed the case to federal court and the plaintiffs sought remand based on Colorado River abstention and/or that the amount in controversy did not exceed $75,000. The court easily rejected the later argument in a footnote, and rejected the former, fundamentally because there was no parallel state proceeding.
Date of Decision: August 18, 2008
Marchky v. Motorists Mutual Insurance Company, United States District Court for the Western District of Pennsylvania, No. 08-1058, 2008 U.S. Dist. LEXIS 63364 (W.D.Pa. August 18, 2008)(Schwab, J.)
L.A.