Monthly Archive for July, 2011
A widowed plaintiff, Janice Bariski, brought a bad faith claim against the insurer after it terminated her late husband’s life insurance policy.
The insurance policy was issued to plaintiff’s husband in 1990 and provided for a thirty day grace period in which late payments could be made while the policy remained in effect. If payments were not made during the pendency of this thirty day period, the policy would lapse, but the insured would still have the opportunity to pay what was owed and reinstate the policy, without re-applying, on the same terms.
In November 2005, the late Mr. Bariski fell behind in his premium payments and failed to satisfy them during the initial thirty day grace period. He was informed that his policy had lapsed and that he would have until January 9, 2006 to pay in full and reinstate before his policy would be terminated.
Mr. Bariski then sent a check for the overdue payments to the insurer. The check was post-marked sometime before January 8th but was not received by the insurer until January 10th, one day after the policy was to be terminated. The insurer then sent Mr. Bariski a notice of the policy’s termination which was dated January 9th but not received until January 13th, at least four or five days after the payment was sent.
Despite their receipt of the payment, the insurer nevertheless informed Mr. Bariski that he would have to re-apply for coverage and demonstrate proof of insurability. Mr. Bariski appealed this finding and sent the insurer a letter requesting immediate reinstatement of his policy. The insurance company denied this request and remained steadfast in its position that the former policy had been and would remain terminated pending a full reapplication process.
After the insured died in December, 2007, his widow and estate’s executrix initiated this lawsuit alleging, among other things, bad faith.
Defendant moved for summary judgment, basing its motion on two grounds, the first one being that the two year statute of limitations period for bringing bad faith claims precluded plaintiff from bringing suit. And, alternatively, that the bad faith statute applies only in the context of an insurer denying payment of policy proceeds and not in the context of a policy being terminated.
The insurance company prevailed on the statute of limitations defense; thus, the court did not address the applicability of the bad faith statute to a termination situation.
While the plaintiff was not the life insurance policy’s named beneficiary, the court, for purposes of the summary judgment motion, assumed that the policy was assigned to her and treated her as a proxy for the named beneficiary. In evaluating the plaintiff as a named beneficiary, the court noted that her individual claim would have accrued (i.e. the statute of limitations would begin to run) on the date of her husband’s death—December 20, 2007. As such, the plaintiff, pursuant to the bad faith statute’s two year statute of limitations, would have had until December 20, 2009 to bring a timely claim. However, she waited over a year after the statute of limitations had run before initiating suit in January 2011.
The court eschewed the plaintiff’s arguments that application of a “discovery rule” would have tolled the running of the statute of limitations in this case, especially because plaintiff’s husband had informed her of his feeling that the policy had been wrongfully terminated almost four years before the plaintiff finally brought suit. Consequently, the discovery rule argument was not sufficient to parry the insurer’s statute of limitations defense and plaintiff’s bad faith cause of action was dismissed as time barred.
Date of Decision: July 6, 2011
Bariski v. Reassure Am. Life Ins. Co., Civil Action No. 1:10-cv-804, United States District Court for the Middle District of Pennsylvania, 834 F. Supp. 2d 233, 2011 U.S. Dist. LEXIS 72459 (July 6, 2011) (Kane, J.)
The plaintiff was involved in a car accident, totaling his Honda truck. He held an insurance policy with GEICO and submitted a claim for coverage of both the damage to his vehicle and his personal medical expenses. GEICO, however, denied the claim on the grounds that the particular vehicle involved in the accident had not been listed on plaintiff’s policy and as such an accident in that vehicle was not covered under that policy.
Plaintiff brought suit and alleged that he had attempted to cover his truck under the policy several times and that each time coverage had been unreasonably denied, thereby constituting bad faith. GEICO countered by claiming that the plaintiff’s bad faith claim under Pennsylvania’s Bad Faith Statute is pre-empted by the more narrowly tailored Motor Vehicle Financial Responsibility Law (75 Pa. C.S. § 1797), a statute dealing with the reasonableness and necessity of medical treatment for which a claim is made after a motor vehicle accident.
While the United States District Court for the Eastern District of Pennsylvania recognized Third Circuit authority stating that the provisions of the latter, more specific statute do serve as exceptions to the general statutory remedy for bad faith, the court also noted that the applicability of section 1797 (the more specific, potentially pre-emptive statute) depends on whether the dispute is over the reasonableness and necessity of medical treatment. Here, the Court noted, the defendant never suggested that the medical treatment plaintiff received was unnecessary or financially unreasonable.
Thus, the court cited a proposition adopted by numerous Pennsylvania courts in finding that where insurers’ actions do not fall squarely under section 1797, claims under section 8371 (the general Bad Faith Statute) should not be dismissed as barred by section 1797.
As such, plaintiff’s bad faith claim was deemed not pre-empted and GEICO’s motion to dismiss that claim was denied.
Date of Decision: June 23, 2011
Richter v. GEICO Indem. Co., Civil Action No. 10-CV-7133, United States District Court for the Eastern District of Pennsylvania, 2011 U.S. Dist. LEXIS 67021, 797 F. Supp. 2d 529 (June 23, 2011) (Joyner, J.)
Plaintiffs James and Marlene Genter brought claims, among others, for consumer protection law violations against Allstate after the insurer denied coverage on their underinsured motorist (UIM) claims. This included claims for violating the Unfair Insurance Practices Act. The plaintiffs brought suit in Allegheny County and Allstate removed to the Western District on diversity grounds.
The claim arose from an accident involving Mr. Genter and Adam O’Bryan, in which the plaintiff suffered severe injuries which he claimed would have permanent effects on his health and earning capacity. Due to the extent of his injuries, plaintiff deemed Mr. O’Bryan’s $100,000 policy limit insufficient to fully compensate him for his injuries. Thus, the plaintiff sought the underinsured motorist benefits he believed to be available under his auto insurance policy with Allstate—benefits which, according to the plaintiff, had a limit of $2 million.
Allstate offered Genter $15,000 to settle the claim, which Genter’s counsel rejected, requesting arbitration. Allstate responded that it was unwilling to arbitrate the claim and that Genter would have to bring suit in order to vindicate his rights to the UIM benefits.
That was Allstate’s stand.
Genter brought suit, making claims, among others, under Pennsylvania’s Unfair Trade Practices and Consumer Protection Law (UTPCPL) seeking treble damages and alleging that the insurer failed to settle the claim in a prompt, fair and equitable fashion. In that claim, Genter alleged violation of Pennsylvania’s Unfair Insurance Practice’s Act as part of the basis for that count. Plaintiff claimed that Allstate’s actions constituted an intentional course of conduct calculated to take advantage of the insured’s old age and poor health to force an unreasonably low settlement.
Allstate moved to dismiss but the Western District denied the insurer’s motion.
The court concluded that Allstate’s denial of the insured’s UIM claim could well have constituted misfeasance in this case, rather than nonfeasance, as the insured had sufficiently alleged wrongful and intentional action on the part of the insurer to deny reasonable claims. The court found further that deceptive conduct, which is something distinct from fraudulent conduct, could be the basis of a UTPCPL claim.
The court specifically found such misfeasance was pleaded based on the following allegations: “Plaintiffs claim that Allstate ‘unreasonably delayed’ handling their benefits claim; ‘failed to make a reasonable settlement offer;’ ‘failed to adequately investigate’ their benefits claim; ‘failed to negotiate in good faith;’ and ‘failed to promptly provide a reasonable explanation of the basis in the insurance policy in relation to the facts or applicable law’ for the proposed $15,000 settlement.” As such, Genter was found to have stated a viable claim under UTPCPL.
As to the alleged violations of Pennsylvania’s Unfair Insurance Practices Act, which Pennsylvania’s Supreme Court has long held does not create a private right of action in itself, the court stated in a footnote: “Plaintiffs assert that ‘Defendant’s violation of the Pennsylvania Unfair Insurance Practice Act constitutes an unfair trade practice under the [CPL] [as] set forth in Pekular v. Eich, 355 Pa. Super. 276 (1986).’ … The Court in Pekular determined that an insured may maintain a private cause of action under the CPL even though allegations in his or her complaint address acts that are also prohibited by the Pennsylvania Unfair Insurance Practices Act. … The decision in Pekular does not provide Plaintiffs an independent basis for relief.”
The Western District did, however, grant Allstate’s motion to strike the awarding of treble damages.
Date of Decision: June 24, 2011
Genter v. Allstate Prop. & Cas. Ins. Co., 11cv0709, United States District Court for the Western District of Pennsylvania, 2011 U.S. Dist LEXIS 67840 (June 24, 2011) (Schwab, J.)
It should be observed that other courts have questioned the use of UTPCPL claims concerning claims handling by insurance company, such as failure to pay a claim, and that the UTPCPL only give a cause of action in the conduct leading up to the sale of the insurance policy.
Liberty administered PGT’s worker’s compensation program. Liberty initially brought suit seeking a declaration of its rights under the insurance policies it provided to PGT as well as recovery of unpaid premiums in excess of $180,000. PGT counterclaimed, asserting breach of contract, bad faith and breach of fiduciary duty claims. Liberty, here, challenged PGT’s counterclaims and sought to have them dismissed.
As to PGT’s bad faith counterclaim, Liberty asserted that PGT’s allegations of bad faith merely stated legal conclusions without any supporting facts to show that Liberty could have acted in bad faith. The Western District agreed, finding PGT’s allegations to be “vague” and “bare-boned” as to the actual alleged bad faith conduct and thus insufficient to support a bad faith claim. The court noted that a retrospective listing of the various ways in which bad faith theoretically could have occurred is not sufficient to state a bad faith claim under the Twombly standard of pleading specificity.
Date of Decision: June 27, 2011
Liberty Ins. Corp. v. PGT Trucking, Inc., 2:11-cv-151, United States District Court for the Western District of Pennsylvania, 2011 U.S. Dist. LEXIS 68444 (June 27, 2011) (McVerry, J.)
The plaintiff, Petty, was the owner of a construction company called R.G. Petty Masonry. The company contracted with Blue Cross of Northeastern Pennsylvania to provide health insurance coverage for all of its employees including the eponymous Petty. Petty and his company allege that Blue Cross breached its duty of good faith as well as the state’s non-profit laws by accumulating excessive profits and surplus well beyond the “incidental profit” permitted by the statute.
The trial court concluded that the plaintiffs (Petty and his company) did not have standing to bring suit since they could not show that they were personally aggrieved by either a breach of contract or a breach of fiduciary duty by Blue Cross. This was because, the lower court reasoned, the plaintiffs’ contract with Blue Cross had been for the provision of coverage to pay for health care services and the plaintiffs did not allege a breach of that particular contractual relationship. The court further opined that Blue Cross’s only fiduciary relationship to the insured was that which specifically related to the performance of its duties under the insurance contract (and thus did not relate to any profit surpluses).
Plaintiffs’ appealed but the intermediate appellate court agreed that they lacked standing, noting that the challenged action had nothing to do with the specific duties arising out of the parties’ contractual relationship
The issue before the Supreme Court on appeal was whether policyholders who have purchased medical insurance from a non-profit corporation have standing under the state’s Non-Profit Corporation statute—15 Pa.C.S. 5793 (a)— to challenge that corporation’s actions in court, especially when those actions do not directly relate to the specific agreement between the insured and the corporation.
The court found that corporate decisionmaking does not call for the inclusion of a layperson (e.g. the plaintiff policy holder in this case) with no vested interest or authority in the corporation’s inner workings. The plaintiff’s argued that they should have standing to bring suit because they and other similarly situated Blue Cross subscribers are the only parties with reason to challenge inappropriate corporate action.
While the Supreme Court did not find the plaintiffs’ position unreasonable, its reasoning ultimately led it to side with the corporate defendants. As a matter of policy, the court believed that to allow subscribers and policyholders to challenge the inner workings of a corporation would effectively hamstring the corporation.
As such, plaintiffs—as mere policyholders without any other “special relationship” to the corporation—were found to lack standing to challenge Blue Cross’s corporate actions.
Date of Decision: June 20, 2011
Petty v. Hosp. Serv. Ass’n of Northeastern Pa, No. 34 MAP 2010, Supreme Court of Pennsylvania, 2011 Pa. LEXIS 1376, 23 A.3d 1004 (June 20, 2011)(Eakin, J.)
Earl Lehman worked for Halbleib’s Auto Repair shop as an independent contractor providing tow truck services. Halbleib’s owned a 2007 GMC pickup truck which it leased to Lehman for use in his towing business. By agreement with Halbleib’s, Lehman was responsible for the truck’s maintenance and insurance. As such, Lehman purchased a vehicle insurance policy from Victoria Fire and Casualty in October, 2008.
In November 2008, Lehman drove the truck to the wedding of a member of his motorcycle club. By his own admission, Lehman was “totally drunk” by the time he showed up to the wedding and, sometime after the wedding, continued to drink at his motorcycle club’s clubhouse well into the morning. What is unclear is exactly what transpired from the time Lehman left the wedding reception to the time he ended up drinking back at the clubhouse.
Lehman’s initial story was that after the reception he drove to a bar called Spencer’s. He alleged that he was involved in a physical altercation the Spencer’s parking lot and was knocked unconscious. Lehman then alleged that when regained consciousness, his friend Chico drove him to their clubhouse where they continued to drink beer until around 5am.
At his deposition, Lehman stated that it was around this time (5am) that he asked Chico to drive him back to his truck, at which point Chico was said to have told Lehman that he did not see the truck when he found Lehman in the parking lot. Lehman testified (at deposition) that he then asked Chico to drive him home. On the way home, they spotted Lehman’s truck and Lehman testified that he drove his truck back to Halbleib’s parking lot and then walked home. By Lehman’s account, it was not until examining his truck the next morning that he realized his front tire was missing and his fender was damaged. Lehman said that he called the police after making this discovery.
Meanwhile, a Pittsburgh police officer had responded to a report of a hit and run at around 5am on the same morning—just around the time that Lehman would have been driving his truck back to Halbleib’s. At the scene of the hit and run accident, where a Chevy Tahoe and trash cans were sideswiped, was a detached tire—presumably from the hit and run vehicle— and a set of scrape marks that led from the scene of the accident to where Lehman’s truck was parked at Halbleib’s. The tire that was found at the scene of the accident also matched the other tires on Lehman’s truck.
It would turn out that the version of the night’s events recounted at a later deposition differed from the account Lehman gave the day after the accident to the investigating police officer. Lehman told that officer at the initial interview that after the reception he had gone to a bar called Doug’s Den and once inside was knocked unconscious by three bikers. He claimed that Chico woke him up, told him his truck was missing and proceeded to drive him to the clubhouse for more beer drinking.
Two days later, Lehman was interviewed by a detective and gave a different account. This is when he told the version of the story he would later repeat at his deposition—that he was knocked out in Spencer’s—not Doug’s Den— parking lot and returned there later only to find his truck missing, ultimately finding it running idly, abandoned on second avenue.
The detective attempted to verify this account by checking the tapes from Spencer’s security cameras, none of which recorded an altercation of the type described by Lehman.
The owner of the damaged truck, John Halbleib, then submitted a claim to Victoria to cover the truck’s damage. In Lehman’s statement to Victoria’s claim representative, he reiterated that the incident in which he was knocked unconscious occurred in the Spencer’s parking lot.
Victoria then referred the claim to its “Special Investigative Unit” (SIU), whereupon the police told the insurance company’s SIU rep that it did not believe Lehman was telling the truth, as there was no evidence to indicate that there had been a fight in Spencer’s parking lot or a truck stolen or towed from that lot.
Based upon this and other information collected throughout Victoria’s investigation of the claim, the insurer sent Lehman a letter in which it denied coverage pursuant to the policy provision which precluded coverage in cases of misrepresentation, concealment or fraud. Moreover, the State brought criminal charges against Lehman and his friend Chico, charging them with making false reports to the authorities, leaving the scene of an accident and conspiracy to commit insurance fraud.
Ultimately, the criminal charges against the two were dropped but in the intervening period Lehman brought breach of conflict and bad faith claims against Victoria, which the insurer removed to the Western District on diversity grounds.
The Court declined to find any bad faith on the part of Victoria, ruling that the insurer’s investigation of the claim was fair, thorough and reasonable based on the information available. The Court recognized that there were some specific actions not taken by the insurer’s investigator but also stated that a defendant insurer in a bad faith claim does not have to show that the investigatory process was flawless or that its methods eliminated all possibilities at odds with its conclusion. Rather, in borrowing from a 1999 opinion of the Eastern District, all an insurance company must do is conduct an investigation which is sufficiently thorough to yield a reasonable foundation for its action. Cantor v. Equitable Life Assur. Soc’y of the United States, 1999 U.S. Dist LEXIS 4805 (E.D.Pa. April 12, 1999). And the Court concluded that Victoria conducted just such a reasonable investigation in this particular case.
As such, Victoria’s motion for summary judgment on the bad faith claim was granted.
Date of Decision: June 16, 2011
Lehman v. Victoria Fire and Cas. Ins. Co., No. 09-1542, United States District Court for the Western District of Pennsylvania, 2011 U.S. Dist. LEXIS 64212 (June 16, 2011) (Standish, J.)
Plaintiff Pinkhasov owned a residential property in Pittston, PA which was insured by Allstate. Plaintiff’s Homeowner’s policy had a coverage limit of $250,000 for his dwelling, $25,000 for other structures and $150,000 for personal property. While the policy did cover damage from the sudden and accidental escape of water, it did not cover losses caused by continuous or repeated seepage or leakage. During the life of the policy, plaintiff discovered that his basement had undertaken extensive flooding and immediately reported the loss to Allstate. But Allstate refused payment on the claim, without investigating or inspecting the property.
Without receiving coverage under his Allstate policy, plaintiff was unable to complete the necessary structural repairs to his basement, which resulted in further damage including the growth of mold.
Plaintiff brought breach of contract, bad faith and unfair trade practice claims in the Lackawanna County Court of Common Pleas, which Allstate removed to the U.S. District Court on diversity grounds. Under the breach of contract claim, the insured sought approximately $75,000 in compensatory damages; under the bad faith claim, he sought punitive damages, interest and attorney’s fees; and he also sought to treble damages pursuant to the unfair trade practices claim.
In order to support his bad faith claim, the insured was required to show that the Allstate lacked a reasonable basis for denying benefits and that it knew of or recklessly disregarded its lack of reasonable basis. Here, the Middle District declined to grant Allstate’s motion to dismiss the bad faith claim, finding that the plaintiff stated sufficiently factual allegations that Allstate failed to investigate the claim in good faith.
The court also found that plaintiff’s unfair trade practices claim survived dismissal because taking the facts asserted in the complaint as true, the court would find that Allstate had misrepresented their policy in denying plaintiff’s claim. This is because Allstate basically denied the claim out of hand without first investigating the claim or inspecting the property; action, or inaction, made evident by the fact that Allstate sent the insured a denial letter that cited policy provisions that were inapplicable to the insured’s particular loss.
The court ultimately found that the plaintiff relied on Allstate’s fraudulent assurances to its detriment in entering into the policy at issue. As such, the Middle District refused to dismiss both the claim of bad faith and the claim for unfair trade practices.
Date of Decision: June 20, 2011
Pinkhasov v. Allstate Ins., No. 3:11cv171, United States District Court for the Middle District of Pennsylvania, 2011 U.S. Dist. LEXIS 64933 (June 20, 2011) (Munley, J.)
