Monthly Archive for September, 2015
In Royce v. Erie Insurance Exchange, the insured brought breach of contract and bad faith claims against an insurer for the insurer’s purported failure to fairly evaluate the insured’s claim and to promptly offer payment of the claim. The insurer sought summary judgment on the basis that the policy included a “suit against us” provision, which precluded the insured from bringing suit against the insurer unless the insured had fully complied with the policy.
The underlying claim involved a burglary to the insured property. Two days after his home was burglarized, the insured reported the burglary to the insurer and submitted a personal property inventory form as requested by the insurer, as well as a list of personal property stolen and lost from the burglary.
The policy at issue provided that the insurer could not be sued unless the insured complied with all the terms of the policy, which included the duty to submit to examinations and statements under oath at the request of the insurer. After the insurer requested that the insured and his wife submit to an examination under oath (“EUO”), counsel for the insured stated that while his clients were willing to submit to the EUO, it may be necessary to schedule the EUO by video conference as the insured and his wife were now residents of the state of Florida.
Counsel for the insurer responded by e-mail and explained that the insurer “could not agree to an EUO by video conference because a video conference would make the use of exhibits extremely difficult, if not impossible.” The insurer’s counsel further stated that because the claim arose out of a Pennsylvania contract and claim of loss, the EUOs would properly be taken in Pennsylvania. The insured’s counsel did not respond to this e-mail.
Over the next several months, the insurer’s counsel sent periodic e-mails to the insured’s counsel inquiring as to possible dates to schedule the EUOs in Pennsylvania. The insured’s counsel did not respond to any of these e-mails, and maintained that a response was not necessary because the insured and his wife had “previously made their position clear [that they would appear by video conference for the EUO] and any follow up letter was only repetitive and unnecessary given the [insurer’s] refusal to cooperate and act in good faith to investigate the loss given [the insured’s] physical condition.”
Subsequently, the insured’s counsel e-mailed the insurer’s counsel a doctor’s note restricting the insured’s travel due to the insured’s medical condition. Sometime prior to the burglary, the insured had allegedly been involved in a car accident, which caused him severe physical injury that prevented him from traveling. However, no mention had been made of this accident or the insured’s medical condition in his counsel’s previous request to the insurer for an EUO by video conference. In its reply brief to its motion for summary judgment, the insurer questioned the legitimacy of the doctor’s note and travel restrictions, specifically, “how [the insured] was able to travel from the Commonwealth of Pennsylvania to his current residence in Florida after the purported motor vehicle accident that caused his physical injuries.” The insurer also questioned how a “Pennsylvania physician was able to issue an ‘Excuse Slip’ noting [the insured’s] physical condition and travel restrictions when [the insured] was living in Florida and therefore, had not been physically examined by the Pennsylvania physician.” To date, there is no evidence in the record that the insured ever submitted to an EUO.
The insured filed suit and asserted breach of contract and bad faith claims against the insurer “on the basis that [the insurer] purportedly failed to, inter alia, fairly evaluate [the insured’s] claim and promptly offer payment of the claim.” The insured asserted that the insurer acted in bad faith “by failing to accommodate [the insured’s] disability in scheduling an EUO by video conference.” The insurer moved for summary judgment, and argued that because the insured failed to fully comply with the policy, he was precluded from bringing suit under the Policy’s “suit against us” provision. Specifically, the insurer alleged that the insured failed to comply with the Policy by “failing to (1) submit to an EUO in Pennsylvania and (2) provide documentation relating to his claim that [the insurer] had previously requested.”
The Court first acknowledged that the “suit against us” provision was enforceable under Pennsylvania law. The Court also noted that the insured had complied with the Policy in several ways, but at issue was whether the insured complied with the Policy’s requirements to (1) provide all supporting documentation related to his claim as [the insurer] may reasonably require and (2) submit to an EUO.” More specifically, at issue was whether the insured complied with three provisions of the Policy.
The first required the insured to submit certain documentation relating to his claim. The insurer asserted that the insured failed to submit this documentation, while the insured asserted that he did in fact produce the requested documents. The Court determined that it was unclear what other documentation had been requested by the insurer that had not been provided by the insured. Thus, a genuine issue of material fact existed with regards to this issue.
The second required the insured to submit to an EUO. The Court noted that “[r]egardless of whether or not [the insured’s] medical condition restricts him from traveling to the Commonwealth of Pennsylvania to physically appear for an EUO, he agreed to submit to an EUO by video conference, and it is not clear from the terms of the Policy that this constitutes a failure to fully comply ….” The Court further acknowledged that the provision only required the insured to submit to an EUO, but did not reference where the examination must take place. Thus, a genuine issue of material fact existed as to whether the insured’s offer to submit to an EUO by video conference was in full compliance with the Policy.
The third required the insured to “cooperate with [the insurer] in [their] investigation of a loss and any suits.” The Court determined that it was a question for the fact-finder as to whether the insured’s offer to submit to an EUO by video conference satisfied this provision to “cooperate” with the insurer in its investigation. In addition, the Court found that “a reasonable juror could find that the repeated failure by [the insured] and his counsel to respond to [the insurer’s] letters and e-mails over a course of four (4) months requesting an EUO and additional documentation also fails to satisfy this provision.” Thus, genuine issues of material fact existed as to whether or not the insured fully complied with the Policy such that he would be precluded from filing suit, and the Court denied the insurer’s motion for summary judgment.
Date of Decision: August 21, 2015
Royce v. Erie Ins. Exch., Case No. 3:15-CV-00058, 2015 U.S. Dist. LEXIS 110656 (M.D. Pa. August 21, 2015) (Caputo, J.)
In Wehrenberg v. Metropolitan Property and Casualty Insurance Company, the insured brought breach of contract and bad faith claims against an insurer refusing to provide coverage for alleged vandalism to a house owned by the insured.
The insured had previously leased the insured property to a lessee in October 2011 for five years starting in November, 2011. The house was subject to a mortgage, and the lessee was to pay each month’s rent directly to the mortgage company. In early 2012, the lessee stopped making his monthly rent payments and the insured received notice from the mortgage company that foreclosure proceedings had begun. After unsuccessfully attempting to email and call the lessee, the insured visited the house around June 24, 2012, and found that the locks had been changed.
The insured observed through the windows that the house had been gutted. The insured was able to reach the lessee by phone and told the lessee that he did not have permission to gut the house or perform any work on the house, and that the property had been damaged. The lessee responded that he was a contractor, that the house had major structural problems which he felt were necessary to fix by gutting the house, and that he would put the house back together.
The insured did not notify the insurer of what the lessee had done, but instead allowed the lessee to continue his “work” on the house. The insured told the lessee to get the mortgage caught up and put the house back together as soon as possible.
In January, 2013, the insured visited the property and found that not only was the first floor in the same disassembled condition, but that the basement and second floor had been gutted as well. According to the insured, “[t]hree bathrooms, flooring, bedroom walls, closets, furnaces, and air conditioner had all been removed.” However, the furnaces and air conditioners had been replaced.
In February 2013, the insured filed a claim with the insurer, asserting that the property had been vandalized. The insured alleged the insurer refused to cover the claim and neglected to return any of the insured’s phone calls. The insured eventually lost the house to foreclosure. The issue then became whether the lessee’s “work” on the property constituted vandalism, for which coverage would be provided, or renovations, for which coverage would be denied under the policy.
The insurer argued that the claim was not covered as a matter of law for two reasons. (1) The insured “failed to carry his burden of pleading that his loss falls within the Policy because he has not averred facts from which it could be shown that his loss could be considered ‘vandalism or malicious mischief.’” (2) The insurer averred that the loss characterized by the insured as vandalism was actually an incomplete renovation, subject to a policy exclusion.
The Court held that the insurer’s arguments failed for several reasons. First, the insurer failed to demonstrate that the facts alleged could never be “vandalism or malicious mischief.” The Court noted that if the complaint solely relied on the initial house-gutting, then the insurer might have a winning argument under the theory that the insured acquiesced to the act, from which malice could not be implied.
However, the Court acknowledged that after the insured instructed the lessee to repair the damage, the insured returned to the property six (6) months later and found additional damage done. Thus, the Court reasoned that it was “certainly plausible that [the insured] did not acquiesce in the second incident in which [the lessee] removed even more elements from [the insured property] without [the insured’s] permission.” Accordingly, the Court could not say at this point, as a matter of law, that the lessee’s actions could not constitute vandalism or malicious mischief, as the Court did not have enough information to make a determination either way.
Further, the Court stated that the insurer had not pointed to any applicable law “that stands for the proposition that vandalism could never be found under facts such as alleged here.” Here, the facts showed that the lessee committed a wrongful act in conscious or intentional disregard of the insured’s rights, which was allegedly the proximate cause of significant damage to the insured. Thus, “the further damage done to the property was not necessarily renovation gone wrong – it could plausibly have been vandalism.” Accordingly, the Court denied the insurer’s motion to dismiss the insured’s complaint.
As to the bad faith claim, the insurer focused on the argument that because there was no coverage obligation, there could be no bad faith as a matter of law. However, because the Court found a plausibly pleaded argument for coverage, this argument necessarily failed (“i.e., the Court has not concluded as a matter of law that no coverage existed for [the insured’s] insurance claim for vandalism”). The insurer had apparently not pursued an argument that the bad faith claim should be dismissed in any event, because even if coverage was plausible the insurer’s position was not unreasonable as a matter of law.
Date of Decision: August 7, 2015
Wehrenberg v. Metro. Prop. & Cas. Ins. Co., Case No. 2:14-CV-01477, 2015 U.S. Dist. LEXIS 103758 (W.D. Pa. August 7, 2015) (Hornak, J.)