APRIL 2007 BAD FAITH CASES NO BAD FAITH UNDER STANDARDS FOR STATUTORY BAD FAITH CLAIM OR CONTRACT-BASED BAD FAITH CLAIM (Philadelphia Federal)
The defendant’s insured was the driver of a car involved in a one-car accident that seriously injured three passengers, including the plaintiff. Over a year after the accident, defendant tendered its policy limits to plaintiff. Plaintiff rejected the limits and proceeded to trial against the insured and won a verdict in excess of $4,000,000. The insured settled with plaintiff and assigned him any claims she had against defendant. Plaintiff then brought a contract action for bad faith as well as a statutory action for bad faith to recover the unpaid amount of his verdict. Defendant moved for summary judgment.
In granting Defendant’s motion, the court first held that the standard for liability in a statutory bad faith claim differs from the standard in a contract-based bad faith claim. In a statutory claim, the two part standard articulated in Terletsky v. Prudential Property & Cas. Ins. Co., 437 Pa. Super. 108 (Pa. Super. Ct. 1994) applies and requires plaintiff show that the insurer lacked a reasonable basis for denying coverage and the insurer knew or recklessly disregarded its lack of reasonable basis.
In contract based bad faith claims, however, the court held that the Terletksy standard does not apply and used the standard articulated in Cowden v. Aetna, 389 Pa. 459 (Pa. 1957), which requires the insurer to accord its insured the same faithful consideration it givens its own interest.
The court then applied these standards and held that the defendant’s conduct did not satisfy the standard for either a statutory or a contract-based bad faith claim.
In so holding, the court found that it was reasonable for the defendant to wait until it had received the medical records of all injured passengers before offering the plaintiff the policy limits. The court held that the defendant was not required to act in bad faith with respect to the claims of the other two passengers in order to avoid being accused of bad faith with respect to the plaintiff.
In addition, the court held that the delay in obtaining the medical records of the other passengers was caused by the passengers, not the defendant, and defendant therefore did not act in bad faith in delaying payment of defendant’s claim.
Finally, the court held that defendant’s failure to communicate the status of the investigation and claims to it’s insured did not constitute bad faith because the lack of communication did not cause the excess verdict.