AUGUST 2012 BAD FAITH CASES: MIDDLE DISTRICT REJECTS RECENT EASTERN DISTRICT HOLDING THAT BAD FAITH CLAIMS ARE NOT ASSIGNABLE AND PERMITS ASSIGNMENT OF BAD FAITH CLAIMS TO RECOVER PUNITIVE DAMAGES, COUNSEL FEES AND INTEREST UNDER §8371 (Middle District)
In Wolfe v. Allstate Prop. & Cas. Ins. Co., the court heard a carrier’s motion to dismiss filed in opposition to an assignee’s bad faith and Unfair Trade Practices and Consumer Protection Law (“UTPCPL”) suit. The case arose from a car accident caused by the carrier’s insured, who was under the influence at the time his car struck the assignee. The insured’s policy excludes coverage for gross negligence or reckless conduct.
As a result, the carrier rejected the injured-assignee’s settlement offers, countering with a rigid offer of $1,200. The case therefore proceeded to trial in 2009. The carrier agreed to indemnify the insured from the victim-assignee’s compensatory damages, but, citing policy exclusions, refused to cover the insured’s punitive damages.
As such, the insured incurred a personal obligation to pay the punitive damages and assigned the victim-assignee all rights, claims and causes of action arising from the carrier’s refusal to defend, protect and indemnify him in the underlying case. The assignee filed bad faith and UTPCPL claims against the carrier in early 2010 and the carrier removed the case to federal court.
After the carrier won on a motion to dismiss, the court permitted the assignee to amend its complaint. The carrier thereafter filed the instant motion to dismiss the assignee’s amended complaint.
The carrier’s main defense was based upon two recent cases out of the Eastern District of Pennsylvania (“EDPA”), which held that bad faith claims brought under Pennsylvania law are not assignable due to their nature as unliquidated tort claims. (Case one case can be found here, and case 2 here on this Blog). However, this court held that the EDPA decisions were inconsistent with both Pennsylvania and Third Circuit precedent, and found the assigned claims for punitive damages, counsel fees and interest are permissible.
Date of Decision: July 12, 2012
Wolfe v. Allstate Prop. & Cas. Ins. Co., No. 4:10-CV-800, 877 F. Supp. 2d 228, 2012 U.S. Dist. LEXIS 99280, U.S. District Court for the Middle District of Pennsylvania (M.D. Pa. July 12, 2012) (Jones, J.)