The carrier moved to dismiss an amended complaint for breach of contract and bad faith. Middle District Judge Wilson originally dismissed the contract and bad faith claims in the first complaint, summarized here, with leave to amend. In addressing the motion to dismiss the amended complaint, Judge Wilson again dismissed the breach of contract claim, and further saw no reason to change her initial opinion that there can be no statutory bad faith claim if there is no viable predicate breach of contract claim.
Judge Wilson states:
There has been no substantial change in the arguments regarding Moses Taylor’s bad faith claim since the first motion to dismiss. Coverys moves to dismiss Moses Taylor’s claim for bad faith on the grounds that, inter alia, bad faith under 42 Pa. Con. Stat. § 8371 may not be brought as an independent cause of action. … Coverys argues that if Moses Taylor has failed to properly plead a breach of contract claim, then there is no predicate cause of action for the bad faith claim. … In response, Moses Taylor argues that § 8371 creates a private cause of action against insurance companies, and it has established non-speculative damages beyond compensatory damages giving rise to a proper breach of contract claim.
As stated in the court’s prior opinion [summarized here] under Pennsylvania law, bad faith claims against insurers arise under statute, rather than common law. The Brickman Group, Ltd. v. CGU Ins. Co., 865 A.2d 918, 926 (Pa. Super. Ct. 2004); 42 PA. CONS. STAT. § 8371 (1990). Section 8371 states:
Courts have recognized that this statute creates a cause of action where “(1)…the insurer did not have a reasonable basis for denying benefits under the policy, and (2)…the insurer knew of or recklessly disregarded its lack of a reasonable basis.” Rancoscky v. Wash. Nat’l Ins. Co.….
A bad faith claim under § 8371 is distinct from the predicate contract claim. … As such, there must be a predicate contract claim for a § 8371 claim to proceed. … A breach of contract claim can serve as one such predicate action. … While the predicate claim need not be tried together with the § 8371 claim, the predicate cause of action “must be ripe for a § 8371 claim to be recognized.” … The Pennsylvania Supreme Court has also recognized this requirement. See Ash v. Continental Ins. Co., 932 A.2d 877, 882 (Pa. 2007) (holding that section 8371 “applies only in limited circumstances—i.e., where the insured has first filed ‘an action arising under an insurance policy’ against his insurer”).
In this case, while Moses Taylor has alleged a breach of contract claim along with its § 8371 bad faith claim, the court’s dismissal of the breach of contract claim removes the predicate cause of action otherwise required to proceed on the § 8371 claim. As another court within this Circuit has articulated, a bad faith claim in a vacuum is not actionable. MP III Holdings, Inc. v. Hartford Cas. Ins. Co., …. Thus, because there are no other actionable claims raised in this case that could serve as a predicate cause of action, Moses Taylor’s § 8371 claim for bad faith will be dismissed.
Date of Decision: November 22, 2021
Moses Taylor Foundation v. Coverys & Proselect Insurance Company, U.S. District Court Middle District of Pennsylvania No. 3:20-CV-00990, 2021 WL 5447106 (M.D. Pa. Nov. 22, 2021)