Archive for the 'PA – Claims Handling (reasonable)' Category

(1) NO WANTON CONDUCT UNDER MVFRL INVOKING TREBLE DAMAGES AND SUPER INTEREST; (2) NO STATUTORY BAD FAITH WHERE (i) MVFRL PREEMPTS BAD FAITH STATUTE; (ii) THERE IS ONLY A VALUATION DISPUTE; (iii) INVESTIGATION REASONABLE; (4) BIAS CLAIMS ARE MERELY SUBJECTIVE (Philadelphia Federal)

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Plaintiff was injured in an auto accident and made both PIP claims and underinsured motorist (UIM) claims. She found the carrier’s settlement offers and negotiations wholly inadequate, and brought statutory bad faith claims, and claims for damages under the Motor Vehicle Financial Responsibility Law (MVFRL) seeking treble damages and super interest for the insurer’s allegedly “wanton” conduct concerning her medical benefit claims.

MVFRL Claims

The court found the insured could proceed on her PIP claim under a breach of contract theory. However, the MVFRL claim for treble damages and 12% interest, under 75 Pa. C.S. § 1797(b)(4), was dismissed without prejudice. Judge Pappert held plaintiff had not pleaded “wanton” conduct, a predicate for gaining the extraordinary remedies under this statute.

The insurer also asserted the MVFRL count actually alleged a breach of the duty of good fair dealing, and moreover constituted an improper effort to get relief under the Bad Faith Statute. It asked the court to strike certain averments related to this putative backdoor bad faith claim.

The court rejected this argument: “Although Count II appears to assert a claim under the MVFRL … it also appears to assert a claim for … alleged breach of the implied contractual duty to act in good faith related to her PIP coverage. …  Because [the insured] may pursue a claim for breach of her policy’s PIP coverage obligations and because motions to strike are ‘not favored and usually will be denied unless the allegations have no possible relation to the controversy and may cause prejudice to one of the parties,’ the Court will not strike her allegations regarding the duty of good faith and fair dealing in Count II.”

MVFRL Claims and the Bad Faith Statute

The court then addressed the statutory bad faith claim.

The court first observed that unless the insurer’s “conduct falls outside of the scope of § 1797 of the MVFRL, 75 Pa. C.S. § 1797, and involves a bad faith abuse of the process challenging more than just the insurer’s denial of first party benefits, the MVFRL preempts any statutory bad faith claim concerning … PIP benefits.” The court made clear, “To the extent that the gravamen of [the] bad faith claim is the denial of first party medical benefits and nothing more, [the insurer’s] alleged conduct is within the scope of § 1797 of the MVFRL and therefore [she] is precluded from bringing such a claim.”

However, “[s]ection 8371 bad faith claims remain cognizable when the basis of a benefits denial does not relate to the reasonableness and necessity of treatment, or when an insurer’s conduct is obviously not amenable to resolution by the procedures set forth in Section 1797(b).”

Dispute Over Valuation not Bad Faith

The insured alleged the insurer delayed her claim and denied its value. The court found these allegations did not equate to allegations that the insurer actually deny the UIM or PIP. Rather, there was a dispute over valuation.

Analyzing the matter as a valuation dispute, Judge Pappert found the insured did not allege “facts sufficient to show [the insurer’s] valuation is unreasonable.” The insured’s subjective beliefs as to her claim’s value “is not indicative of bad faith because … subjective belief as to the value of the claim may reasonably, and permissibly, differ.”

Rather, “[t]o state a bad faith claim, [an insured] must do more than call [the insurer’s] offers low-ball.” These kind of conclusory and subjective allegations “suggest nothing more than a normal dispute between an insured and insurer.”

Low but Reasonable Offers Not Bad Faith

Bad faith does not exist “merely because an insurer makes a low but reasonable estimate of an insured’s damages.” Nor does a refusal “to immediately accede to a demand for the policy limit … without more, amount to bad faith.”

Insurer had Reasonable Basis to Deny Claim/No Adequate Claim of Bias

Next, Judge Pappert rejected the argument that the insured adequately pleaded the insurer lacked a reasonable basis to deny the claim’s value.  The insurer requested medical records and had an IME performed. It assessed the insured’s injuries based on that information.

The court did not give weight to conclusory allegations the doctor performing the IME was “a biased IME doctor” and “well-known as [someone] who provides so-called Independent Medical Examinations exclusively for and apparently to the liking of insurance companies….”  Further, that the plaintiff’s own doctor said she needed surgery did not, by itself, support a bad faith claim. The insurer was not unreasonable in relying  on the IME doctor’s assessment that the symptoms requiring surgery were unrelated to the accident at issue.

“In the absence of any supporting facts from which it might be inferred that [the] investigation was biased or unreasonable, this type of disagreement in an insurance case is not unusual, and cannot, without more, amount to bad faith.”

The court, however, permitted plaintiff to amend the statutory bad faith claim “to the extent it is not preempted by the MVFRL and to the extent she is able to allege facts stating a plausible claim for relief.”

Date of Decision: October 2, 2020

Canfield v. Amica Mutual Insurance Co., U.S. District Court Eastern District of Pennsylvania No. CV 20-2794, 2020 WL 5878261 (E.D. Pa. Oct. 2, 2020) (Pappert, J.)

PENNSYLVANIA SUPERIOR COURT ADDRESSES CONCLUSORY BAD FAITH ALLEGATIONS IN SUMMARY JUDGMENT CONTEXT (Pennsylvania Superior Court) (Not Precedential)

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We do not often see Pennsylvania’s state courts addressing “conclusory” allegations in bad faith cases. In this case, the Superior Court makes clear that conclusory assertions cannot forestall summary judgment on a bad faith claim.

The employee plaintiffs/insureds demanded underinsured motorist coverage under the employer’s policy.  They asserted that there were $1,000,000 in UIM limits. The carrier countered that the employer had selected and signed off on a $35,000 UIM coverage limit, and the insurer ultimately paid the $35,000.  The trial court agreed with the carrier on the facts of record that coverage was only $35,000, and granted summary judgment on the breach of contract claim. The Superior Court affirmed, finding the employer’s UIM sign-down enforceable and effective.

As to the bad faith claim, the trial court found “there can be no dispute that [the insurer] had a reasonable basis for denying the … claim for coverage beyond $35,000, as we have already determined the trial court did not err in concluding that the UIM policy limit was $35,000.” The panel then looked at the bad faith claim based upon the insurer’s timeliness in dealing with the claim. This appears to be an argument there was a bad faith delay in paying the $35,000 admittedly due.

The insureds argued the insurer failed “to promptly offer any payment,” engaged “in dilatory and abusive claims handling,” acted “unreasonably and unfairly by withholding underinsured motorists benefits justly due and owing,” subordinated “the interests of its insured and those entitled under its insured’s coverage to its own financial monetary interest,” and caused the insured to spend money in bringing their claims.

The Superior Court again affirmed the trial court’s granting the insurer summary judgment, favorably citing the trial court’s reasoning.

First, the trial court rejected the insureds’ Nanty-Glo argument. Further, the insureds “provided no evidence to support their Bad Faith claim beyond conclusory assertions.” The record showed the insureds made a $900,000 demand on what the insurer (correctly) believed was a $35,000 policy.  The record also revealed the insurer was attempting to get information from the insureds to resolve the claim, and that the carrier tendered the $35,000 limit multiple times, which offers were refused or ignored.

The Superior Court favorably quoted the trial court on how to address conclusory bad faith allegations in responding to a summary judgment motion. The trial court had relied on Pennsylvania Supreme Court precedent in reaching its conclusion:

“Allowing non-moving parties to avoid summary judgment where they have no evidence to support an issue on which they bear the burden of proof runs contrary to the spirit of [Pennsylvania Rules of Civil Procedure] 1035. We have stated that the mission of the summary judgment procedure is to pierce the pleadings and to assess the proof in order to see whether there is a genuine need for a trial. We have a summary judgment rule in this Commonwealth in order to dispense with a trial of a case (or, in some matters, issues in a case) where the party lacks the beginnings of evidence to establish or contest a material issue…. Forcing parties to go to trial on a meritless claim under the guise of effectuating the summary judgment rule is a perversion of that rule. [Emphasis added]

Thus, we hold that a non-moving party must adduce sufficient evidence on an issue essential to his case and on which he bears the burden of proof such that a jury could return a verdict in his favor.”

In this case, the Superior Court found that plaintiffs’ “lacked ‘the beginnings of evidence’ concerning how [the insurer] engaged in dilatory and abusive claims handling, and subordinated the interests of its insured and those entitled under its insured’s coverage to its own financial monetary interest.”  The insureds failed to adduce sufficient evidence of record concerning delays, or evidence that any delay in tendering settlement was unreasonable or done with knowing or reckless disregard that the delay was unreasonable.

The underlying dispute over whether coverage was $1,000,000 or $35,000, and the insureds insistence on pursuing large six figure demands, contributed to the circumstances of any delays.

Date of Decision:  September 11, 2020

Beach v. The Navigators Insurance Company, Superior Court of Pennsylvania No. 1550 MDA 2019, 2020 WL 5494530 (Pa. Super. Ct. Sept. 11, 2020) (Musmanno, Panella, Stabile, JJ.)

INSURER PUT ON UNREBUTTED EVIDENCE THAT ITS CLAIM DENIAL WAS REASONABLE (Philadelphia Federal)

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In this case, the insurer moved for summary judgment on bad faith, and the insured did not respond to the motion. After a review of the record and legal arguments, the Court granted the insurer’s motion.

The case involved a personal injury. The insurer had an independent medical review performed on the insured’s medical records. The carrier’s doctor concluded that the injuries the insured alleged were not the result of the accident at issue. Rather, those injuries were caused by a prior accident. The carrier argued this alone was sufficient to establish a reasonable basis to deny coverage.

As stated, the insured did not respond to the carrier’s motion, and thus put forward no evidence that the insurer acted in bad faith by failing to consider the relevant medical records. Judge Brody agreed:

“After reviewing [the] motion and evidence, I conclude that [the insurer] has satisfied its summary-judgment burden, shifting the burden to Plaintiff to demonstrate the existence of genuine disputes of material fact that preclude summary judgment. Plaintiff has failed to carry his burden. Despite several chances to do so, Plaintiff never filed any objection to [the] Motion for Partial Summary Judgment. He has not pointed to any evidence that [the insurer] behaved in bad faith, nor has he offered any evidence to refute the evidence [the insurer] offered in support of its motion.”

Date of Decision: August 13, 2020

Dwyer v. Nationwide Property and Casualty Insurance Company, U.S. District Court Eastern District of Pennsylvania No. CV 19-2814, 2020 WL 4699047 (E.D. Pa. Aug. 13, 2020) (Brody, J.)

INSURER REASONABLY RELYING ON ENGINEERING INSPECTION REPORT CANNOT BE LIABLE FOR BAD FAITH (Philadelphia Federal)

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The insureds had two nearly identical losses. In 2016, there was water damage to their roof and interior home damage. The insurer originally paid for the interior damage, while having an engineer inspect the roof. The engineer concluded the roof damage was not the result of a storm, but the result of uncovered faulty construction. Moreover, he concluded that even the interior home damage resulted from the uncovered faulty roof construction. The insurer issued a denial letter on this basis and the insureds did not respond.

Two years later, there was another storm, with new roof and interior damage. The insurer sent out the same engineer who reached the same conclusions, i.e., the damage resulted from faulty construction, not storm damage. Further, the record showed that the insureds had not repaired the roof after the original loss two years earlier. Again, under the policy, “coverage for damage caused by faulty, inadequate, or defective workmanship was explicitly excluded in their homeowner’s insurance policy.” Thus, the insurer denied the second claim.

On the second claim, the insured engaged a public adjuster and their own engineer. The public adjuster inspected the home, and took the position the insureds were not seeking coverage for faulty construction, but for damage caused by wind, snow and ice, on the theory that the poorly installed roof only made the home susceptible to these covered elements. The insurer’s engineer reviewed the other engineer’s report, but did not change his position, nor did the insurer rescind its denial.

The insureds sued for breach of contract and bad faith. The insurer moved for summary judgment on the bad faith claim.

The court observed that an insurer “may defeat a claim of bad faith by showing that it had a reasonable basis for its actions.” The court tied this axiom to the legal principle that summary judgment is warranted in bad faith cases when insureds cannot meet their burden of proving by clear and convincing evidence that the insurer’s conduct was unreasonable.

The insureds attempted to argue that the insurer improperly relied on its expert’s denying the first claim to deny the second, independent, claim. Judge Bartle rejected that argument.

The insureds conceded they never repaired the original damages identified two years earlier. Further, they did not dispute that the insurer’s engineer came out a second time and did a completely new report concluding “that the same unrepaired faulty construction caused the claimed damage,” and further rejecting the insureds’ claim the damage was caused by wind, ice, and snow.

In finding no bad faith, Judge Bartle stated “the cause of damage is not material to the plaintiffs’ bad faith claim. … Rather, the plaintiffs must present clear and convincing evidence to substantiate their claim that [the insurer] acted unreasonably.” They did not do so in this case.

The record demonstrated the insurer sent its engineer out to do a second inspection, and that the second denial was based on the second inspection, not events that transpired two years earlier. Once it was established that the insurer did base its denial on a current second inspection, the court found that “[f]or purposes of defeating a bad faith claim, an insurer may rely on the conclusions of its independent experts.”

Thus, summary judgment was granted on the bad faith claim.

Date of Decision: April 9, 2020

Balu v. The Cincinnati Ins. Co., U. S. District Court Eastern District of Pennsylvania NO. 19-3604, 2020 U.S. Dist. LEXIS 63987 (E.D. Pa. April 9, 2020 (Bartle, J.)

(1) NO COVERAGE DUE MEANS NO BAD FAITH AS A MATTER OF LAW ON COVERAGE DENIAL; (2) REASONABLE RELIANCE ON ENGINEERING EXPERT NEGATES BAD FAITH INVESTIGATION CLAIM (Philadelphia Federal)

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The insured church’s roof collapsed. The insurer denied coverage on the basis that its engineer determined the causal factors were “a combination of deferred maintenance, improper roof slope, and poor drainage,” and none of these collapse factors are covered causes of loss under the policy.

The insured sued for breach of contract and bad faith.

The church’s evidence for coverage came from its public adjuster. He testified (1) there was heavy wind and rain “close” to the date of loss; (2) there was no long term damage from roof leaks; and (3) and even if so, he doubted any such leaks were the “main factor” in the roof’s collapse. The public adjuster, however, “did not offer an opinion as to what caused the roof’s collapse,” and the church did not produce “any other evidence suggesting the cause of the roof’s collapse was a covered event under the policy.”

The insurer successfully moved for summary judgment on both counts.

No Coverage Due

In granting summary judgment on the breach of contract claim, Judge Robreno stated the church “failed to produce any evidence, beyond mere speculation, that the roof’s collapse was caused by a wind and rain event.” Thus, there were no facts sufficient to show the roof’s collapse fell within a covered cause, and it could not meet its burden of proof.

Bad Faith Claim Analyzed for both Improper Coverage Denial and Inadequate Investigation

On the bad faith claim, the church alleged both improper denial and failure to conduct a proper investigation. The court noted that because a number of courts have held statutory bad faith claims are not contingent on the outcome of the breach of contract claim, the court would consider the inadequate investigation claim as a separate basis for plaintiff’s statutory bad faith claim. The court further observed Pennsylvania’s Supreme Court has not decided this specific issue.

[We have noted before on this Blog that a failure to investigate, standing alone, is arguably not a cognizable claim under the Bad Faith Statute based on the Pennsylvania Supreme Court’s 2007 decision in Toy v. Metropolitan Life.]

As to improper denial, the court found for the insurer as a matter of law. “A finding that denial of the claim under the policy was warranted is inconsistent with a claim that [the insurer] acted in bad faith in denying the claim.”

As to the inadequate investigation claim, Judge Robreno observed that “[i]nsurance companies act reasonably, and do not exercise bad faith, when they deny claims based upon engineering experts’ reports.” He relied on his 2011 decision in El Bor v. Firemen’s Fund, and Western District Judge Fischer’s decision in Palmisano v. State Farm.

The court then examined the reasonableness of the insurer’s reliance. There was no dispute the engineer’s report pre-dated the carrier’s claim denial. Further, there was no support in the record for the insured’s assertions that the report was “’devoid of facts, experiments, measurements, testing, and scientific principles.’” Rather, the report was based on an actual property inspection, and that the engineer provided the carrier “with photographs and measurements of the property.”

On the other hand, in its denial letter the carrier asked the church if it could provide any additional information supporting coverage. It gave the insured 30 days to provide any further information supporting coverage, but nothing was forthcoming.

The court stated that under these facts, there was no evidence that the insurer relied on the report in bad faith, observing that even if an insurer’s expert were incorrect, that alone “’is not evidence that his conclusions were unreasonable or that Defendant acted unreasonably in relying upon them.’”

Date of Decision: April 7, 2020

Gethsemane FBH Church of God v. Nationwide Insurance Co., U.S. District Court Eastern District of Pennsylvania CIVIL ACTION NO. 19-03677, 2020 U.S. Dist. LEXIS 60780 (E.D. Pa. April 7, 2020) (Robreno, J.)

 

NO BAD FAITH: (1) NO BENEFIT DUE; (2) NO ESTOPPEL UNDER THE UIPA OR UCSP REGULATIONS; (3) AN OVERSIGHT CAUSING DELAY IS NOT BAD FAITH (Philadelphia Federal)

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The court described this as the case of the missing email. The insurance policy at issue covered various cars. The insured emailed its broker to add another vehicle to the policy. The broker claims it never got the email, and thus never asked the insurer to issue an endorsement adding the new car to the policy. As things sometimes go in life, the new car was involved in a collision, damaging another vehicle as well as its own new car.

The insured reported the claim. However, the insured identified its vehicle as one of existing cars listed in the policy, rather than the new unlisted vehicle. The insurer accepted coverage, and even paid damages to the other driver. The insurer later reversed itself on coverage once its appraiser determined the insured’s vehicle was not the car identified in the claim form, and was not covered under the policy.

The police report did list the correct vehicle. The insurer had the police report at the time it initially provided coverage, and only reversed itself when its appraiser realized that the damaged car was not the car on the claim form and was not listed in the policy.

The insured sued for breach of contract and bad faith, among other claims against the insurer as well as the broker. The insurer moved for summary judgment, which the court granted.

There is no breach of contract, or estoppel under the UIPA or UCSP regulations

First, there was no breach of contract, as the vehicle at issue never became part of the policy. The insured argued, however, that the insured was estopped from denying coverage under the Unfair Insurance Practices Act (UIPA) and the Unfair Claims Settlement Practices (UCSP) regulations governing “Standards for prompt, fair and equitable settlements applicable to insurers”. The insured relied on 31 Pa. Code § 146.7(a)(1), which states that, “Within 15 working days after receipt by the insurer of properly executed proofs of loss, the first-party claimant shall be advised of the acceptance or denial of the claim by the insurer.”

Judge Wolson rejected the statutory/regulatory argument for three reasons:

  1. There is no private right of action under the UIPA and UCSP regulations, and only Pennsylvania’s Insurance Commissioner can enforce the UIPA and UCSP regulations.

  2. The policy itself did not incorporate the UIPA or UCSP obligations or impose those obligations on the insurer. “Absent the incorporation of these obligations into the Policy, their potential violation does not breach the Policy.”

  3. The doctrines of waiver or estoppel cannot “create an insurance contract where none existed.”

THERE IS NO BAD FAITH

  1. The broker is not an insurer subject to the bad faith statute

First, the court recognized that there was no sustainable statutory bad faith action against the broker because it was not an insurer.

  1. There is no bad faith where no benefit is denied

Next, as to the insurer, “To prevail on a bad faith claim, a plaintiff must present clear and convincing evidence that, among other things, an insurer ‘did not have a reasonable basis for denying benefits under the policy’ or that an insurer committed a ‘frivolous or unfounded refusal to pay proceeds of a policy.’” Because the insurer had no contractual obligation to pay its refusal could not have been unreasonable, and the claim failed.

  1. The UIPA and UCSP regulations do no prevent changing a coverage decision based on new information

The court rejected another argument based on the UIPA and UCSP regulations cited above. The insured argued the failure to pay was unreasonable once the insurer accepted coverage. The court found, however, the UCSP regulations did not “prevent an insurer from changing a coverage determination based on new information.”

More importantly to the court, the insured adduced no case law adding such a gloss to section 146.7, i.e. a mandate that once coverage was accepted it could never be denied under any circumstances. Thus, it was reasonable for the insurer to interpret that regulation to permit an insurer to revise a coverage decision based on new information.

  1. A Delay based on an Oversight is not the Basis for Bad Faith

Finally, any delay in revising its coverage determination was likewise not bad faith. Citing the 2007 DeWalt decision, the court observed that an “insurer’s actions in allegedly delaying investigation did not constitute bad faith under Pennsylvania law [when] there was no evidence that such delay was deliberate or knowing, or was unreasonable.”

While the carrier “probably could have been more diligent” in determining which vehicle was involved in the collision by looking at the police report earlier, “an insurer ‘need not show that the process used to reach its conclusion was flawless or that its investigatory methods eliminated possibilities at odds with its conclusion.’” There was nothing in the record to establish the insurer “acted with reckless disregard of its obligations or otherwise fell so short that it acted in bad faith.”

Date of Decision: April 1, 2020

Live Face on Web, LLC v. Merchants Insurance Group, U.S. District Court Eastern District of Pennsylvania Case No. 2:19-cv-00528-JDW, 2020 U.S. Dist. LEXIS 56852 (E.D. Pa. April 1, 2020) (Wolson, J.)

Our thanks to attorney Daniel Cummins of the excellent Tort Talk Blog for bringing this case to our attention.  We also note the Tort Talk Blog’s three recent posts on post-Koken motions to sever and stay bad faith claims in the Western District, York County, and Lancaster County.

NO BAD FAITH POSSIBLE WHERE INSURER HAS ANY REASONABLE BASIS FOR ITS CONDUCT; UIPA AND UCSP REGULATIONS DO NOT CREATE BASIS FOR BAD FAITH CLAIMS (Philadelphia Federal)

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This UIM bad faith claim involved allegations of delayed investigation and settlement payment. The insurer moved for summary judgment, which Eastern District Judge Robreno granted.

The court observed that any reasonable basis to deny coverage defeats a bad faith claim, and consultation with counsel can establish a reasonable basis for the insurer’s actions. Negligence or poor judgment do not make out a bad faith case. Further, “[a]n insurer who investigates legitimate questions of insurance coverage is not acting in bad faith, and no insurer is required ‘to submerge its own interest in order that the insured’s interests may be made paramount.’”

Moreover, although bad faith can be proven through unreasonable delays in paying on a claim, “’a long period of time between demand and settlement does not, on its own, necessarily constitute bad faith.’” For example, if the insurer’s delay is tied to its need for further investigation, this is not bad faith.

Judge Robreno’s opinion sets forth a meticulous recitation of the factual history. The key factual issues were the length of time in reaching a settlement and the investigation into what portion of the insured’s injuries were attributable to the accident at issue vs. a separate auto accident in the preceding year.

In analyzing these facts, the court observed that the insureds’ principal argument was that the insurer took 15 months to make a settlement offer. However, the court found this was “not a per se violation of § 8371, and courts have found no bad faith in cases where insurers took the same length of time to evaluate a claim.” (Emphasis in original)

Drilling down with specific calendar calculations by relevant event, Judge Robreno found the length of time attributable to the insurer’s own delay was around 9 months. This was only half of the nearly 18-month period between the first petition to open a UIM file and filing suit. Further, during its investigation, the insurer had “repeatedly asked … for additional medical documentation, repeatedly communicated with Plaintiffs’ Counsel, and provided updates on the progress of the investigation. In the light most favorable to Plaintiffs, no reasonable jury could find by clear and convincing evidence that Defendant lacked any reasonable basis in its investigation.” (Emphasis in original)

UIPA and UCSP regulations not a basis for bad faith here

In a closing footnote Judge Robreno rejects the insureds’ effort to create a claim from the Unfair Insurance Practices Act (UIPA) or Unfair Claims Settlement Practices (UCSP) regulations.

He states, “While recognizing that they do not provide private causes of action, Plaintiff also cites to the Pennsylvania Unfair Insurance Practices Act, 40 Pa. C.S. § 1171, and the Pennsylvania Unfair Claims Settlement Practices regulations, 31 Pa. Code § 146, which each require prompt and reasonable responses from insurers in response to a claim, as further evidence of Defendant’s bad faith conduct. … However, ‘a violation of the UIPA or UCSP is not a per se violation of the bad faith standard.’ …. Further, both statutes apply to behavior performed with such recurrence as to signify a general business practice. See 31 Pa. Code § 146.1; 40 Pa. C.S. § 1171.5(a)(10). Because Plaintiffs only identify an isolated instance of Defendant’s alleged bad faith conduct in their argument that Defendant violated both statutes, neither is persuasive in showing Defendant lacked any reasonable basis in delaying Plaintiffs’ claim.” (Emphasis in original)

Date of Decision: March 19, 2020

Bernstein v. Geico Casualty Co., U.S. District Court Eastern District of Pennsylvania CIVIL ACTION NO. 19-1899, 2020 U.S. Dist. LEXIS 47798 (E.D. Pa. Mar. 19, 2020) (Robreno, J.)

 

NO BAD FAITH: (1) LOW BUT REASONABLE SETTLEMENT OFFER; (2) FAILURE TO PAY FULL RESERVES NOT BAD FAITH; (3) ADDITIONAL INVESTIGATION WOULD NOT HAVE CHANGED RESULT; (4) INSURED DELAYED CLAIMS HANDLING (Western District)

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In this UIM bad faith case, the court set out a detailed claims handling history. It shows an active claims handler, conflicting expert reports, and what appears to be a genuine dispute over the scope of the insured’s injury. The central discrepancy is between permanent disability vs. no medical record of serious injury.

The court granted summary judgment on bad faith, finding the insured could not meet the clear and convincing evidence standard. It specifically addressed four issues in reaching this conclusion.

  1. Was the Settlement Offer Unreasonably Low?

The insured claimed losses in excess of $2,000,000. The UIM insurer offered $25,000. As the tortfeasor’s carrier paid $100,000, this meant the UIM carrier valued the claim at $125,000.

The court set out the relevant law. Low but reasonable offers are not bad faith, but “low-ball offers which bear no reasonable relationship to an insured’s actual losses can constitute bad faith….” A carrier can reasonably rely on expert opinion when investigating claims. In this context, insurers “can rely on IMEs of qualified health professionals who examine claimants in a usual and customary manner.”

First, the court found the claims handler’s well documented file showed an IME was warranted. Next, the court examined the claims handler’s review of the insured’s economic expert’s report of over a $2,000,000. The court found that multiple medical reports provided the claims handler with a reasonable basis to question the economic expert’s critical assumption of permanent disabled. “Thus, with no other evidence to establish [the insured’s] economic losses other than [the economic expert’s] report that assumes total disability, no reasonable juror could find bad faith by clear and convincing evidence from [the] $25,000 settlement offer to [the insured].”

  1. Reserves

Reserves were set at $55,000. The insured asserted the insurer should have offered the $55,000, rather than $25,000. The court stated that an insurance company must set reserves aside when placed on notice of a possible loss arising under its policy. “However, the failure of a carrier to offer its full settlement authority does not constitute bad faith.” In the present case, “because the Court finds no sufficient evidence of bad faith as to the $25,000 settlement offer, there is likewise no bad faith in [the insurer’s] reserve for this UIM claim.”

  1. Adequacy of Investigation

To prove bad faith investigation, the insured “must show that the outcome of the case would have been different if the insurer had done what the insured wanted done.” The putative investigative failures here would not have changed the result.

Thus, even if the claims handler had reviewed the economic loss reports with her own economic experts, sought medical authorizations, or spoken to treating physicians or the tortfeasor’s lawyer, this additional investigation would not have altered the IME opinions that there was no permanent injury, and that any injuries had resolved. These IMEs provided a reasonable basis to contest value. “Therefore, [the insured] cannot meet his burden to show that a reasonable juror could find by clear and convincing evidence that [the insurer] would have evaluated [the] claim differently had it conducted an earlier or different investigation as argued by plaintiff’s counsel.”

  1. Unnecessary Delay in Investigation

“In order for an insured to recover for bad faith from delay, an insured must demonstrate that ‘the delay is attributable to the defendant, that the defendant had no reasonable basis for the actions it undertook which resulted in the delay, and that the defendant knew or recklessly disregarded the fact that it had no reasonable basis to deny payment.’”

The court first observed that much of the delay in this matter was caused by the insured. There were delays in providing information and producing documents to the insurer. The insured also changed his damage theory during the claims handling process, which led to insurer to require additional evaluations. Thus, “no reasonable juror could conclude by clear and convincing evidence that [the insurer] acted in bad faith in the timeline of its investigation….”

Date of Decision: February 19, 2020

Stewart v. GEICO Insurance, U.S. District Court Western District of Pennsylvania 2:18-CV-00791-MJH, 2020 U.S. Dist. LEXIS 28459 (W.D. Pa. Feb. 19, 2020) (Horan, J.)

Our thanks to Attorney Dan Cummins of the excellent Tort Talk Blog for bringing this case to our attention.

 

INSURER’S RELIANCE ON ADVICE OF COUNSEL, AMONG MANY OTHER FACTORS FAVORING THE INSURER, DEFEATS BAD FAITH CLAIM (Philadelphia Federal)

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This case involves a head-spinning array of factual discrepancies between the insured’s claims to the carrier and the results of the insurer’s investigation. These range from whether the insured actually owned the property to whether the structure at issue collapsed from a sudden event or collapsed because of (uncovered) faulty construction. We leave you to the court’s lengthy and detailed narrative concerning these discrepancies, and the various coverage issues invoked by their presence. Of particular interest here is that in addition to involving an adjuster, SIU adjuster, supervisor and engineering expert, the insurer also puts its outside counsel’s coverage opinion on the record.  

The insured brought a bad faith claim, and the insurer moved for summary judgment after making a detailed record.  The insurer asserted various bases for why it was entitled to summary judgment. In granting summary judgment, the court stated that, at a minimum, there was a reasonable basis to deny coverage:

“The record indicates that [the insurer] conducted a thorough investigation of the claim and ultimately decided that coverage should be denied. Indeed, [a] property adjuster and an SIU adjuster inspected Plaintiff’s loss; the claim was reviewed by [a] supervisor; [the insurer] took the recorded statement of Plaintiff and reviewed relevant property documentation from the City of Philadelphia; [the insurer] obtained the services of a structural engineer; and [the insurer] then sent the structural engineer’s report, which opined on the cause of the loss, to independent legal counsel for an opinion on the coverage. Finally, relying upon independent legal counsel’s conclusion that coverage did not exist for Plaintiff’s loss, [the insurer] denied Plaintiff’s insurance claim. It cannot be said that [the insurer]’s investigation and decision-making process was ‘frivolous or unfounded,’ as required under Pennsylvania law to succeed on a bad faith claim.”

The court added, “the factual record is devoid of any ‘clear, direct, weighty and convincing’ evidence that would allow a factfinder to find ‘without hesitation’ that [the insurer] acted in bad faith in investigating and ultimately denying Plaintiff’s insurance claim.”

Moreover, even if the insured could make a case for unreasonableness, “the record is devoid of any evidence that [the insurer] either knew it had an unreasonable basis for denying coverage or recklessly disregarded its lack of a reasonable basis in denying Plaintiff’s claim or in the manner in which it investigated Plaintiff’s claimed loss.” The record shows the contrary. The insurer not only engaged a structural engineer, but also independent legal counsel to analyze coverage. It then “relied on the independent findings of both the expert and legal counsel in its ultimate decision to deny” the claim.

Date of Decision: February 14, 2020

Nguyen v. Allstate Insurance Co., U.S. District Court Eastern District of Pennsylvania CIVIL ACTION No. 18-5019, 2020 U.S. Dist. LEXIS 25789 (E.D. Pa. Feb. 14, 2020) (Kenney, J.)

 

EVEN THOUGH COVERAGE MIGHT BE DUE, INSURED COULD NOT ESTABLISH DENIAL WAS UNREASONABLE (Philadelphia Federal)

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This case involved a wall collapse. The insured and carrier provided each other with expert reports on causation. The carrier’s expert analysis would result in a finding of no coverage under the policy, but the insured’s expert analysis would result in coverage. The insurer denied coverage, and the insured sued for breach of contract and bad faith.

After discovery, the insured moved for summary judgment on both counts. The court denied summary judgment on the contract claim, because issues of fact remained on causation that might allow for coverage, but granted summary judgment on the bad faith claim after finding that the insured could not meet her burden to show the insurer lacked a reasonable basis in denying coverage.

In addressing bad faith, the court observed that an insurer can defeat bad faith by showing there was a reasonable basis for its action. The court further made clear that at the summary judgment stage, the plaintiff’s obligation to prove its case at trial by clear and convincing evidence of bad faith was a necessary consideration. In this case, even taking the facts in the insured’s favor, the insurer had a reasonable basis to deny the claim.

The insurer’s denial was based on a reputable forensic engineer’s report that determined two causes of the collapse; both of which were excluded under the policy. The insured argued that the carrier should have rejected this report, and instead followed the analysis in the report provided by the insured’s expert. The court found this was not enough to make out a claim of bad faith because “the mere fact that the parties disagree about coverage is not enough to show bad faith.” The court cited Post v. St. Paul Travelers Ins. Co., for the proposition that there is no bad faith “when the plaintiff could only show the parties disagreed about coverage….”

The insured also argued bad faith because the insurer allegedly “ignored the possibility that [the insured’s] house would be demolished.” The court found this irrelevant to the bad faith claim.

“If the collapse was not covered under the insurance policy, [the insurer] would not have been obligated to pay [the insured] regardless of whether her house was later demolished. In other words, whether the house was demolished would have no impact on [the] coverage decision.” Thus, this argument did not go to the reasonableness of the coverage decision itself.

In sum, the insured did not adduce evidence that the insurer lacked a reasonable basis for its coverage decision, and summary judgment was granted on the bad faith count.

Date of Decision: January 31, 2020

Hentz v. Allstate Property & Casualty Insurance Co., U.S. District Court Eastern District of Pennsylvania CIVIL ACTION No. 19-2007, 2020 U.S. Dist. LEXIS 17379 (E.D. Pa. Jan. 31, 2020) (Sanchez, J.)