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

NO BAD FAITH PLEADED: (1) 38 BAD FAITH ALLEGATIONS ALL CONCLUSORY; (2) ONLY A VALUATION DISPUTE; (3) INSURER DID NOT “CONSTRUCTIVELY IGNORE” RECORDS SUPPORTING CLAIM; (4) NO DILATORY CONDUCT SPECIFICALLY PLEADED; (5) “LOW BALL” OFFER ALLEGATION ISN’T SUFFICIENT IN ITSELF TO STATE A BAD FAITH CLAIM (Philadelphia Federal)

Print Friendly, PDF & Email

“If at first you don’t succeed, try and try again.”  That didn’t work in this case, where a bad faith claim was dismissed with prejudice after Eastern District Judge Pratter had already given the plaintiff leave to replead. A summary of Judge Pratter’s original decision in this uninsured motorist bad faith case can be found here.

In her second decision, Judge Pratter finds, among other things:

  1. “All told, the Amended Complaint contains a list of 38 ways in which Liberty Mutual allegedly acted in bad faith. But this list is a list of conclusions—not facts.”

  2. “[T]here are no details that would describe what was supposedly unfair about the process, other than that [the insured] disputes the value of the settlement offer.”

  3. There is no plausible for “constructively ignoring” medical records because the reviewer was not “medically educated”. “[T]here is nothing pled that the claims adjusters are somehow ill-equipped to perform their job—which entails reviewing medical records in connection with a claim.”

  4. The Court’s first opinion signaled the insured needed to plead more specific facts to support an allegation of bad faith dilatory conduct, “i.e., the number of months between demand and settlement offer.” However, “[t]he Amended Complaint does not describe the course of the parties’ dealings, let alone whether Liberty Mutual delayed its offer of settlement.”

  5. “In the final analysis, the Amended Complaint reflects a disagreement over the amount of settlement of [the insured’s] claim. To state a bad faith claim, an insured must do more than call [the insurer’s] offers ‘low-ball.’” As the Court explained at length in its prior opinion, this appears to be a familiar dispute between parties over the entitlement to UM coverage as an initial matter as well as the value of a claim to UM benefits. Moreover, accepting the well-pleaded allegations as true that [the insured] is indeed entitled to UM benefits, it does not necessarily follow that she is entitled to the limit of that coverage. A policy limit—as its name suggests—is the theoretical maximum that an insured could recover. ‘It is not the de facto value of a claim.’”

Date of Decision:  August 26, 2021

Brown v. LM Gen. Ins. Co.,  U.S. District Court Eastern District of Pennsylvania 2021 No. CV 21-2134, WL 3809075 (E.D. Pa. Aug. 26, 2021) (Pratter, J.)

MERE EXISTENCE OF CONTINUING INVESTIGATION AND NEGOTIATION RATHER THAN AN ARBITRARY AND IMMEDIATE DENIAL IMPLIES REASONABLENESS ON THE PART OF THE INSURER (Philadelphia Federal)

Print Friendly, PDF & Email

The insureds brought breach of contract and bad faith claims in connection with water damage to their home.  Eastern District Judge Tucker granted the insurer summary judgment on the bad faith claim.  She states

When Plaintiffs’ home was damaged by an overflowing toilet, [the insurer] inspected the loss and made payments on the dwelling damage and personal items it determined to be related to the loss. Later, when Plaintiffs submitted other estimates, [the insurer] reviewed those estimates to determine if payment was warranted, and that the scope of those estimates was in line with its own damage observations. When there were concerns on scope and pricing, [the insurer] asked for re-inspections and negotiated with Plaintiffs. Plaintiffs argue that the denial of payment is unreasonable because under a “replacement cost policy” like theirs, Defendant is to make payment on an actual cash value basis until the repairs are made, after which depreciation is payable to the policy holders. But Plaintiffs fail to present sufficient evidence of unreasonableness in their claim processing. While claim negotiations were ongoing at the time suit was initiated, and reimbursement or denial of depreciation costs may have eventually taken place, the mere existence of continuing investigation and negotiation rather than an arbitrary and immediate denial implies reasonableness on the part of Defendant.

Date of Decision:  August 13, 2021

Davis v. Safeco Insurance Company of Illinois, U.S. District Court Eastern District of Pennsylvania No. CV 19-3871, 2021 WL 3603037 (E.D. Pa. Aug. 13, 2021) (Tucker, J.)

 

INSURER’S COVERAGE DENIAL OBJECTIVELY REASONABLE AND THUS NO BAD FAITH IS POSSIBLE (Western District)

Print Friendly, PDF & Email

Western District Judge Hornak adopted Magistrate Judge Kelly’s Report and Recommendation to grant the insurer summary judgment, in this underinsured motorist coverage breach of contract and bad faith case.

First, the breach of contract claim hinged on whether the insurer’s underinsured motorist coverage rejection form comported with Pennsylvania’s Motor Vehicle Financial Responsibility Law (MVFRL).  The insured signed a form rejecting UIM coverage, but argued the form he signed did not meet the MVFRL’s requirements, and therefore should be deemed void.

The court rejected this argument, and found no UIM coverage due.  The court also found that the failure to include a proper renewal notice regarding the rejection of UIM coverage was a violation of the MVFRL. Renewal notice MVFRL violations, however, have long been held not to provide a private remedy in the courts.  Rather, any failure in the renewal form was solely for administrative review by the insurance department.

Thus, the insurer obtained summary judgment on the coverage claim.

In light of this ruling, the bad faith claim necessarily failed because there was an objectively reasonable basis to deny UIM coverage, since the insured himself had rejected UIM coverage.  While there were some flaws in the claim adjuster’s manner of denying coverage, the fact is that the adjuster reached the correct conclusion that no coverage was due; and the carrier consistently took that position throughout, including an independent analysis by coverage counsel after the adjuster’s initial denial that no coverage was due.

Dates of Decision:  July 12, 2021 (Report and Recommendation), August 2, 2021 (Order adopting Report and Recommendation)

Keeler v. Esurance Insurance Services, U.S. District Court Western District of Pennsylvania No. 20-271 (W.D.Pa. July 12, 2021) (Kelly, M.J.) (Report and Recommendation), adopted by Order of the District Court (Aug. 2, 2021) (Hornak, J.)

Our thanks to Attorney Daniel Cummins, author of the excellent TortTalk Blog, for bringing this case to our attention.

WESTERN DISTRICT JUDGE STICKMAN ISSUES TWO BAD FAITH OPINIONS: (1) DIFFERENCE IN VALUATION ALONE IS NOT BAD FAITH; (2) BAD FAITH CANNOT BE PURSUED AGAINST CARRIER’S CLAIM ADJUSTER (Western District)

Print Friendly, PDF & Email

On July 19th, Judge Stickman held in Stegena v. Nationwide, that simply pleading the insured’s injuries are worth significantly more than the carrier’s valuation of the same injuries cannot, by itself, constitute bad faith.  One week later, Judge Stickman opined in the Alexander v. Mid-Century, that an insured could not bring breach of contract or bad faith claims against a carrier’s claim adjuster.

Valuation dispute alone cannot constitute bad faith

In this undersinsured motorist breach of contract and bad faith case, the insured’s “argument in support of her statutory bad faith claim consists almost entirely of nothing more than a bare recitation of the materials and evidence submitted in support of her claim, together with monetary valuations included in the opinions of experts procured after the initiation of this litigation….”

Judge Stickman found the complaint alleged a claim handling history that did not make out a plausible bad faith claim, with the insured trying to meet her clear and convincing evidence burden by simply emphasizing the amount of damages her experts found due to compensate her damages, which the carrier would not pay. Judge Stickman states: “The problem with [the insured’s] argument is that, although she provides sizeable dollar amounts, which her experts claim represent prospective lost wages and medical expenses, her argument fails to address the present issues before the Court—why there was an absence of a reasonable basis, or how [the insurer] knew or recklessly disregarded that absence.”

He recognizes that “under the right circumstances, an unsupported low-ball offer may support a claim for insurance bad faith … [but] it remains [the insured’s] burden to scrutinize the relationship between [the insurer’s] considerations and determinations.” Here, the insured’s failure to “identify, with any specificity, factual deficiencies illustrating the unreasonableness of [the insurer’s] conduct, demonstrates that her claim is more properly characterized as an inappropriate, generalized grievance over the monetary valuation of her claim.” Moreover, the record showed the carrier’s “investigation and determinations, and, more specifically, the process that he used to evaluate and value the claim … cannot be characterized as anything other than reasonable, as that term applies in the bad faith context.”

Judge Stickman cites Judge Caputo’s 2019 Moran decision in support, summarized here, where the Middle District court collected cases on valuation discrepancies and bad faith.

Finally, in reciting case law detailing Pennsylvania’s statutory bad faith standards, we observe that Judge Stickman quoted the long-standing principle that “an insurance company is not required to demonstrate its investigation yielded the correct conclusion or even that its conclusion more likely than not was accurate. The insurance company also is not required to show the process by which it reached its conclusion was flawless or that the investigatory methods it employed eliminated possibilities at odds with its conclusion. Rather, an insurance company simply must show it conducted a review or investigation sufficiently thorough to yield a reasonable foundation for its action.”

Date of Decision:  July 19, 2021

Stegena v. Nationwide Property & Casualty Insurance Company, U.S. District Court Western District of Pennsylvania No. 2:20-CV-428, 2021 WL 3038800 (W.D. Pa. July 19, 2021) (Stickman, J.)

No viable breach of contract or bad faith claim against individual adjuster

The insured brought  breach of contract and bad faith claims against both his insurer and its claim adjuster.  The defendants moved to dismiss, arguing there was no viable claim against the adjuster, and that the adjuster was joined to improperly destroy diversity jurisdiction and prevent removal to federal court.

Judge Stickman found Pennsylvania case law made clear that neither a breach of insurance contract or insurance bad faith claim could be pursued against an individual claim adjuster working for the insured’s carrier.  He cites the 2017 Pennsylvania Superior Court decision in Brown v. Everett, summarized here, holding that “a statutory action for bad faith can only be brought against the insurer,” and not an adjuster.

Judge Stickman rejected the argument that the adjuster could be sued under the “participation theory,” finding that theory inapposite to the context of an insurance adjuster handling a claim for an insurance company.  Thus, he dismissed the claims against the adjuster with prejudice, which further resulted in jurisdiction over the remaining claims against the insurer being proper in federal court.

Date of Decision:  July 26, 2021

Alexander v. Mid-Century Insurance Company, No. 2:21-CV-392, U.S. District Court Western District of Pennsylvania 2021 WL 3173621 (W.D. Pa. July 26, 2021) (Stickman, J.)

COURT ADDRESSES (1) COMMON LAW VS. STATUTORY BAD FAITH STANDARDS; (2) LACK OF CLARITY IN THE LAW AND BAD FAITH; (3) DELAYS IN CLAIM HANDLING AND SETTLEMENT OFFERS; (4) APPLYING THE UNFAIR INSURANCE PRACTICES ACT IN BAD FAITH CASES; (5) AGGRESSIVE DISCOVERY/CLAIM HANDLING DURING LITIGATION; and (6) LOW RANGE SETTLEMENT OFFERS (Philadelphia Federal)

Print Friendly, PDF & Email

Eastern District Judge Tucker explains the similarities and differences between common law and statutory bad faith, in granting the insurer summary judgment on the statutory bad faith claim, but rejecting dismissal of the common law bad faith claims.  She observes both types of bad faith are subject to the clear and convincing evidence standard. However, common law bad faith only requires proof of negligent claim handling, while statutory bad faith requires a knowingly or recklessly unreasonable claim denial.

Judge Tucker cites Judge McLaughlin’s 2007 Dewalt case as authority on the negligence standard.  Judge Tucker does focus on the Cowden type of common law bad faith in discussing these standards, i.e., an insurer can avoid a common law bad faith claim for failure to settle within policy limits by showing “a bona fide belief … predicated on all the circumstances of the case, that it has a good possibility of winning the suit.”  This kind of third party insurance bad faith claim was not before the court.  Rather, the facts involved an underinsured motorist claim.

In an earlier decision, Judge Tucker entered judgment for the insurer on the basis the plaintiff did not qualify as an insured under the policy.  The Third Circuit reversed her decision.  While true the policy language did not provide the plaintiff UIM coverage, the Third Circuit found this limitation violated Pennsylvania’s Motor Vehicle Financial Responsibility Law (MVFRL).

On remand, the insured argued that the policy was issued in bad faith because it included language violating the MVFRL.  Judge Tucker rejected the common law bad faith claim on this point.  There was no precedent or binding authority on point before the Third Circuit’s decision, and the carrier’s position, while ultimately incorrect, was not unreasonable. “This matters because an insurer making a reasonable judgment as to coverage in a situation where the law is not clear cannot be liable for bad faith.”

This did not end the common law bad faith inquiry. Once the Third Circuit ruled, making the law applied to the policy crystal clear, this changed the measure of the insurer’s behavior, i.e., at that point the carrier knew it had an obligation to provide UIM coverage. In determining the common law bad faith claim, Judge Tucker stated:

  1. Conduct that postdates the start of litigation can form the basis for a proper bad faith claim.

  2. After the Third Circuit ruled that the Nationwide policy violated the MVFRL, Nationwide did not extend a settlement offer for ten months after the decision.

  3. When Nationwide did present an offer … it was for just $500,000 of the UIM benefits—in exchange for releasing the bad faith and class action claims.

  4. This offer was doubled a week later to $1 million, but it was contingent on a broader release of all disputes related to coverage.

  5. A failure to “promptly settle claims, where liability has become reasonably clear, under one portion of the insurance policy coverage in order to influence settlements under other portions of the insurance policy” is considered an unfair insurance practice under Pennsylvania law. 40 Pa. Stat. Ann. § 1171.5(a)(10)(xiii).

  6. The [UIPA] also singles out a refusal to “effectuate prompt, fair and equitable settlements of claims in which the company’s liability under the policy has become reasonably clear” as a similarly unfair insurance practice.

  7. While a violation of the Unfair Insurance Practice Act (UIPA) does not constitute a per se violation of the bad faith statute, it does point to a material fact that could support a common law bad faith claim. [Judge Tucker observes apparently contrasting case law on this point, quoting some cases to the effect that UIPA violations are not bad faith per se, and another that “the rules of statutory construction permit a trial court to consider … the alleged conduct constituting violations of the UIPA or the regulations in determining whether an insurer, like Nationwide, acted in ‘bad faith.”]

  8. Again citing Dewalt, Judge Tucker states: The fact that Nationwide offered a settlement is also not a safe harbor from a bad faith claim. “Although most Pennsylvania cases finding bad faith do so in situations where an insurer refuses to settle, no case suggests that such a refusal is a pre-requisite for a bad faith claim.”

  9. Judge Tucker concludes that: Given the resolution of the disputed terms in the Nationwide policy by the Third Circuit, Defendant’s refusal to provide an unconditioned settlement for a claim under those terms is enough evidence that a reasonable jury could find in favor of Plaintiff on the common law bad faith claim.

Thus, the common law bad faith was allowed to proceed. The statutory bad faith claim was not.

The pre-suit conduct, i.e., drafting the policy with a clause violating the MVFRL, certainly could not be bad faith under the higher statutory standards if it did not constitute negligence under the common law standard.  Plaintiff could not show by clear and convincing evidence that the policy language and the carrier’s conduct in following that language was objectively unreasonable at the time, much less in knowing or reckless disregard of some unreasonable conduct.

As to litigation conduct after the Third Circuit had ruled, the insurer pursued aggressive discovery.  [This discovery was essentially the insurer’s claim handling at this point.]  Judge Tucker laid out the details of the insurer’s discovery/claim handling and specific events over the course of discovery/claim handling.  This included the insurer’s making a number of reasonable requests for information and the insured’s creating delays.  The carrier’s zealous, and maybe at times questionable, defense tactics did not equate to bad faith.

Judge Tucker also observed that offers on the low end of a settlement range for subjective damages such as pain and suffering do not constitute clear and convincing evidence that the insurer’s action were unreasonable, knowing or reckless.  These sorts of claims require investigation, and the carrier’s discovery on these issues amounted to standard claim handling.

Judge Tucker next stated that the insurer’s 10 month delay in making a settlement offer, absent other aggravating factors, was “well under periods of time that have been deemed acceptable for statutory bad faith purposes.”

Judge Tucker also found it significant that the insurer “communicated with Plaintiff during discovery, sending multiple document requests and communicating with Plaintiff’s counsel, which is arguably more responsive than the amount of communication Defendant received in response. This too weighs against whether a reasonable jury could rule that Nationwide had knowing or reckless disregard for the deficiency of its position.”

Thus, summary judgment was denied on the statutory bad faith claim.

Date of Decision:  July 14, 2021

Slupski v. Nationwide Mutual Insurance Company, U. S. District Court Eastern District Pennsylvania No. CV 18-3999, 2021 WL 2948829 (E.D. Pa. July 14, 2021) (Tucker, J.)

NO BAD FAITH CLAIM HANDLING OR DELAY IN UIM BAD FAITH CASE (C.C.P. Monroe)

Print Friendly, PDF & Email

The excellent, and important, TortTalk blog has posted a summary of Monroe County Judge Williamson’s decision in Sabajo v. Allstate, granting summary judgment to the insurer on a UIM bad faith claim.  After reviewing the record, Judge Williamson could not find clear and convincing evidence of bad faith conduct in claim handling, or any delay that amounted to bad faith.  A copy of the opinion can be found here, Sabajo v. Allstate Fire and Casualty Insurance Co., Court of Common Pleas Monroe County, No. 7703 Civil 2019 (June 22, 2021) (Williamson, J.)

Our thanks to Attorney Daniel Cummins for bringing this case to our attention.

COVERAGE DUE, BUT NO BAD FAITH WHERE (1) REASONABLE INVESTIGATION AND (2) REASONABLY DEBATABLE BASIS TO DECLINE COVERAGE (Philadelphia Federal)

Print Friendly, PDF & Email

The case centered on a dispute over whether the plaintiff had an insurable interest in its tenant’s property improvements.  The carrier denied coverage for damage to those improvements, asserting the policy did not cover tenant improvements.  The insured sued for breach of contract and bad faith.

The court found the policy did provide coverage, and ruled for the insured on its breach of contract claim.

On bad faith, the insured alleged the insurer both failed to investigate and that it unreasonably denied coverage.  Magistrate Judge Rice disagreed, finding the insured “lacks clear and convincing evidence that [the insurer] investigated and handled the claim in bad faith or denied coverage without a reasonable basis.”

First, a seven-month delay in the claim handling process was reasonable in light of the insurer’s very detailed and active investigation into the claim.

Second, even though the insurer incorrectly denied coverage, “[b]ecause Pennsylvania courts have held that insurable interest is generally decided by the jury … and there was testimony … contradicting [the insured’] expectation of benefit from the improvements, [the insurer] had sufficient reasonable basis to support its coverage decision.” The court’s own “analysis demonstrates … the existence of an insurable interest as a matter of law is a close question subject to reasonable debate.”

Date of Decision:  June 11, 2021

Greentree Properties Corp. v. Aspen Specialty Ins. Co., U.S. District Court Eastern District of Pennsylvania No. CV 20-4646, 2021 WL 2400727 (E.D. Pa. June 11, 2021) (Rice, M.J.)

NO BAD FAITH BASED ON DELAY OR “LOW-BALL” OFFER; POLICY LIMIT IS NOT THE DE FACTO VALUE OF A CLAIM (Philadelphia Federal)

Print Friendly, PDF & Email

Eastern District Judge Pratter provides a clear discussion on allegations of delay and valuation that do not make out a bad faith claim.

This underinsured motorist coverage breach of contract and bad faith case focused on a dispute over whether the insured was entitled to stacked benefits.  The insured had waived stacking, but asserted that the insurer’s failure to send new waiver forms when she added additional vehicles negated that waiver.  She pleaded serious personal injuries, and that the insurer only offered $4,500 on the claim.

First, Judge Pratter found the insured failed to plead a plausible claim for bad faith delay.  “Although this complaint alleges the accident took place in January 2020, it does not allege when [the insured] noticed her intent to seek UIM coverage or when [the insurer] transmitted its offer. So, the complaint fails to plead the length of the alleged delay, let alone whether it was unreasonable.”

There were no allegations the insured made a timely demand or that the insurer failed to investigate or conducted an unreasonable investigation. At best, the insured’s argument was that the insured offered $4,500, and when compared to her alleged injuries, this was facially unreasonable.  Judge Pratter did not accept this argument, observing that “the pleadings must provide sufficient allegations from which the Court can plausibly infer that [the insurer] knew or recklessly disregarded a lack of a reasonable basis to deny benefits.”

The complaint revealed “a “’normal dispute between an insured and insurer over the value of a UIM claim’ which is itself predicated on a dispute over [the insured’s] entitlement to stacked coverage limits.” Judge Pratter describes the coverage disagreement as a “live dispute that motivates both the declaratory judgment and breach of contract claims. An insurer’s refusal to pay the policy limit when it disputes that the insured is entitled to any such coverage at all is not evidence of unreasonable conduct that would support a bad faith claim.”

Finally, on bad faith, Judge Patter states that a “low-ball” offer by itself is not necessarily bad faith.  “The complaint contains no allegations that [the insured] submitted documentation of the extent of her injuries to support her position such that she is entitled to the policy limit. A policy limit is just that—the ultimate maximum that an insured could theoretically recover. It is not the de facto value of a claim.”

Judge Pratter did give leave to amend the bad faith claim, but only if the insured could plead within the parameters set out in the Court’s opinion.

Date of Decision:  June 7, 2021

Brown v. LM General Insurance Company, U.S. District Court Eastern District of Pennsylvania No. CV 21-2134, 2021 WL 2333626 (E.D. Pa. June 7, 2021) (Pratter, J.)

NO BAD FAITH FOR: (1) VALUATION DISPUTE (2) DELAY (3) DECISION MADE BASED ON UNCERTAIN LAW (Middle District)

Print Friendly, PDF & Email

Middle District Judge Conner dismissed this UIM bad faith claim on three grounds.

First, the complaint relied upon conclusory averments, and lacked sufficient factual allegations to set forth a plausible bad faith claim.

No bad faith for not paying sum demanded.

Second, the carrier’s decision not to meet the insureds demand did not constitute bad faith. The complaint merely averred that the insureds issued a demand letter, the carrier’s claim handler reviewed the letter and a PIP medical file, and did not offer fair value. The insureds did not plead their demand amount, but only that the insurer refused to pay their demand.

Judge Conner observed that valuation disputes alone cannot create bad faith, citing Judge Caputo’s 2019 Moran decision, summarized here. Judge Conner further relies upon the Third Circuit’s oft-cited 2012 Smith decision, summarized here, for the proposition that “an insurer does not act in bad faith ‘merely because [it] makes a low but reasonable estimate of an insured’s damages….’”

Judge Conner also makes clear that “insurers need not blindly accede to an insured’s demand when the value of the insured’s potential recovery is in dispute.” Supporting this proposition, Judge Conner again cites Smith and his own Castillo v. Progressive, and Yohn v. Nationwide decisions. Applying these principles in the present case, the carrier’s refusal to accede to the insureds’ payment demand alone is not bad faith.

Judge Conner further found the insureds failed to explain how the declination constituted bad faith. The insureds “do not allege: whether or when [the insurer] actually extended an offer; what that offer was; when and whether plaintiffs reviewed, rejected, or countered [the] offer; or why that offer was unreasonable under the circumstances.” “Plaintiffs’ disagreement with an offer made by [an insurer] or its decision not to extend an offer, without more, does not establish a plausible claim.”

No bad faith delay

Third, the insureds could not establish bad faith delay.

An insured alleging bad faith delay must establish 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.”  Judge Conner relies on Eastern District Judge Kelly’s 2011 Thomer v. Allstate decision for this principle.

Judge Conner was “mindful that the process for resolving an insurance claim can be ‘slow and frustrating,’ … but a long claims-processing period does not constitute bad faith by itself….” “Furthermore, delay caused by a reasonable investigation or mere negligence in causing a delay does not amount to bad faith.”

Judge Conner observed that even long delays do not constitute bad faith where an investigation was necessary, citing Thomer (42 months) and Williams v. Hartford (15 months).  In the present case, the UIM claim was submitted only 9 months before suit was filed and a formal demand was only made 5 months before suit was filed.  Moreover, Judge Conner found the insureds themselves concede liability was not clear, and that more investigation was needed to determine the value of their claim. Further, the pleadings suggest “that the parties were engaged in a deliberative process—during which they both reviewed relevant documents, retained counsel, and participated in a negotiation process—shortly before this action was filed.” Some delay was also attributable to the insureds.

Finally, the insureds asserted it was bad faith to review the injured insured’s PIP file without his permission, as this violated “some rule of law.”   Judge Conner disagreed, stating, “an insurer’s reasonable legal conclusion in an uncertain area of law does not constitute bad faith. … Neither party has pointed the court to cases discussing whether or not an insurer’s unauthorized review of an insured’s PIP file is unlawful. Based on the court’s review, it appears that insureds can request to review PIP files, but it is unclear whether permission is required. … Given the apparent dearth of case law on this matter, we cannot conclude at this juncture that [the insurer’s] decision to review [the insured’s] PIP file was per se unreasonable or sufficient to state a plausible claim of bad faith.”

While doubting the pleading deficiencies could be cured, Judge Conner did give leave to file an amended bad faith claim.

Date of Decision: May 17, 2021

Green v. State Farm Mutual Automobile Insurance Company, U.S. District Court Middle District of Pennsylvania No. 3:20-CV-1534, 2021 WL 1964608 (M.D. Pa. May 17, 2021) (Conner, J.)

NO BAD FAITH WHERE REASONABLE BASIS TO DENY COVERAGE (Philadelphia Federal)

Print Friendly, PDF & Email

The insurer denied plaintiff’s first party fire loss claim because it concluded that the insured set the fire himself.  The insured brought breach of contract and bad faith claims, and the insurer counterclaimed for insurance fraud.

Eastern District Judge Surrick granted the insurer summary judgment on the bad faith claim, and denied plaintiff summary judgment on coverage and the insurance fraud counterclaim.

A bad faith plaintiff must show that an insurer acted unreasonably in denying a benefit, and either knew or recklessly disregarded the fact that its position was unreasonable.  The insured must prove bad faith by clear and convincing evidence.  The reasonable basis prong is measured objectively, i.e., would a reasonable insurer have denied payment under the facts at issue.  In making this determination, courts “examine the factors that the insurer relied on in evaluating a claim to determine whether the insurer had a reasonable basis for denying benefits.”

Judge Surrick closely examined the record and concluded the insurer has a reasonable basis to conclude the insured himself started the fire.  He found “substantial evidence in that record that reasonably leads to the conclusion that the fire was intentionally set, and that Plaintiff had both the motive and the opportunity to intentionally set it.” Thus, “based on all the information before Defendant at the time, Defendant’s conclusion that Plaintiff had intentionally set the fire was not unreasonable.”

Conversely, Judge Surrick denied the insured’s motion for summary judgment on coverage and the insurance fraud counterclaim.  “Having determined that it was not unreasonable for Defendant to conclude that Plaintiff had intentionally set his property on fire, the issue of coverage is not appropriate for this Court to decide on summary judgment. Nor is there a basis for dismissing Defendant’s counterclaim of insurance fraud at this juncture. These issues are more appropriate for a jury.”

Date of decision:  May 7, 2021

Ly v. Universal Property & Casualty Insurance Company, U.S. District Court Eastern District of Pennsylvania No. CV 19-1239, 2021 WL 1837468 (E.D. Pa. May 7, 2021) (Surrick, J.)