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

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

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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)

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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)

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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.)

 

“EXPECTING AN INSURER TO BOTH INVESTIGATE CLAIMS PLACED AT ISSUE BY THE INSURED AND TO DO SO ONLY IN A MANNER THAT IS ACCEPTABLE TO THE INSURED, IS UNTENABLE” (Western District)

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Western District Judge Horan previously dismissed breach of contract and bad faith claims in this case, with leave to amend.  A copy of our earlier summary can be found here.  The insured cured the defects in its contract claim, but once again failed to set out a plausible bad faith claim.  This time, however, Judge Horan dismissed the bad faith claim with prejudice, as any future attempt to amend would be futile.

The claim centered on a dispute over actual cash value losses for damaged equipment, and documents the insurer requested as part of an examination under oath (EUO). The insured failed to produce those documents, deeming them irrelevant, and the insurer would not proceed without those documents.

The complaint pleads that the carrier’s actual cash value calculation was fundamentally flawed, and that the carrier sought documents for the EUO that had nothing to do with coverage.

Judge Horan carefully reviewed the second amended complaint, finding plaintiff still failed to state a statutory bad faith claim for the same reasons set forth in her original March 4, 2021 opinion. Rather than overcoming the bad faith claim’s flaws, the new allegations in the second amended complaint “regarding Defendants’ pre-litigation investigation and document requests further buttress[ed] the Court’s prior decision.”

Judge Horan states:

“Defendants undertook an investigation upon the initial loss of the [damaged equipment] and made an offer. [The insured] rejected that offer and made its own claim of value for payment. … In response, Defendants continued the investigation by seeking documents and an examination under oath, as permitted by the Policy. Such conduct is not bad faith.”

Further, in once again rejecting the insured’s complaint over the document requests’ relevance, Judge Horan reiterates that “[e]xpecting an insurer to both investigate claims placed at issue by the insured and to do so only in a manner that is acceptable to the insured, is untenable.”

“Finally, as to the remaining allegations, they speak to a general disagreement over Defendants’ estimate of … damages. The Second Amended Complaint continues to support that an offer was made and that further effort at investigation was attempted by Defendants. These allegations of valuation and investigation disagreements do not support that Defendants engaged in bad faith.”

Date of Decision: April 30, 2021

Integral Scrap & Recycling, Inc. v. Conifer Holdings, Inc., U.S. District Court Western District of Pennsylvania No. 2:20-CV-00871-MJH, 2021 WL 1720713 (W.D. Pa. Apr. 30, 2021) (Horan, J.)

NO BAD FAITH WHERE INSURER’S POSITION ON COVERAGE WAS CORRECT, AND OTHER ISSUES WERE BELATEDLY RAISED POST-TRIAL (Third Circuit)

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The Third Circuit’s precedential decision focused primarily on what constitutes a sufficient writing to request lower underinsured motorist limits under 75 Pa. C.S. § 1734. That statute only provides there must be a “request in writing”.  After close analysis, the panel determined that such a request can effectively be made in the insurance application itself, without the need for using a specialized form.

“The statute says little beyond that [there must be a request in writing]. But that silence speaks volumes. As we reiterate today, the statute means what it says: an insured can make that choice ‘in writing’ in any writing as long as the choice is clear.”

In this case, the insured requested lower than the maximum UIM limits in her written insurance application.  After suffering a serious injury, and despite the application asking for lower limits and the policy being issued with those lower limits, the insured demanded the maximum UIM limits allowed by statute.

She argued the application request was not binding because she had not filled out a separate form the insurer itself provided, which was designed for the insured to expressly acknowledge she was accepting these lower limits.  The insurer took the position that even without the insurer filling out the acknowledgment form, the written request in the application was sufficient to set lower limits for UIM coverage, and refused to pay full limits allowed by the statute.

The insured sued for breach of contract and bad faith.  The district court agreed with the insured on the policy limit issued, but dismissed the bad faith claim. The case proceeded to trial and jury awarded $1.75 million, which the trial judge molded to $750,000 to meet the UIM maximum, rather than the lower sum requested in the application.

A summary of the trial court’s decision can be found here.

For the reasons stated above, the Third Circuit reversed and found the lower limit requested in the application controlling. It ordered the trial court to mold the verdict to $300,000.

The Third Circuit did affirm the trial court’s dismissal of the insured’s bad faith claim.  The insured tried to attack the bad faith claim’s dismissal, post-verdict, via a motion for reconsideration.

  1. First, the appellate panel agreed with the trial court that the jury verdict was irrelevant to bad faith, and that the trial court should solely look “at the actions and omissions of [the insurer] to evaluate [the insured’s] claim when it was submitted and then processed. [Note:  We recently posted on a New Jersey federal decision similarly rejecting this type of “hindsight” bad faith analysis.]

  2. As the arguments were presented by motion for reconsideration, there had to be some new facts that did not exist or could not have been discovered at the time of the original decision. The Third Circuit agreed with the district court that the insured’s efforts in this regard failed, as the facts she wanted to adduce were not new.

  3. The insured failed to request certain documents in discovery, e.g., the insurer’s Best Practices Manual, and gave no justification. Further, the Rule 26(f) report revealed early on the insurer’s position about the lower limit in the application controlling the UIM policy limits.  Thus, there was no basis for reconsideration involving discovery activities.

  4. In bringing and pursuing her case, the insured did not argue the insurer acted in bad faith on the basis of misrepresenting the scope of coverage, even though she had information allegedly supporting such a claim before trial. Rather, she “chose instead to base [the] bad faith claim on an alleged failure … to investigate the [insured’s] claim.” The court would not allow the insured belatedly to bring up the misrepresentation based claim, finding there should be no second bite at the apple.

  5. The Third Circuit observed that an insurer can defeat a bad faith claim if there “is evidence of a reasonable basis for the insurer’s actions or inaction.” In this case, the insurer believed the application constituted a sufficient writing under section 1734 to reduce UIM coverage limits. The Third Circuit found the insurer’s belief, “not only reasonable but correct.” Thus, its “reliance on the lower UM/UIM coverage limits in informing its investigation and settlement offers was therefore not deceptive.”

Date of Decision:  April 8, 2021

Gibson v. State Farm Mutual Automobile Insurance Company, U.S. Court of Appeals for the Third Circuit No. 20-1589, 2021 WL 1310777 (3d Cir. Apr. 8, 2021) (Hardiman, Pratter, Roth, JJ.)

NO BAD FAITH WHERE “RED FLAGS” EXISTED THAT COULD UNDERMINE COVERAGE; RULE TO FILE COMPLAINT NOT BAD FAITH (Middle District)

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This case involved an auto accident death, and whether the deceased was an insured “family member” under his stepfather’s auto policy.  Coverage depends on whether the deceased resided with the named insured/step-father at the time of the accident.  The stepfather brought breach of contract and bad faith claims, on behalf of his stepson’s estate.

The court denied summary judgment to both parties on the coverage issues, as material facts remained open on the coverage issued.  As Judge Mannion states, “[i]n short, there exist too many disputed material facts as to whether [the stepson] was a ‘family member’ of plaintiff’s household at the time of the accident.”

The court did grant the insurer summary judgment on the bad faith claim, as plaintiff could not meet the clear and convincing evidence standard necessary to prove bad faith.

Judge Mannion observed that during its investigation, the insurer discovered that the stepson might not have met the definition of “family member” under the policy.  There were statements from two people that the stepson with living with his girlfriend and her mother, not the stepfather; that the stepfather had removed the stepson from the policy at issue; and that the deceased had purchased his own vehicle with its own insurance policy, and that policy had an address other than the stepfather’s address at the time of the accident.

While the stepson’s driver’s license and tax returns did indicate he resided with his stepfather, the insurer “certainly had sufficient evidence that showed [the stepson’s] physical residence was at [the girlfriend’s] house.”

Red flags oblige the insurer to investigate thoroughly

Looking at all the circumstances, Judge Mannion observed that “[u]nder Pennsylvania law, insurers are permitted to ‘conduct a thorough investigation’ of a questionable claim without acting in bad faith”, and “[w]here an insurer sees red flags’ that cause concern of insurance fraud and prompt an investigation, the insurer has a reasonable basis for investigation, and is therefore not liable for claims of bad faith.”  Here, the insurer “had more than a reasonable basis to investigate where [the stepson] was really residing at the time of the accident since it had ample evidence to show that he may have moved out of plaintiff’s house months before the accident.”

Under these circumstances, the insurer was “entitled to conduct its own investigation and its finding that [the stepson] was not residing with plaintiff and was not a covered family member as defined in plaintiff’s Policy was reasonably based on evidence it uncovered. Thus, defendant’s denial [of] plaintiff’s UIM claim made on behalf of [the stepson’s] Estate was not an act in reckless disregard of its obligations under plaintiff’s Policy.”

Rule to file a complaint not bad faith

The court also rejected the notion that the insurer acted “outrageously” in filing a rule to file a complaint, after plaintiff had initiated the action by way of writ of summons.  The insurer sought to have a complaint filed because it lacked information, and “instructed plaintiff to file a complaint so that it could develop the facts as to [the stepson’s] residence.” Judge Mannion added, “[i]ndeed, as defendant points out, the court held in Fabrikant v. State Farm Fire and Cas. Co., [a summary of which can be found here] …. that ‘an insurer’s exercising its procedural right to serve a Rule to File Complaint is not bad faith, absent a showing of clear and convincing evidence that such action was taken in bad faith.’” Here the insurer “was obliged to investigate where [the deceased] was physically residing at the time of the accident in order to properly consider plaintiff’s UIM claim, especially since there was evidence that his residence was at [another] house.” [Emphasis added]

Date of Decision:  April 1, 2021

Fuentes v. USAA General Indemnity Co., U.S. District Court Middle District of Pennsylvania, No. CV 3:19-1111, 2021 WL 1225934 (M.D. Pa. Apr. 1, 2021) (Mannion, J.)

NO BAD FAITH WHERE (1) NO COVERAGE DUE, (2) ALLEGED BAD FAITH COMMUNICATIONS WITH CLIENT WERE EITHER IMMATERIAL OR ACCURATE, AND (3) ANY OMISSIONS IN THOSE COMMUNICATIONS ONLY AMOUNTED TO NEGLIGENCE AT MOST, NOT BAD FAITH (Western District)

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The insured brings this breach of contract and bad faith case based on the insurer’s denying virtually all of her water damage claim, and its allegedly improper claim handling in communications to the insured.  Western District Magistrate Judge Dodge grants the insurer’s motion to dismiss, but with leave to file an amended complaint.

First, the court dismissed the breach of contract claim.  Magistrate Judge Dodge found there was no coverage for the claims pleaded because the damages specifically alleged, when compared to the clear policy language, were not insured losses. There was, however, enough ambiguity in the plaintiff’s allegation that she suffered “resulting damages”, to allow the insured to amend if she could identify any other forms of damages that might be covered under the policy.

As to the bad faith claim, Magistrate Judge Dodge first observed that her contract ruling explained how the coverage denial was proper.  Further, “[t]he bad faith claim does not refer to any circumstances other than [plaintiff’s] contention that [the insurer] failed to communicate all of the policy language to her in one of its letters.” This was of no moment. The policy exclusion language omitted in the letter was irrelevant because the insurer did not rely on the omitted exclusion in denying coverage.

The insured alleged that the insurer also omitted a distinct important policy provision in correspondence to the insured. This was belied, however, by the correspondence itself. The purportedly omitted provision actually was included in the letter. Moreover, even if the omission occurred, this amounted at most to negligence, mistake, or poor judgment, none of which makes out an actionable bad faith claim.

Thus, the motion to dismiss the bad faith claim was granted, but without prejudice.

Date of Decision:  March 19, 2021

Blanton v. State Farm Fire & Casualty Co., U.S. District Court Western District of Pennsylvania Civil Action No. 20-1534, 2021 WL 1060661 (W.D. Pa. Mar. 19, 2021) (Dodge, M.J.)

Our thanks to the insurer’s counsel, Mark A. Martini, of Robb Leonard Mulvihill LLP, for bringing this case to our attention.

CLAIM HANDLING REASONABLE + NO CLEAR AND CONVINCING EVIDENCE ON INTENT = NO BAD FAITH (Middle District)

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Middle District Judge Conner closely examined the claims handling history before granting the insurer summary judgment on plaintiff’s bad faith uninsured motorist claim.

The record’s details show the claims handler actively investigating the claim and injuries, communicating with the insured’s counsel, and discussing the case with two other involved insurers as to their valuation before making a settlement offer.  The settlement offer was a small fraction of the policy limit demand, but that could not create bad faith under the circumstances.

As the court stated,

At bottom, the record establishes nothing more than a legitimate disagreement over causation of [plaintiff’s] injuries and valuation of her claim. It is well settled that genuinely disputing causation and value is not tantamount to bad faith. That [the insurer] did not “immediately accede to” [a] demand for policy limits also is not, by itself, evidence of bad faith. … Nor does [the insured’s] belief that the preliminary offer was too low, without more, establish that [the insurer] acted unreasonably. … “[O]ur Courts have not recognized bad faith where the insurer makes a low but reasonable estimate of the insured’s losses.” … This is particularly true given that [the insurer] articulated legitimate reasons for doubting causation; reasonably concluded the claim would not pierce the limited-tort threshold; had not been advised of any wage-loss claim by [plaintiff’s] legal team; and, perhaps most importantly, made clear that its offer was not final.”

Judge Conner concluded that the insured “failed to identify any evidence—much less clear and convincing evidence—from which a reasonable juror could find that [the insurer] lacked a reasonable basis for its preliminary settlement offer.” Thus, the insured could not establish that the insurer’s conduct was unreasonable.  Summary judgment was warranted for failing to meet this first element of statutory bad faith.

Judge Connor also addressed the knowing or reckless disregard element as well.  The insured offered no clear and convincing evidence on intent to take an unreasonable position.  The insured argued, in conclusory language, that “critical information” was withheld and “irrefutable proof” existed to prove intent; but there were no facts adduced from the record to support these assertions. The documents referenced that purportedly provided clear and convincing proof did not even exist at the time of the insurer’s purported bad faith settlement offer.

Thus, summary judgment also was warranted for this failure to make out the second bad faith element.

Date of Decision: March 15, 2021

Castillo v. Progressive Insurance, U.S. District Court Middle District of Pennsylvania No. 3:19-CV-1628, 2021 WL 963478 (M.D. Pa. Mar. 15, 2021) (Conner, J.)

NO BAD FAITH WHERE INSURED FAILS TO PLEAD BREACH OF CONTRACT; INSURED CAN’T DICTATE MANNER OF INVESTIGATION (Western District)

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The insured suffered a fire loss and asserted the carrier’s actual cash value estimate was unreasonably low.  It brought breach of contract and bad faith claims.  The insurer moved to dismiss.

Breach of contract claim dismissed, without prejudice, for failing to allege damages

The court dismissed the breach of contract claim, without prejudice, because the insured failed to plead damages adequately.  The policy required, “as a condition of reporting a loss that ‘the insured … give immediate written notice to this company of any loss … showing in detail actual cash value and amount of loss claimed.’ … [The] Amended Complaint does not detail an actual cash value and amount of loss claimed. Therefore, without sufficient pleading as to the damage[]s element, [the insured] has not adequately pleaded a breach of contract claim.”

No bad faith in denying payment, or in the manner of investigation that is justified under express policy language

On the bad faith claim, the insured claimed the same unreasonably low valuation, and a bad faith investigation via “propounding unnecessary, burdensome, and overbroad document requests related to mutual funds, life insurance policies, five years of tax returns, and bankruptcy documents, which allegedly served no legitimate purpose in Defendants’ investigation of this commercial insurance claim.” In making these claims, however, the insured did “not account for the requirements under the Policy and [the pleadings merely] contain conclusory allegations.”

As to the document requests, the bad faith allegations were conclusory, “given that the allegations do not specify how the documents requested would not support the requirements of proof under the … Policy.”  The policy provided a specific and wide range of categories subject to investigation as a prerequisite to paying a loss.  In rejecting the insurer’s offer, the insured “placed the … valuation at issue and invited further investigation under the Policy, which could include some of the documentation requested by the Defendant. Defendants are placed in a position where they have a duty to conduct a thorough investigation; however, they are hamstrung by their insured’s unilateral determinations of what Defendant’s should be allowed to investigate.”

Analogizing this to inevitable discovery requests and objections should the claim be allowed to proceed, the court found the insured would not meet its burden in objecting to the same requests posed in discovery.  Thus, the allegations these document requests constitute bad faith were conclusory and inadequate.

Finally, the “claims that the Defendants’ determination of actual cash value was unreasonable are similarly conclusory, and [the insured] has provided neither a specific claim for damage nor an alternative valuation method. Thus, [the insured] has not adequately pleaded a statutory bad faith claim.”

Plaintiff was, however, given leave to amend.

Date of Decision:  March 4, 2021

Integral Scrap & Recycling, Inc. v. Conifer Holdings, Inc., U.S. District Court Western District of Pennsylvania No. 2:20-CV-00871-MJH, 2021 WL 826747 (W.D. Pa. Mar. 4, 2021) (Horan, J.)

DEFENSE VERDICT FOR INSURER AFFIRMED; NO BAD FAITH BASED ON ALLEGED LOW-BALL OFFERS OR CLAIM HANDLING (Pennsylvania Superior Court) (Non-precedential)

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This fact-driver UIM bad faith case resulted in a non-jury verdict for the insurer.  Pennsylvania’s Superior Court affirmed.

[This is the second non-precedential Superior Court opinion reviewing bad faith verdicts that we’ve summarized in last three weeks, demonstrating the increasing role these non-precedential appellate decisions may come to play in briefing bad faith issues.  Per Pennsylvania Rule of Appellate Procedure 126(b), such decisions issued after May 19, 2019 can be cited for their persuasive authority.  This decision is also noteworthy in reiterating that it is not the court’s job on appeal to flesh out arguments or find support in the record that is not adduced by a party in its briefing.]

Factual and procedural background

Plaintiff was injured as a bus passenger, when another vehicle hit the bus.  The plaintiff’s symptoms and treatment concluded six months after the collision.

The tortfeasor only had $15,000 in coverage, and plaintiff sought UIM benefits under his brother’s policy. Plaintiff did not seek this UIM coverage, however, until 19 months after the collision.

The brother’s carrier began its investigation the same month the claim was reported. Both brothers were interviewed and provided evidence that would lead to there being no coverage, but plaintiff provided other evidence favoring coverage. After two months, the insurer completed its investigation, and concluded it would provide UIM coverage.

Shortly after, the insured provided a document package. The carrier evaluated the information and soon offered $5,000, additionally telling plaintiff’s counsel the insurer needed proof that plaintiff’s work loss was due to the collision and not any other causes. Instead of replying, 17 days later plaintiff filed his bad faith suit.

The complaint alleged bad faith based only on “low ball offers and the investigation as being excessively long….” No loss of consortium claim was ever pleaded, though it was mentioned in some correspondence between counsel.

The arbitration award and the arbitrator’s doubts

The underlying claim went to binding arbitration, while the bad faith claim was pursued in court.  Before the arbitration hearing, the insurer offered $12,500, and then $30,000, to settle. Plaintiff never lowered his demand below the $100,000 policy limit.  The arbitrator’s award “was not far above the final offer of $30,000.00.”

Although the arbitrator awarded money damages, he expressed doubts about plaintiff’s case.  He observed the contradiction between plaintiff’s telling medical personnel in October 2013 that his medical issues had resolved, while later claiming they did not resolve but continued to get worse.  The arbitrator also expressed concern over apparent conflicts between the plaintiff’s claim he could not, and did not, work, compared to the actual work and medical history. Among other things, the arbitrator recited details as to the funds plaintiff alleged he and his wife lived on for years, and how it appeared highly unlikely they could actually have survived on this amount without plaintiff himself having also worked (despite his assertions that he could not work).

In later reviewing the arbitration award for loss of consortium, the court expressed concerned that while the arbitrator observed the complaint failed to actually include any claim for loss of consortium, he still awarded $15,000 in loss of consortium damages. The arbitrator did so because the wife’s name was in the caption and the policy provided for loss of consortium damages.

The Superior Court was also concerned that the arbitrator never explained the basis for its other damage awards. “While the arbitrator awarded [plaintiff] $21,905.00 for lost wages and $35,000 for pain and suffering, this Court is again unable to determine the bases for these figures.”

The trial court’s verdict and reasoning, and Superior Court’s affirmance

The trial court ruled against plaintiffs on the merits.  First, the passenger’s wife claimed bad faith for the carrier failing to pay on the loss of consortium claim. But the trial court only learned of this loss of consortium claim the day of trial, and it refused to consider that belated claim. The Superior Court ultimately found this issue waived on appeal.

As to the bad faith claims for delays in the investigation and low ball offers, the trial court observed that plaintiff and his wife did not even appear at trial to support their claims. Rather they relied on witnesses associated with the insured to focus on the allegedly improper claims handling, and apparently an expert witness (whose testimony or report was not persuasive to the trial court judge). The trial court found plaintiff failed to meet his burden by putting on clear and convincing evidence of bad faith.

The Superior Court affirmed.

The “low ball” offer claim fails

In addressing the “low ball offer” bad faith claim, the court contrasted the instant facts with those in the seminal Boneberger case.  In Boneberger, the trial court found the insurer’s witnesses lacked credibility, did not conduct at IME when challenging medical records, actively promoted unethical claim handling practices, and that the insureds only brought suit after long negotiations and an arbitration award. In the present case, there were no similar credibility rulings against the insurer, there was an IME, and there was no finding the carrier promoted an unethical philosophy. Further, instead of allowing the investigation to develop, the bad faith suit was filed in short order, without any prolonged negotiations and before the arbitration award.

The Superior Court also rejected the argument that the arbitration award was evidence of bad faith “low ball” offers. As the court observed, the arbitrator did not find plaintiff and his wife credible, found their medical and wage evidence unreliable, and failed to explain sufficiently the basis for his damage awards. “The fact that the arbitrator awarded damages which were less than those sought … but more than what [was] offered does not support a finding that [the insurer] acted in bad faith.”

The claim handling argument fails

The court then rejected the argument for bad faith in evaluating the information plaintiff provided to the insurer. In rejecting this argument, the court not only found it “scattershot, unsupported by legal authority and undeveloped[,]” but made clear what courts will not do in reviewing cases on appeal.

The Superior Court will not play the role of advocate

  1. “Arguments not appropriately developed include those where the party has failed to cite any authority in support of a contention. This Court will not act as counsel and will not develop arguments on behalf of an appellant. Moreover, we observe that the Commonwealth Court, our sister appellate court, has aptly noted that [m]ere issue spotting without analysis or legal citation to support an assertion precludes our appellate review of [a] matter.”

  2. “While the [insureds] complain that [the insurer] failed to properly evaluate certain medical and wage evidence they provided, they do not specify the evidence, explain its relevance, or state where it is in the record. … The certified record, including transcripts, is nearly 6000 pages. While we have undertaken careful review, it is not our responsibility to comb through the record seeking the factual underpinnings of a claim. Commonwealth v. Mulholland, 702 A.2d 1027, 1034 n.5 (Pa. Super. 1997) (‘In a record containing thousands of pages, this court will not search every page to substantiate a party’s incomplete argument’).”

Superior Court would not reverse trial court credibility determination on expert

The Superior Court also ruled plaintiff had waived the argument that the trial court failed to properly consider expert testimony, while still observing that the “trial court, as the finder of fact, is free to believe all, part or none of the evidence presented. Issues of credibility and conflicts in evidence are for the trial court to resolve; this Court is not permitted to reexamine the weight and credibility determination or substitute our judgment for that of the fact finder.”

Date of Decision:  February 26, 2021

Gavasto v. 21st Century Indem. Ins. Co., Superior Court of Pennsylvania No. 1625 WDA 2019, 2021 WL 754026 (Pa. Super. Ct. Feb. 26, 2021) (McCaffery, Murray, Olson, JJ.)