Archive for the 'PA – Communication with insured' Category

BANKRUPTCY COURT PERMITS BAD FAITH CLAIM TO PROCEED, EVEN AFTER BREACH OF CONTRACT CLAIM DISMISSED (Philadelphia Bankruptcy Court)

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This is a rare bad faith case raised before a Bankruptcy Court in the context of an adversary proceeding.

The bankrupt/insureds brought a first party property damage claim against an excess insurer.  It is not fully clear from the record if the insureds were parties to the excess insurance agreement, which appears to be designed to protect a mortgage holder.  In any event, the court held there was nothing in the record that could establish excess coverage was triggered.  Thus, the court granted summary judgment on the breach of contract claim, finding no excess coverage possibly due that could have invoked the insurance contract’s coverage obligations.

The absence of any benefits being due, however, did not stop the court from analyzing the bad faith claim, and ultimately allowing that claim to proceed.

As discussed many times in this blog, there is a serious issue about whether a statutory bad faith claim can proceed if the insurer has not denied any benefit under an insurance policy, i.e., payment of a first party claim or defense and indemnification under a liability insurance policy. This limitation appears to be the required by the Pennsylvania Supreme Court’s 2007 decision in Toy v. Metropolitan Life.  An article addressing this issue can be found here.  See also this January 2020 post, this March 2021 post, and this January 2021 post questioning whether the non-precedential Third Circuit decision in Gallatin Fuels failed to consider Toy in reaching the conclusion that it was possible to pursue a bad faith claim when no policy was even in effect at the time of the loss.

In the present adversary proceeding, the court chiefly relied on Gallatin Fuels for the proposition that statutory bad faith claims can be pursued even where no benefits are due because there is no enforceable insurance contract, solely based on claims of poor investigation practices and possible misrepresentations during the investigation.

The court also relied on Pennsylvania’s Unfair Insurance Practices Act and Unfair Claim Settlement Practices regulations in finding a potential basis for bad faith. In particular, the court cites, 31 Pa. Code § 146.6 (providing “that every insurer shall complete investigation of a claim within thirty days after notification of the claim unless it cannot reasonably be completed in that time. It further provides that if the investigation cannot be completed within that timeframe, every forty-five days thereafter, the insurer shall provide the claimant with a reasonable explanation for the delay and state when a decision on the claim may be expected.”)

Courts approach violations of the UIPA and UCSP regulations differently, ranging from a complete prohibition on considering their violation in proving statutory bad faith cases, to using those violations as evidence of bad faith.  Our May 2, 2019 post summarizes different approaches courts take in considering UIPA and Unfair Claim Settlement Practices regulations.

Most recently on this Blog, we summarized Western District Magistrate Judge Dodge’s December 2020 Kleinz v. Unitrin opinion. Magistrate Judge Dodge found that since the seminal Terletsky opinion in 1994, “federal courts have uniformly rejected plaintiffs’ attempt to rely on UIPA violations to support bad faith claims.” She found that contrary to the insured’s arguments that some federal cases hold otherwise, “for the past 26 years, case law in federal courts on this issue has been consistent.”  Magistrate Judge Dodge cites, among other cases, the Third Circuit’s opinion in Leach, Judge Gibson’s 2019 Horvath opinion, Judge Fisher’s 2014 Kelman decision (while sitting by designation in the Western District), Judge Kosik’s 2007 Oehlmann decision, and Judge Conti’s 2007 Loos opinion.

Some other recent opinions look unfavorably toward using UIPA and UCSP violations to make the statutory bad faith case. See, e.g., Judge Quiñones Alejandro’s December 2020 White Opinion, and Judge Wolson’s April 2020 Live Face decision. In his March 2020 Clapps decision, Judge Darnell Jones notes that while there is no private right of action under the UIPA or UCSP regulations, there might be some circumstances where their violation might be the premise for a bad faith case.

All that being said, the bad faith claim was allowed to proceed in this case, in light of claim handling conduct that clearly troubled the court.

Date of Decision:  April 15, 2021

In Re Lena D. Lewis, Debtor, Lewis v. U.S. Bank National Association, U.S. Bankruptcy Court for the Eastern District of Pennsylvania No. AP 18-00240-AMC, 2021 WL 1424721 (Bankr. E.D. Pa. Apr. 15, 2021) (Chan, J.)

BAD FAITH CLAIM BARELY STATED BASED ON ALLEGED FAILURES TO INVESTIGATE, DELAY, AND LOW VALUATION, TAKEN IN THEIR TOTALITY (Middle District)

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This is a breach of contract and bad faith first party property damage claim.  The court denied the insurer’s motion to dismiss the bad faith claim.

The insured suffered a furnace malfunction that she claimed led to $35,000-$40,000 in damages. She later suffered a second malfunction leading to a roughly equal amount of additional damages.

The insurer valued the first claim at $15,000, paid that sum less the deductible, and refused to pay any sum for the second claim.  This full denial was based on the insured’s alleged failure to clean after the first incident, and that the only odor in the house was from cigarettes, not soot from the furnace discharge.

Middle District Judge Mariani found that while the complaint included some conclusory allegations, and the facts alleged on bad faith were “sparse”, the complaint’s allegations were “enough to barely ‘nudge[ ] [the] claim[ ] across the line from conceivable to plausible….’”

Delay related bad faith

The relevant facts pleaded were that the insurer waited one month until after the first loss to send out an adjuster to investigate.  Further, the insurer did not pay anything for the first loss for seven months. The court observed that “’bad faith may be premised on an insurer’s bad faith in investigating a claim, such as by failing to conduct a good faith investigation into the facts or failing to communicate with the claimant.’”  Further, “[a]lthough delay ‘on its own [does not] necessarily constitute bad faith’, the delay between a demand for benefits and an insurer’s determination of whether to pay a claim is a relevant factor in determining whether an insurer has acted in bad faith.”

Applying these principles to the factual allegations, Judge Mariani found enough delay pleaded in both sending out an investigator, and in paying on the first claim, to survive dismissal.

Valuation related bad faith

The court next addressed whether the valuation differences could amount to bad faith.  As stated, the insured provided estimates ranging from $35,000 to $40,000 and the carrier’s expert valuation was $15,000.  After taking out the deductible, the payment was $10,400.

Judge Mariani observed that “[a]lthough bad faith ‘is not present merely because an insurer makes a low but reasonable estimate of an insured’s damages,’ the disparity between the defendant insurer’s payment and the plaintiff’s estimates is a relevant consideration in bad faith claims.” He relied on Middle District Judge Mannion’s Meiser v. State Farm opinion for the proposition that an “extreme disparity” in the parties’ damage estimates can lend support to a bad faith claim, especially where exhibits are attached showing the extent of the damages. A link to our Meiser summary can be found here.

Judge Mariani found the $25,000 disparity, accompanied by exhibits explaining the damages, to be sufficient to support a bad faith claim. The opinion’s language indicates that the valuation allegations were read along with the delay allegations in evaluating the bad faith claim, and that it was the totality of these three factors (delayed investigation, delayed payment, and valuation disparity) that together made out a plausible bad faith claim.

[For a few examples of valuation disputes insufficient to state a bad faith claim, see this post.]

Failure to investigate related bad faith

As to totally denying the second claim, the complaint alleged denial was based on the insured’s alleged failure to clean the premises after the first loss. However, the insured allegedly informed the carrier that she and her daughter made a significant cleanup effort after the first malfunction and before the second, and the insurer knew this before denying the claim.  Thus, plaintiff alleged the carrier ignored the fact that she did clean, and then ignored her damage estimate transmitted to the carrier because of this putative failure to clean. The insured also alleged the carrier did not pay heed to her public adjuster “pointing out that the home was a forced, hot air system and that [the insurer] had agreed to clean the ducts on the second floor, but not the rooms that were contaminated with the soot/smoke….”

Judge Mariani found the totality of these factual allegations, taken in the light most favorable to plaintiff,  made out a bad faith claim for failure to conduct an adequate investigation, which in turn resulted in an unfounded claim denial. He added that, “[a]lthough discovery in this case may later reveal that Defendant did in fact have a reasonable basis to deny Plaintiff’s second claim, the Complaint states the minimum amount of facts necessary to allow Plaintiff’s bad faith claim to survive the motion to dismiss.”

After surveying the totality of the facts on both claims, Judge Mariani summarized as follows: “Though none of these factual allegations alone may be sufficient to state a claim under § 8371, taken together, Plaintiff has successfully, though barely, stated a plausible claim of bad faith.”

Date of Decision:  March 19, 2021

Chuplis v. State Farm Fire and Casualty Co., U.S. District Court Middle District of Pennsylvania No. 3:20-CV-1757, 2021 WL 1080932 (M.D. Pa. Mar. 19, 2021) (Mariani, 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.

NO BAD FAITH BASED ON: (1) COMPARISON OF OFFER AND RESERVES; (2) UIPA VIOLATIONS; (3) LOWER SETTLEMENT OFFER THAN INSURED DEMANDED; (4) FAILURE TO RAISE SETTLEMENT OFFER; (5) INSURED’S FAILURE TO NEGOTIATE; (6) TIMING OF PARTIAL PAYMENT; OR (7) CLAIM MANUAL (Western District)

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In Western District Magistrate Judge Dodge’s May 2020 opinion in this case, the court allowed this UIM bad faith claim to survive a motion to dismiss. That decision is summarized here.  Her present opinion addresses the insurer’s summary judgment motion on bad faith.

The stipulated facts show, among other things, the insured’s injuries, that the tortfeasor’s carrier paid $50,000, that the insured demanded full UIM policy limits of $500,000, that the insurer set a $25,000 reserve and offered $10,000 to settle the claim fully, and that there was a dispute among medical experts about the scope of future treatment.  The record showed that the insurer’s claim adjustor reviewed new information from the insured on a number of occasions and found no basis to revise his damage analysis behind the $25,000 reserve figure.

After a considerable time period, the insured’s counsel did demand partial payment of the $10,000, saying this was undisputed, but never provided a full counter demand to the $10,000 offer because the course of medical treatment remained open.  The insurer eventually agreed to pay the $10,000, but the record appears ambiguous as to how each side interpreted the conditions of that payment.

Although the earlier motion to dismiss resulted in dismissal of claims asserting a private right of action under the Unfair Insurance Practices Act (UIPA), the insured asserted there were technical violations of the UIPA that could be considered in ruling on a statutory bad faith claim.

The court identified the following bad faith claims:

  1. The insurer allegedly “failed to re-evaluate the UIM claim when presented with new information and then make a higher offer despite raising the amount of its reserves.”

  2. The insurer “failed to make a timely partial payment of $10,000 even though that amount was undisputed.

  3. The insurer “violated the UIPA and its own claims-handling policies in at least two respects—by failing to notify [the insured] of its position that his alleged contributory negligence reduced the value of his claim, and failing to respond to an offer within ten days.”

Poor Judgment is Not Bad Faith

Magistrate Judge Dodge stated that “neither an insured’s disagreement with the amount offered on a UIM claim nor a citation to negligent mistakes made by the insurer in handling the claim is sufficient to demonstrate bad faith.”

She looked to Judge Hornak’s recent Stewart decision, summarized here, granting the insurer summary judgment “where plaintiff pedestrian suffered injuries that he valued at $2 million but the insurer investigated, set the value of the claim at $125,000, set reserves at $55,000 and offered $25,000” and Judge McVerry’s 2013 Schifino decision, summarized here, where a “$10,000 initial offer on UIM claim valued at $60,000 did not constitute bad faith and although [the insurer’s] conduct was ‘not free from criticism in its initial handling of the claim … this conduct is more indicative of poor judgment than bad faith.’”

Setting Aside Reserves Cannot be used as a Cudgel

Magistrate Judge Dodge also addressed the law concerning reserves, stating that “setting aside reserves does not amount to an admission of liability.” “Reserves are merely amounts set aside by insurers to cover potential future liabilities,” and “the setting of reserves is an estimate of an insurer’s exposure under a claim …[but] the court is reluctant to fashion a rule requiring an insurer to make an offer reflecting the reserve as soon as it is set.” Thus, “bad faith does not hinge on whether an offer is less than the reserves….”

The Alleged Failure to Increase an Offer is Not Bad Faith

The court rejected the claim that the insurer had raised reserves while failing to reevaluate the claim. In fact, the claim handler had not raised reserves even after receiving new information from the insured, but kept the reserves at the same figure after evaluating that new information.

The adjustor’s claims notes omitted $45,000 in medical expenses at two different dates, which were in his original evaluation. The insured claimed this demonstrated bad faith in evaluating the claims. The adjustor testified “that this was simply a mistake ‘because if you look at the doctor’s notes there’s no difference in what I already knew.’ Thus, this evidence suggests that [the] adjustor made an error when he recorded or updated information in his notes. This would amount to negligence, not bad faith. Importantly, it is undisputed that [the adjustor] concluded in each evaluation that a reserve setting of $25,000 was appropriate and his assessment of the potential value of the UIM claim did not change.”

Further, simply because the $10,000 offer was lower than the reserves did not prove bad faith, nor was it even “evidence of bad faith.” There also was no evidence the adjustor concluded the UIM claim’s value “was far in excess of the amount he set as a reserve or that his offer was unreasonable.”

The court distinguished the well-known Boneberger case on grounds that case was about intentionally devious claim handling practices used to create artificially low values. It was not about simply making offers that were much lower than the claimed value.

Magistrate Judge Dodge then discussed case law recognizing the principle that low but reasonable estimates cannot support bad faith claims. She looked to the Third Circuit’s 2019 Rau decision, summarized here. In addition, she looked to Judge Conti’s Katta opinion, summarized here, in observing factors weighing against bad faith, such as: the uncertainty of the claim’s value; “the offer was not unreasonably low because an initial offer below the alleged amount of loss does not constitute evidence of bad faith”; the insurer’s willingness to increase its offer and the insured’s refusal to negotiate down from a policy limit demand; and the insured’s failure to provide additional information to the insurer as to why its offer should be increased.

The court quoted Judge Conti at length: “It is troubling that plaintiff seeks to proceed with his bad faith claim despite having made no effort to engage in negotiations with defendant. Plaintiff was under no duty to negotiate, but courts have recognized that stonewalling negotiations is a relevant consideration in determining whether an insurer acted in bad faith. …. If plaintiff’s bad faith claim were to proceed, future plaintiffs could survive summary judgment on bad faith claims by simply filing suit after receiving an offer that the plaintiff believes is too low. The mere fact that defendant’s initial offer was lower than plaintiff’s unsubstantiated claim of lost wages, in absence of any other substantive evidence of bad faith, including unreasonable delay, intentional deception, or the like, is not sufficient to constitute clear and convincing evidence.”

In the present case, the insured never made a counter demand or attempted to negotiate after the $10,000 initial offer, and never came off of a policy limit demand.  Moreover, as set out above, the adjustor’s claim handling and claim evaluation were not unreasonable.

Partial Payment Issue not a Basis for Bad Faith

Magistrate Judge Dodge cited Third Circuit precedent that a failure to make partial payment could only reach the level of bad faith “where the evidence demonstrated that two conditions had been met. The first is that the insurance company conducted, or the insured requested but was denied, a separate assessment of some part of her claim (i.e., that there was an undisputed amount). The second is, at least until such a duty is clearly established in law (so that the duty is a known duty), that the insured made a request for partial payment.” She observed Pennsylvania’s Superior Court has followed this standard.

In the present case, there was no separate assessment of a partial claim, or any partial valuation carried out, resulting in an agreed upon undisputed partial sum due.  There was only an offer that the insured originally declined, but later demanded be paid without the insured admitting he either accepted or rejected that offer. Rather, the insured’s counsel asked the carrier to “issue a draft in the amount of the $10,000 as a partial payment of the UIM benefits until a counter can be made and the matter can be resolved in full.” Further, even when the $10,000 was paid, the parties disagreed over the meaning of the payment.

Magistrate Judge Dodge concluded the “agreement to pay to Plaintiffs the amount of its previous offer to settle the UIM claim does not represent evidence of bad faith.” While it might be generally correct to characterized the $10,000 as undisputed “there were no communications about this amount representing a separate assessment of some component of [the] claim.” Moreover, any delay in paying the $10,000 fell on the insured.

“Thus, to the extent that Plaintiffs continue to assert that the failure [] to make a more timely partial payment represents bad faith, any such claim fails as a matter of law. Plaintiffs cannot assert that [the insurer] acted in bad faith by offering to make a partial payment—which it was not required to do—and not offering it again sooner after Plaintiffs rejected it.”

UIPA Violations Cannot Form the Basis of a Bad Faith Claim

The parties agreed there is no private right of action under the UIPA. The insured, however, wanted to use UIPA violations as evidence of statutory bad faith. The court rejected that effort.

Magistrate Judge Dodge stated that since the seminal Terletsky opinion in 1994, “federal courts have uniformly rejected plaintiffs’ attempt to rely on UIPA violations to support bad faith claims.” Contrary to the insured’s arguments that some federal cases hold otherwise, she states that “for the past 26 years, case law in federal courts on this issue has been consistent.”  Magistrate Judge Dodge cites, among other cases, the Third Circuit’s opinion in Leach, Judge Gibson’s 2019 Horvath opinion, Judge Fisher’s 2014 Kelman decision (while sitting by designation in the Western District), Judge Kosik’s 2007 Oehlmann decision, and Judge Conti’s 2007 Loos opinion.

[Our May 2, 2019 post summarizes different approaches courts take in considering UIPA and Unfair Claim Settlement Practices regulations.]

No Bad Faith Based on Insurer’s Own Manuals

Magistrate Judge Dodge found this was not a case where the insurer’s manuals and guidelines recommended aggressive claims handling and litigation tactics to discourage an insured’s legitimate claims.  “In this case, there is no evidence in the record that [the insurer’s] manual promotes improper tactics or conduct; quite the contrary.”

The court also rejected the argument that the insurer acted in bad faith by violating its own claim handling policies. “The issue here is not whether [the insurer’s] claims handling policy is admissible, but whether it provides any support for Plaintiffs’ bad faith claim. It does not.”

In sum, partial summary judgment was granted on the bad faith claim.

Date of Decision:  December 10, 2020

Kleinz v. Unitrin Auto and Home Insurance Company, U.S. District Court Western District of Pennsylvania No. 2:19-CV-01426, 2020 WL 7263548 (W.D. Pa. Dec. 10, 2020) (Dodge, M.J.)

INSURED ADEQUATELY PLEADED UNREASONABLE DENIAL/DELAY, BUT NOT KNOWLEDGE OR RECKLESS DISREGARD; UIPA/UCSP NOT BASIS FOR BAD FAITH (Philadelphia Federal)

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The insurer successfully moved to dismiss a UIM bad faith claim. While the plaintiff pleaded sufficient facts to show the insurer’s conduct was unreasonable, plaintiff failed to sufficiently plead that the insurer’s conduct was knowing or reckless.

Factual Background

The complaint alleged that after settling with the tortfeasor, the insured demanded UIM policy limits from her own carrier. The demand was in writing, accompanied by medical documents, and requested a response in 30 days. There was no response in 30 days, and the insured sent another demand on the 32nd day, and again a month after that.  The carrier’s adjuster responded to the third demand, on the day it was sent, that the carrier did not agree with plaintiff’s valuation of her injuries. On that same day, the insured also requested a copy of the policy, which the carrier initially refused to provide, but eventually sent almost six weeks later. The Insured made more requests for documents she alleges were relevant, but received no response.

She pleads she was never provided “with (1) a written explanation for the delay in investigating her UIM claim, (2) any indication of when a decision on the claim might be reached, or (3) any written explanation on the status of her claim.” Instead, over six months after her original demand, the insurer made a written demand to arbitrate the UIM claim.

Thus, the only two communications in the six-month period were to dispute valuation and demand arbitration.

The insured sued for breach of contract and bad faith. The carrier moved to arbitrate the UIM claim, and to dismiss the bad faith claim. The court granted the motion to arbitrate, and stayed the insured’s coverage claim pending arbitration.  It dismissed the bad faith claim.

Alleged Bases for Bad Faith

The insured alleged seven bases for her bad faith claim:

  1. “failing to promptly and reasonably determine the applicability of benefits;”

  2. “failing to pay benefits or settle her UIM claim;”

  3. “unreasonably delaying payment;”

  4. “failing to provide a copy of the … Policy when requested;”

  5. “failing to respond to multiple attempts at communication;”

  6. “unreasonably delaying evaluation of her claim;” and

  7. “violating the Unfair Insurance Practices Act (“UIPA”), 40 P.S. § 1171.1 et seq., and the Unfair Claims Settlement Practice (“UCSP”) Guidelines, 31 Pa. Code § 146.1 et seq., by failing to complete claim investigation within thirty days or, if unreasonable, to provide a written explanation and an expected date of completion every forty-five days thereafter.”

Bad Faith Standards and First Element of Bad Faith

The court observed two factors are needed to prove bad faith, as approved in Rancosky: the insured must show “(1) the insurer did not have a reasonable basis for denying benefits under the policy and (2) that the insurer knew of or recklessly disregarded its lack of a reasonable basis.” Judge Quiñones Alejandro stated that the first element covers a range of insurer conduct, such as “an insurer’s lack of good faith investigation or failure to communicate with the claimant regarding UIM claims[, … or] where the insurer delayed in handling the insured’s claim.”

The insured pleaded enough to support a plausible claim for unreasonable conduct in denying the claim. She “alleged that during the nearly six months between Plaintiff initially filing her UIM claim and [the insurer] making a written arbitration demand, Plaintiff’s counsel attempted to communicate … on at least five separate occasions for any update on the status of Plaintiff’s claim.” The insurer only responded once to dispute valuation and then three months later to demand arbitration.  This was enough to make out a claim for “unreasonable delay to investigate and settle Plaintiff’s claim.”

Second Element of Bad Faith Not Met

Proving knowledge or reckless disregard goes beyond mere negligence or poor judgment. Pleading “the mere existence of the delay itself is insufficient.” “Rather, a court must look to facts from which it can infer the defendant insurer ‘knew it had no reason to deny a claim; if [the] delay is attributable to the need to investigate further or even simple negligence, no bad faith has occurred.’” “In cases involving delay or failure to investigate or communicate, courts have found the length of the delay relevant to an inference of knowledge or reckless disregard.” Judge Quiñones Alejandro cited examples of cases with more than one and two year investigation delays.

She went on to find the insured did not plead a plausible claim of knowing or reckless disregard in denying or delaying payment. “In bad faith cases premised on an insurer’s delay and failure to communicate, courts have generally only inferred plausible knowledge or reckless disregard where the time periods of delay were much longer than six months.” She cites the Superior Court’s Grossi decision (one year delay), and Judge Leeson’s January 2020 Solano-Sanchez decision (two year delay) as other examples.

By contrast, “[h]ere, the time lapse before [the insurer] acted on Plaintiff’s claim by seeking arbitration was roughly six months. Further, nothing in Plaintiff’s complaint attributes this time period to [the insurer’s knowledge or reckless disregard of a reasonable basis for denying (or delaying) the claim, as opposed to ‘mere negligence’ or even an actual need to investigate. Without a longer delay more consistent with the delays established in the aforementioned precedent, or other factual allegations from which this Court could infer that Travelers acted with knowledge or reckless disregard of the unreasonableness of its actions, Plaintiff has not pled facts sufficient to plausibly allege the second element of her bad faith claim. Therefore, Plaintiff’s bad faith claim is dismissed.”

UIPA or UCSP Violations Cannot Form Basis for Bad Faith Claims

In addressing the bad faith claims, the Court observed, “alleged violations of the UIPA or UCSP cannot per se establish bad faith and have not been considered by Third Circuit courts.” Judge Quiñones Alejandro cites the Third Circuit’s decisions in Leach (“holding that ‘insofar as [plaintiff’s] claim for bad faith was based upon an alleged violation of the UIPA, it failed as a matter of law.’”), and Dinner v. U.S. Auto. Ass’n Cas. Ins. Co., 29 F. App’x 823, 827 (3d Cir. 2002) (holding that alleged UIPA or UCSP violations are not relevant in evaluating bad faith claims), as well as the Eastern District decision in Watson (“observing that, since the current bad faith standard was established in Terletsky, ‘courts in the [Third] circuit have … refused to consider UIPA violations as evidence of bad faith.’).”

Date of Decision: December 7, 2020

White v. Travelers Ins. Co., U.S. District Court Eastern District of Pennsylvania No. CV 20-2928, 2020 WL 7181217 (E.D. Pa. Dec. 7, 2020) (Quiñones Alejandro, J.)

PLAUSIBLE BAD FAITH WHERE INSURER’S POSITION RESULTS IN ILLUSORY COVERAGE; NO BAD FAITH WHERE NO COVERAGE DUE (Western District)

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This case centers on a dispute between the insureds and their homeowners carrier over whether the carrier had agreed to policy limit increases based on a multi-million dollar renovation.  The court details a series of alleged telephone communications between the insureds and the carrier, which the insureds claim committed the carrier to the policy limit increases.  This all occurred before the fire loss at issue.

In addition, the policy included a provision for “Home Protection Coverage”. This provision provides for a 25% coverage extension on existing policy limits.  “Essentially, the Home Protector Coverage’s purpose is to provide extended coverage in the event a homeowner’s losses exceed the policy’s coverage limits.”  The insureds also they did everything necessary for the Home Protection Coverage to be in place at the time of their fire loss.

The carrier asserted to the contrary that there was both no evidence properly documenting an increase in policy limits, or that the insureds met the requirements needed to receive the Home Protection Coverage. The insurer rejected claims for the higher limits and the Home Protection Coverage, and the insureds sued for breach of contract, statutory bad faith, promissory estoppel, and violation of the Unfair Trade Practices and Consumer Protection Law (UTPCPL).

Breach of Contract Claims Partially Survive

The court dismissed the breach of contract claim for extended policy limits, without prejudice. There was no plausible claim that a contract existed as such or through the reasonable expectations doctrine.

However, the court found the breach of contract claim for the “Home Protection Coverage” stated a plausible claim.  The court held that to find otherwise would make the relevant policy language illusory.

BAD FAITH

The court set forth various principles on statutory bad faith, though incorrectly stating that the insured must demonstrate some motive of self-interest or ill will.

Plausible Bad Faith Claim Stated for Pursuing Argument that would make Coverage Illusory

The court found the insureds stated a plausible bad faith claim as to the denial of Home Protection Coverage. The insureds alleged they paid their premiums, gave notice of renovations, and timely submitted their coverage claims. “Plaintiffs thus assert that Defendant ‘unreasonably denied the benefits’ and ‘had knowledge of their lack of reasonable basis for denying benefits.’”

More specifically, at the pleading stage, the Court had already “rejected carrier’s interpretation of the Home Protector Coverage … and thus cannot accept Defendant’s argument that its basis for denial of Home Protector Coverage was reasonable because Plaintiffs ‘could not show that their property was fully insured for replacement cost at policy inception.’ …. Such an interpretation would construct an illusory promise of coverage, which the Court has already determined it should not entertain.”

Failure to State Plausible Bad Faith Claim where no Coverage is Due

As to the bad faith claims concerning extending the policy limits, the Complaint did not set out a plausible claim.  As stated above, the court ruled the insureds failed to plead a plausible claim for breach of contract on extending policy limits through the various telephone communications or failing to reschedule an inspection. “As such, the Court agrees with Defendant that in ‘the absence of insurance coverage, there can be no bad faith by the insurer as a matter of law.’” As with the contract claim, dismissal was without prejudice.

Promissory Estoppel and UTPCPL

The court rejected that promissory estoppel could create or increase insurance coverage.  It allowed the claim to proceed, but solely as to amending allegations that could go to the breach of contract claims.

The court agreed that the UTPCPL could not create liability for claims handling. It was not clear to the court, however, whether the alleged deceptive conduct occurred at times other than during claims handling.

The court then carries out a fairly detailed analysis of significant UTPCPL concepts such as malfeasance vs. nonfeasance, pleading intent, pleading with particularity, and whether the gist of the action doctrine might apply.

The court concludes, “while Plaintiffs’ averments of deceptive conduct are not categorically barred by the UTPCPL to the extent set out above, Plaintiffs have not pled their claim with the level of particularity required by Pennsylvania law. Accordingly, the Court grants Defendant’s Motion to Dismiss … without prejudice and with leave to amend.”

Date of Decision: September 24, 2020

Luketich, v. USAA Casualty Insurance Company, U.S. District Court for the Western District of Pennsylvania No. 2:20-CV-00315, 2020 WL 5669017 (W.D. Pa. Sept. 24, 2020) (Hornak, J.)

BAD FAITH CLAIM IS RIPE TO PROCEED; COURT REJECTS MOTION TO BIFURCATE OR SEVER (Philadelphia Federal)

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In this underinsured motorist bad faith case, Eastern District Judge DuBois denied both a motion to dismiss on ripeness grounds, and an alternative motion to server or bifurcate.

The complaint alleges the tortfeasor had $50,000 in coverage and the plaintiff/insured had $500,000 in UIM coverage. The tortfeasor agreed to settle at $47,000 and the UIM carrier consented. Plaintiffs alleged severe and permanent injuries and pursued a UIM claim.

Specifically, the insureds allege they complied with all policy terms and conditions; the insurer did not tender any UIM benefits or make any settlement offers; the insurer did not conduct any investigation into the claims; and the insurer played “cat and mouse” games by “continuously and systematically failing to communicate any offer of settlement or denial of benefits,” misleading plaintiffs as to potential settlement on at least nine occasions, and “purposefully ignoring [plaintiffs’] demand for underinsured motorist benefits.”

BAD FAITH CLAIM CAN PROCEED

First, Judge DuBois rejected the argument that the bad faith claim was not ripe until the breach of contract claim was actually decided. Among other things, the court stated: “Success on a statutory claim for bad faith does not necessarily depend on the success of the underlying breach of contract claim.” Relying on a 1996 Eastern District decision, the court quotes: “A claim for bad faith brought pursuant to § 8371 is a separate and distinct cause of action and is not contingent on the resolution of the underlying contract claim. A plaintiff may succeed on its bad faith claim even if it fails on the underlying breach of contract claim. Additionally, courts interpreting § 8371 have consistently entertained multi-count complaints containing both unresolved insurance contract disputes and bad faith claims.”

The court further relies on the unpublished Third Circuit decision, Gallatin Fuels, Inc. v. Westchester Fire Insurance Co., in reasoning that “’[a] finding that the insured did not ultimately have a duty to cover the plaintiff’s claim does not per se make the insured’s actions reasonable’ in hindsight.” Judge DuBois concludes: “Therefore, so long as the underlying contract claim is ripe, the bad faith claim is also ripe.”

After finding the claim ripe, the court finds plaintiffs can proceed on their bad faith claim. “Plaintiffs allege defendant acted in bad faith by failing to properly investigate their insurance claim, engage in settlement discussions, and communicate with them. This is ‘a separate and distinct’ cause of action from plaintiff’s claim that defendant breached the terms of the policy in failing to pay UIM benefits. … As such, a finding that defendant does not owe plaintiffs UIM benefits would not mandate a finding that defendant did not act in bad faith in handling the insurance claim.”

[Note: This opinion does not address the impact of the Pennsylvania Supreme Court’s decision in Toy v. Metropolitan Life Insurance Company in determining to what extend a statutory bad faith claim can proceed, if at all, when there is no duty to pay any benefits under the policy. Moreover, we have previously observed that Gallatin Fuels never addressed Toy. These issues have been discussed many times on the Blog, most recently here.

Of special note is Judge DuBois’ 2019 decision in Buck v. GEICO, which appears to emphasize, and confirm, the denial of a benefit as a predicate to statutory bad faith claims. Among other things, the Buck opinion looks to Toy as a leading authority, and not Gallatin Fuels. The Buck opinion includes language, in quotes below, stating:

“Even assuming that the bad faith denial of the benefits claimed by plaintiff was properly alleged in the Complaint, plaintiff’s argument fails because plaintiff does not allege the denial of any benefits within the meaning of the statute. ‘[B]ad faith’ as it concern[s] allegations made by an insured against his insurer ha[s] acquired a particular meaning in the law.’”

“Courts in Pennsylvania and the Third Circuit have consistently held that ‘[a] plaintiff bringing a claim under [§ 8371] must demonstrate that an insurer has acted in bad faith toward the insured through ‘any frivolous or unfounded refusal to pay proceeds of a policy.’”

The Buck plaintiff could not state a claim because “[n]one of the ‘benefits’ that defendant allegedly denied plaintiff concern the refusal to pay proceeds under an insurance policy. To the contrary, plaintiff concedes that he ‘does not allege bad faith for refusal to pay benefits.’”

Buck observes that cases have held “’section 8371 is not restricted to an insurer’s bad faith in denying a claim. An action for bad faith may also extend to the insurer’s investigative practices.’” This means, however, that bad faith claims “’need not be limited to the literal act of denying a claim.’”

Rather, “the essence of a bad faith claim must be the unreasonable and intentional (or reckless) denial of benefits.” “Thus, plaintiff must allege the denial of benefits to state a claim under § 8371.”]

In the present case, there seems to be no question that UIM coverage is provided, but only whether the plaintiff’s damages reach into the UIM coverage level or stop below $50,000. The insurer does not appear to challenge whether a plausible bad faith claim has been pleaded with adequate factual allegations, but only that the bad faith claim should not be allowed to proceed because it is not ripe. The court concludes that the UIM bad faith claim is ripe and can proceed.

MOTION TO BIFURCATE OR SEVER DENIED

The Procedures and Standards Governing Contract and Bad Faith Claims do not Favor Bifurcation or Severance.

Judge Dubois first rejected the argument that the claims should be severed or bifurcated because they will be governed by different procedures and standards. First, the carrier incorrectly argued that the contract and loss of consortium claims go to a jury while bad faith is decided by the judge. While true in Pennsylvania state court actions, bad faith claims can go to the jury in federal court cases. Next the court rejected the notion that the jury would be confused in applying the preponderance of the evidence standard to the contract claim and clear and convincing evidence standard to the bad faith claim. Judge Dubois also rejected the argument that the facts at issue on the two claims were entirely distinct.

“For example, one of plaintiffs’ assertions in the bad faith claim is that defendant failed to conduct an adequate investigation into plaintiffs’ injuries. This requires inquiry into two facts (1) the extent of plaintiffs’ injuries, and (2) the extent of defendant’s investigation into those injuries. The breach of contract claim also requires inquiry into the extent of plaintiffs’ injuries. A separate trial on the bad faith claim would require plaintiffs to present much of the same evidence to the second jury, ‘duplicating in many respects the presentation to the first jury.’ This would be expensive and time-consuming for all parties. Because of the factual overlap between the claims, it would be more convenient to have a single trial in this case. Accordingly, the convenience factor weighs against severance or bifurcation.”

There is no Prejudice Because the Work Product Doctrine Remains Functional.

As to prejudice, the insurer focused on protecting work product. Judge Dubois states: “On this factor, defendant contends that allowing discovery and trial for the claims to proceed simultaneously would prejudice defendant because discovery in the bad faith claim would require defendant to disclose the claim adjustor’s mental impressions, conclusions, and opinions as to the merits of the case, evidence that is not discoverable in the breach of contract case. … To the extent that the claim adjustor’s work product is protected, defendant’s argument is unconvincing.”

Judge Dubois joins the vast majority of opinions finding the attorney client privilege and work product doctrine do not fall by the wayside simply because an insured brings a bad faith claim: “The Federal Rules of Civil Procedure and longstanding judicial precedent protect work product from disclosure—protections that do not disappear merely because work product prepared in anticipation of litigation over one claim may also be relevant to a second claim. Allowing the claims to proceed simultaneously simply means [defendant] will be called upon to prove its entitlement to work product protection….”

Judicial Economy Favors a Single Action

As to judicial economy:

“Defendant’s argument as to this factor is that, should plaintiffs fail on their breach of contract claim, the bad faith claim will be moot. As explained above, that is an incorrect statement of the law. Plaintiffs’ bad faith claim is based, in part, on defendant’s failure to investigate plaintiff’s insurance claims and communicate with plaintiffs regarding their claims. ‘A finding that the [insurer] did not ultimately have a duty to cover the plaintiff’s claim does not per se make the [insurer’s] actions reasonable’ in hindsight. Gallatin Fuels, Inc., 244 F. App’x at 434-35. Whether defendant ultimately owes plaintiff benefits under the policy is distinct from whether defendant appropriately handled the claims.” [See Note above re Toy v. Metropolitan and Buck v. GEICO.]

“To the contrary, a single trial promotes judicial economy because it avoids duplication of effort by the parties across multiple trials. Although the contractual and bad faith claims present distinct legal issues, the underlying facts overlap. Therefore, “[b]ifurcation would essentially double the life of this action requiring a second discovery period, more dispositive motions, more pretrial motions, and a completely separate trial,” much of which would concern the same factual basis. … Accordingly, the judicial economy factor weighs against severance or bifurcation.”

Date of Decision: September 11, 2020

Dunleavy v. Encompass Home & Auto Insurance Company, U.S. District Court Eastern District of Pennsylvania No. CV 20-1030, 2020 WL 5501200 (E.D. Pa. Sept. 11, 2020) (DuBois, 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.)

PLAINTIFFS ADEQUATELY PLEAD DELAY, INADEQUATE INVESTIGATION, AND LACK OF COMMUNICATION TO SUPPORT BAD FAITH CLAIM (Philadelphia Federal)

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This is one of the few recent cases finding that a bad faith plaintiff met federal pleading standards, surviving a motion to dismiss.

In this UIM case, the plaintiffs alleged the insured husband suffered serious and permanent bodily injuries, requiring ongoing treatment. The tortfeasor’s carrier paid $250,000, and the insureds sought the full UIM coverage limit, $1,000,000, from the insurer. The insurer’s highest offer was $200,000, only made nearly three years after the original claim. The insureds brought breach of contract and bad faith claims.

The complaint alleged the insureds cooperated with the carrier, providing information over a 32-month period, “with the necessary liquidated and unliquidated damages information from which Defendant could fairly evaluate and make a timely and reasonable offer on the claim.” The insureds estimated their damages in excess of $1,000,000, “based on Plaintiffs’ unchallenged medical records, narrative reports, and vocational loss and medical prognosis reports, which they provided to Defendant.” They further alleged the carrier “failed to timely respond or comply with Plaintiffs’ counsel’s request for Defendant to fairly evaluate the underinsured motorist claim.”

The insureds focused their bad faith arguments on the insurer’s alleged conduct over the 32-month time period. They alleged the carrier failed to properly respond to the claim and/or failed to evaluate the UIM claim; failed to offer a payment or to pay in good faith; and failed to inform the insureds of its evaluation of their claim. The insureds asserted the carrier “did not have a reasonable basis for delaying and/or denying underinsured motorist benefits or a partial tender of such under the policy” for nearly three years. The insureds labeled the refusal to pay policy limits as frivolous and unfounded, adding that the insurer “lacked a legal and factual basis” for its valuation of the claim.

The insurer moved to dismiss for failing to adequately plead a bad faith claim.

The court first focused on delay. Delay is a bad faith factor, but standing alone does not make out an automatic case for bad faith. In evaluating whether delay might constitute bad faith, “’[t]he primary consideration is the degree to which a defendant insurer knew it had no basis to deny the claimant: if delay is attributable to the need to investigate further or even to simple negligence, no bad faith has occurred.’” (Court’s emphasis)

In beginning his analysis, Judge Jones took cognizance of the potential negative impact of a 32-month window between the claim’s submission and the carrier’s first offer, though again, standing alone this could not prove bad faith. However, as pleaded in the complaint, there were additional factual allegations fleshing out the bad faith delay argument. These included the absence of any facts suggesting the husband was at fault, or that there was any question the UIM policy limit was $1,000,000. The insureds further pleaded: (i) the husband suffered multiple injuries with ongoing expenses; (ii) they provided medical records, reports, vocational loss information and medical prognoses over the 32-month period; and (3) their liquidated and unliquidated damage estimates to the insurer exceeded the $1,000,000 policy limit.

As to the carrier’s conduct, the insureds alleged that during the 32-month period the insurer did not seek an independent medical examination, and did not conduct a records review to properly evaluate the claim. The insureds added that the carrier’s motion to dismiss did not include any argument that the “delay was attributable to the need to investigate further or even to simple negligence.”

On these facts, Judge Jones found the plaintiffs set forth a plausible bad faith claim, focusing on a lack of investigation and failure to communicate. He distinguished this pleading from numerous other cases dismissing conclusory bad faith claims. He stated, “[i]n particular, it is wholly plausible that Defendant did not have a reasonable basis for denying Plaintiffs’ monies owed based upon the information Plaintiffs provided Defendant. Additionally, viewing the time lapse in conjunction with the lack of an independent medical evaluation by Defendant, it is plausible that Defendant knew of, or recklessly disregarded, its lack of a reasonable basis for denying Plaintiffs’ benefits of the policy.”

Judge Jones also rejected the argument that this was merely a disagreement over fair valuation. On a motion to dismiss, the court had to assume the truth of the plaintiffs’ factual allegations. The allegations set out a plausible case the insurer made an unreasonably low offer, or no offer, potentially constituting bad faith conduct. Judge Jones looked to Judge Stengel’s 2017 Davis decision to support this finding.

Date of Decision: April 17, 2020

Lowndes v. Travelers Property Casualty Co. of America, U. S. District Court Eastern District of Pennsylvania CIVIL ACTION NO. 19-5823, 2020 U.S. Dist. LEXIS 67620 (E.D. Pa. April 17, 2020) (Jones, II, J.)

 

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.)