Archive for the 'PA – Federal Pleading Inadequate' Category

49 CONCLUSORY ALLEGATIONS ACCOMPANIED BY 5 FACTUAL ALLEGATIONS NOT SUFFICIENT TO STATE PLAUSIBLE BAD FAITH CLAIM (Middle District)

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This UIM bad faith case was dismissed for failure to state a plausible claim.

The complaint includes 49 bad faith allegations that the court found conclusory.  As such, they have no value to plaintiff in making a plausible claim there is clear and convincing evidence to establish the insurer acted unreasonably and recklessly disregarded that fact.

Stripped of these 49 bare-bones allegations, the court found only 5 facts actually set out in the complaint.  These amounted to the following facts:  the insured was in an accident with a third party tortfeasor; the insured was injured as a result of third party negligence; the insured requested the carrier consent to a settlement with the third party’s insurer, which was granted; the insured made written demand for UIM benefits, accompanied by medical records and other documents; and while the carrier offered to settle, the insured did not find the offer sufficient.

Middle District Judge Saporito these cursory allegations did not make out the elements of a bad faith claim.  There were no facts supporting a plausible claim that the insurer’s conduct was unreasonable, or that the insurer acted knowingly or in reckless disregard of its unreasonable conduct.  Quoting Eastern District Judge Buckwalter’s 2015 Pasqualino opinion, summarized here, the court states:

“While such assertions perhaps suggest that a bad faith claim is possible, they do not allow for any non-speculative inference that a finding of bad faith is plausible.” … Thus, the bad faith claim as presently constructed does not meet the pleading requirements of Iqbal and Twombly. We will, however, grant … leave to file an amended complaint as it is not clear that an amendment would be futile. … Failure to [re-plead a plausible bad faith claim in an amended complaint, however,] will result in the dismissal of this claim with prejudice.

Date of Decision:  October 1, 2021

Allman v. Metropolitan Group Property & Casualty Insurance Company, U.S. District Court Middle District of Pennsylvania No. 3:21-CV-01314, 2021 WL 4502263 (M.D. Pa. Oct. 1, 2021) (Saporito, J.)

DURATION OF INVESTIGATION ALONE CANNOT ESTABLISH BAD FAITH; BAD FAITH CLAIM POSSIBLE EVEN WHERE COVERAGE IS EXCLUDED UNDER THE POLICY (Western District)

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The carrier denied the insured homeowners’ property damage claim.  They sued for breach of contract and bad faith, and the carrier moved to dismiss.

First, the court found the insureds failed to plead their losses were covered under the policy at issue, and dismissed the breach of contract claim because no coverage was due under the policy.

Moving to the bad faith claim, Western District Judge Hardy found there are two general kinds of statutory bad faith in Pennsylvania:  (i) coverage denial bad faith and (ii) poor claim handling bad faith beyond coverage denial.  The court states:  “However, if bad faith is asserted as to conduct beyond a denial of coverage, the bad faith claim is actionable as to that conduct regardless of whether the contract claim survives.”

[As stated on this Blog again and again over the years, this second point is questionable.  The Supreme Court’s 2007 decision in Toy v. Metropolitan Life indicates that cognizable statutory bad faith claims require denial of a benefit, i.e., denial of coverage in a first party claim or refusal to defend and cover in a third party claim are the sine qua non for section 8371 clams. Under this theory, complaints about poor claim handling practices, where no coverage is due or benefit denied, go to the insurance commissioner.  Examples of such Blog posts can be found on January 28, 2020, March 25, 2020, July 16, 2020, August 10, 2020, August 27, 2020, September 24, 2020, January 19, 2021, March 25, 2021,   and this article detailing our reasoning.]

The court readily found no bad faith claim based on a benefit denial, since the court ruled that no coverage was due under the policy.  The bad faith analysis does not stop there, per the position that poor conduct, even where no benefit is or can be due, might constitute section 8371 bad faith.

Even under that standard, however, these plaintiffs’ claim failed for failing to plead a plausible claim. Thus, the court states, “to the extent that Plaintiffs’ bad faith claim is based on [the  insurer’s] alleged failure to conduct an adequate investigation, Plaintiffs simply do not assert sufficient factual allegations in their Amended Complaint to support such a cognizable bad faith claim.”

The court recites the plaintiffs’ conclusory bad faith pleading, that simply recite elements of the cause of action, rather than facts, as examples of inadequate pleading.  The factual allegation that the insurer’s inspection lasted only ten minutes, and did not include testing or measurement taking, still did not cut the mustard. “Although the duration of an adjuster’s inspection might be relevant to a claim of bad faith, it does not itself demonstrate bad faith.”  Judge Hardy relied upon Western District Judge Wiegand’s 2020 Palek decision, summarized here, and Eastern District Judge McLaughlin’s 2012 Gold decision, summarized here, for the principle that the duration of an investigation or review, by itself, cannot establish a plausible bad faith claim.

Judge Hardy also observed, “since Plaintiffs allege that the damage at issue was visible to the naked eye from the interior of the basement and was not obstructed or concealed from view,” it is not clear that [the] visual inspection of the wall was unreasonable under the circumstances that Plaintiffs describe.”

In sum, “even accepting the cited allegations as true, Plaintiffs have not pled sufficient facts in their Amended Complaint to support a cognizable claim of bad faith for … failure to conduct an adequate investigation.”

Date of Decision:  September 30, 2021

Levine v. State Farm Fire and Casualty Company, U.S. District Court Western District of Pennsylvania No. CV 20-1108, 2021 WL 4480168 (W.D. Pa. Sept. 30, 2021) (Hardy, J.)

TWO BAD FAITH OPINIONS BY PHILADELPHIA FEDERAL JUDGE DARNELL JONES: (1) BARE BONES UIM BAD FAITH CLAIM DISMISSED WITH LEAVE TO AMEND (2) NO DUTY TO DEFEND = NO BAD FAITH (Philadelphia Federal)

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Eastern District Judge Darnell Jones recently rendered two bad faith decisions just a few days apart.

CASE 1  – Underinsured Motorist Bad Faith Claim Dismissed Without Prejudice

In the first case, Judge Jones dismissed an underinsured motorist bad faith claim, with leave to amend.

The court focused on the recent Western District decision in Faith, summarized here, to emphasize bad faith can “include a lack of investigation, unnecessary or unfounded investigation, failure to communicate with the insured, or failure to promptly acknowledge or act on claims. Bad faith can also include poor claims-handling, the insurer’s failure to act with diligence or respond to the insured, scattershot investigation, and similar conduct.”

That being said, a UIM bad faith plaintiff “’cannot merely say that an insurer acted unfairly, but instead must describe with specificity what was unfair.’”  Judge Jones relies upon Philadelphia Federal Judge Baylson’s recent O’Brien decision, summarized here, which in turn relied upon Western District Judge Colville’s 2020 Pierchalski decision, summarized here, for this proposition.

Rather, “a Complaint alleging bad faith ‘must specifically include facts to address who, what, where, when, and how the alleged bad faith conduct occurred.’” Bare bones bad faith pleadings in Pennsylvania’s District Courts are routinely dismissed. As examples, Judge Jones cites Eastern District Judge Leeson’s 2020 Shetayh v. State Farm opinion, summarized here, the oft-cited 2012 Third Circuit opinion in Smith v. State Farm, summarized here, Eastern District Magistrate Judge Heffley’s decision in Camp v. NJM, summarized here, Eastern District Judge Slomsky’s 2017 decision in Toner v. GEICO, summarized here, and the Western District decision in Rosenberg v. Amica Mutual, summarized here.

The Complaint fell into the inadequate pleading column, as it was “devoid of facts necessary to infer a plausible bad faith claim.” Other than the accident date, the complaint has no “references to dates or time spans, yet claims several of Defendant’s alleged actions to be untimely.” Plaintiffs allege unreasonableness as to the insurer’s alleged lack of thorough claim assessment, “yet provide[s] no indication as to the manner in which these alleged deficiencies were unreasonable.”

The court cites Judge Baylson’s 2015 Allen v. State Farm case, summarized here, for the proposition that simply reciting that the insurer failed to properly investigate and evaluate a claim, and knew or recklessly disregarded its unreasonable conduct, are conclusory in nature, because all this language does is recite the elements of a bad faith claim, without pleading basic facts to support those elements.

Here, there are no facts pleaded from which the court could draw reasonable inferences supporting a plausible bad faith claim.  The “complaint alleges no factual content to suggest Defendant lacked a reasonable basis for denying the UIM coverage, or that Defendant knew or recklessly disregarded the lack of reasonable basis.”

Dismissal was without prejudice, however, because after the court’s “careful assessment of the allegations set forth in [the bad faith count] of Plaintiffs’ Complaint (as well as those incorporated by reference), this Court is unable to conclude that amendment would be futile.”

Date of Decision:  September 27, 2021

Kelly v. Progressive Advanced Insurance Company, U.S. District Court Eastern District of Pennsylvania No. CV 20-5661, 2021 WL 4399657 (E.D. Pa. Sept. 27, 2021) (Jones, II, J.)

CASE 2 – Bad Faith Not Possible Where No Duty to Defend

In the second case, Judge Jones found no duty to defend the insured, as the claims pleaded against the insured clearly fell within a policy exclusion. Once Judge Jones found coverage obligations absent, he stated the following in a footnote, addressing the bad faith claim:

“[B]ad faith claims cannot survive a determination that there was no duty to defend, because the court’s determination that there was no potential coverage means that the insurer had good cause to refuse to defend.” (internal quotations omitted)

Date of Decision:  October 1, 2021

Jeffers Farms, Inc. v. Liberty Insurance Underwriters, Inc., U.S. District Court Eastern District of Pennsylvania No. CV 20-5475, 2021 WL 4502785 (E.D. Pa. Oct. 1, 2021) (Jones, J.)

(1) BAD FAITH CLAIMS AGAINST INDIVIDUAL ADJUSTERS IMPERMISSIBLE; (2) BENEFIT DENIAL NOT BASIS FOR UTPCPL CLAIMS; (3) STATUTORY BAD FAITH CLAIM PROCEEDS BASED ON ALLEGEDLY EXCESSIVE PEER REVIEWS, AND BENEFIT DENIALS; (4) COMMON LAW BAD FAITH SUBSUMED IN CONTRACT CLAIMS (Philadelphia Federal)

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This case involves claims against a carrier for two distinct auto accidents, as well as against two of its individual claim adjusters.  The insured husband alleged serious injuries in the first incident that were exacerbated in the second.  He alleges he was underpaid on the first loss for medical benefits, and raised a UIM claim on the second loss, claiming the same insurer failed to pay benefits due.

The insureds brought breach of contract claims for UIM and first party medical benefits, common law and statutory bad faith claims on the UIM and first party benefits claims, breaches of the Motor Vehicle Financial Responsibility Law (MVFRL), and Unfair Trade Practices and Consumer Protection Law (UTPCPL) claims.

Plaintiffs also brought UTPCPL claims against the two individuals, as well as common law and statutory bad faith claims, and a breach of contract claim against one of them.

The defendants moved to dismiss the bad faith and UTPCPL claims as to all of them, and all claims against the individual defendants.

ALL CLAIMS AGAINST THE INDIVIDUAL ADJUSTERS FAIL

As to the breach of contract claim against the one insurance adjuster, the court observed that “while insurance adjusters have a duty to their principals and should conduct investigations with propriety, this duty does not create a contractual obligation between the adjuster and the insured.” Thus, only the principal, i.e., the insurer, could have contractual liability.

As to the UTPCPL claims, there were no facts pleaded to support any sort of deceptive or fraudulent conduct. Moreover the failure to pay a benefit is not actionable under the UTPCPL.  Finally, statutory bad faith claims against insurance adjusters are impermissible because an adjuster is not party to the insurance contract. The same reasoning makes common law bad faith claims impermissible.

In sum, as to both adjusters, the court dismissed the claims against these individuals with prejudice. Judge Tucker states they both “worked as claims adjusters … and followed the company’s policies and practices. Plaintiffs fail to plead sufficient facts to allege personal misconduct that established reliance between themselves and the Individual Defendants, despite the lack of a contractual relationship between Plaintiffs and the Individual Defendants, and accordingly, those claims must fail.”

COURT FINDS FRAUDULENT JOINDER AND DENIES MOTION TO REMAND

As it was only the presence of one of the individual adjusters that prevented complete diversity, his dismissal from the case created complete diversity, and plaintiff’s motion to remand was denied. Although courts use the term “fraudulent joinder”, this does not mean what one would typically think of as fraudulent conduct.  Rather, “[j]oinder is fraudulent ‘where there is no reasonable basis in fact or colorable ground supporting the claim against the joined defendant, or no real intention in good faith to prosecute the action against the defendants or seek a joint judgment.’” In this case, the court simply held that there were no viable claims stated against the non-diverse party, i.e., no colorable ground supporting a claim.

STATUTORY BAD FAITH CLAIM STATED AGAINST INSURER

As to the substance of the statutory bad faith claims against the insurer, Judge Tucker found a plausible cause of action stated in the Complaint’s allegations. The Complaint alleges the insurer and one of the adjusters “conducted seven Peer Reviews with respect to … treatment in order to challenge causation and deny benefits … which is at odds with the intended use of the procedure and can factually support a claim of bad faith. Plaintiffs’ bad faith claims survive summary judgment because Defendants administratively closed Plaintiff’s first-collision-benefits-claim, despite acknowledging and having medical support that his initial injuries were exacerbated by the second collision, and then denied benefits under Plaintiffs’ second-collision-benefits-claim.” Thus, she denied the motion to dismiss.

COMMON LAW BAD FAITH CLAIMS DISMISSED

The common law bad faith claims were dismissed, as the court found them subsumed in the breach of contract claims.

Date of Decision:  September 27, 2021

Holohan v. Mid-Century Insurance Company, U.S. District Court Eastern District of Pennsylvania No. CV 20-5903, 2021 WL 4399659 (E.D. Pa. Sept. 27, 2021) (Tucker, J.)

Our thanks to attorney Susan J. French for bringing this case to our attention.

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

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

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

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

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

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

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

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

Date of Decision:  August 26, 2021

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

ANOTHER INADEQUATELY PLEADED UIM BAD FAITH CLAIM IS DISMISSED WITHOUT PREJUDICE (Eastern District)

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Another UIM bad faith case.  Another dismissal for failure to plead beyond conclusory allegations.  Another dismissal with leave to amend, if the insured can meet the Twombly/Iqbal plausible fact pleading standards.

Judge Baylson relied on his January 2021 Baxley decision, summarized here, in granting the insurer’s motion to dismiss the bad faith claim.  In Baxley, the insured failed to “provide any explanation regarding how the defendant had responded to her claim, or what facts, apart from the defendant’s failure to pay her claim, indicated bad faith.”

The same was true in this case: “Plaintiffs do not provide sufficient factual allegations on which the Court can reasonably infer Defendant’s ill will. …. The claims of bad faith as described in ¶¶ 26-32 of the Complaint are overly vague and do not contain any specific factual allegations that suggest bad faith. For example, Plaintiffs plead no specific factual allegations as to how Defendant forced Plaintiffs to file the instant action. Nor does the Complaint give any clarifying details as to what the alleged ‘false pretexts’ and ‘invasive tactics’ utilized by Defendant were. Indeed, Plaintiffs’ sole factual allegation in the Complaint regarding Defendant’s action is that Defendant denied Plaintiffs’ claim. Just as in Baxley, this does not suffice.”

[Note: The court, citing the 1994 Terletsky decision, states that “[f]or an insurer’s failure to pay a claim to be considered in bad faith, the plaintiff must allege an underlying element of self-interest or ill will.” In 2017, however, Pennsylvania’s Supreme Court made clear in Rancosky that “we hold that proof of an insurance company’s motive of self-interest or ill-will is not a prerequisite to prevailing in a bad faith claim under Section 8371…. While such evidence is probative of the second Terletsky prong, we hold that evidence of the insurer’s knowledge or recklessness as to its lack of a reasonable basis in denying policy benefits is sufficient.” A link to our Rancosky summary can be found here.]

Date of Decision:  July 28, 2021

O’Brien v. Liberty Mutual Insurance, U.S. District Court Eastern District of Pennsylvania, No. 21-CV-01234, 2021 WL 3203405 (E.D. Pa. July 28, 2021) (Baylson, J.)

PLAINTIFF FAILS TO PLEAD FACTS SETTING OUT A PLAUSIBLE BAD FAITH CLAIM (Middle District)

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This is a first party property damage breach of contract and bad faith case.  The insurer denied coverage on the basis that the loss was not covered under the policy.  The insurer moved to dismiss the bad faith claim only.

Middle District Judge Brann gives a lengthy history of the plausibility federal pleading standards announced via Twombly and Iqbal.  This is a prelude to his describing the flaws in plaintiff’s pleading, which Judge Brann ultimate gave leave to amend after granting a motion to dismiss, without prejudice.

Plaintiff’s pleading problems are two-fold: (1) conclusory allegations are meaningless under the federal pleading standards and (2) factual pleadings do not state a claim where the facts, even taken as true, do not make out a plausible bad faith case against the defendant insurer.

To quote Judge Brann:

“The claim [plaintiff] brings for bad faith cannot survive as pled. Almost half of the allegations in the complaint are conclusory and receive no pleading presumption of truthfulness. The other half do not establish any bad faith. The well-pled facts span from paragraphs 1-17. Those facts establish the breach of contract claim – which State Farm has not disputed – but the remaining facts are either irrelevant to the issue of bad faith, not well pled, or simply legal conclusions.”

Thus, the bad faith claim was dismissed without prejudice, and with leave to amend if plaintiff could meet these very clearly explained pleading standards.

Date of Decision:  July 16, 2021

Marks v. State Farm Fire and Casualty Company, U.S. District Court Middle District of Pennsylvania No. 4:21-CV-00307, 2021 WL 3022637 (M.D. Pa. July 16, 2021) (Brann, J.)

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.)

“LEGAL THEORIES ALONE ARE NOT ENOUGH TO SUSTAIN LITIGATION. A PLAINTIFF MUST ALSO PLEAD FACTUAL ALLEGATIONS TO SUPPORT HIS LEGAL THEORIES.”

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Legal theories alone are not enough to sustain litigation. A plaintiff must also plead factual allegations to support his legal theories.

The Honorable Joshua D. Wolson, May 6, 2021

In this breach of contract and bad faith case, Eastern District Judge Wolson dismissed all claims.

As to the alleged breach of contract, the insured made conclusory allegations about failures to pay sums due. He did not plead any facts as to what sums were due that the insurer failed to pay, or what provisions in the insurance contract were breached.  Further, he admitted that certain sums asserted as allegedly due were paid.

Finally, even when payment is delayed, there is still payment.  The delay does not create a breach of the insurance agreement when payment is eventually made.  Thus, delay is really an issue of bad faith, not breach of contract.

Moving on to the bad fad faith claim, the insured argued that the delayed payment, “in and of itself” established bad faith.  Judge Wolson disagreed, observing that “a delay in payment is not a per se violation of 42 Pa. C.S.A. § 8371. Although an unreasonable delay can be considered a bad faith insurance practice under the statute, ‘a long period of delay between demand and settlement does not, on its own, necessarily constitute bad faith.’”

Rather, a plaintiff alleging delay based bad faith “must plead facts sufficient to demonstrate that (1) the defendant had no reasonable basis for the actions it undertook, which resulted in the delay, and (2) that the defendant knew or recklessly disregarded the fact that it had no reasonable basis to deny payment. … If the delay is attributable to a need for further investigation or even to simple negligence, there is no bad faith.”

Judge Wolson found nothing in the complaint suggesting the insurer knew or recklessly disregarded the lack of a reasonable basis to delay payment. “On the contrary, according to the Complaint, after [the insured] filed suit, ‘the matter was looked at with greater scrutiny,’ and [the insurer] sent him an additional check … eight to nine months after denying him additional benefits.”

Judge Wolson observed that, taken as true, the Complaint asserts facts that might show negligence. However, the plaintiff did not “attribute this delay to [the insurer’s] knowledge or recklessness that it had no basis for the delay.” The court could not “infer recklessness based only on a nine-month delay of an additional payment.”

Interestingly, while Judge Wolson would not grant leave to file a new amended complaint, he did grant plaintiff an opportunity to correct deficiencies in the existing complaint.

Date of Decision: May 6, 2021

Elansari v. The First Liberty Insurance Corporation, U.S. District Court Eastern District of Pennsylvania No. 2:20-CV-5901-JDW, 2021 WL 1814980 (E.D. Pa. May 6, 2021) (Wolson, J.)