Archive for the 'PA – Federal Pleading Inadequate' Category
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.)
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.
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.)
Western District Judge Horan previously dismissed breach of contract and bad faith claims in this case, with leave to amend. A copy of our earlier summary can be found here. The insured cured the defects in its contract claim, but once again failed to set out a plausible bad faith claim. This time, however, Judge Horan dismissed the bad faith claim with prejudice, as any future attempt to amend would be futile.
The claim centered on a dispute over actual cash value losses for damaged equipment, and documents the insurer requested as part of an examination under oath (EUO). The insured failed to produce those documents, deeming them irrelevant, and the insurer would not proceed without those documents.
The complaint pleads that the carrier’s actual cash value calculation was fundamentally flawed, and that the carrier sought documents for the EUO that had nothing to do with coverage.
Judge Horan carefully reviewed the second amended complaint, finding plaintiff still failed to state a statutory bad faith claim for the same reasons set forth in her original March 4, 2021 opinion. Rather than overcoming the bad faith claim’s flaws, the new allegations in the second amended complaint “regarding Defendants’ pre-litigation investigation and document requests further buttress[ed] the Court’s prior decision.”
Judge Horan states:
“Defendants undertook an investigation upon the initial loss of the [damaged equipment] and made an offer. [The insured] rejected that offer and made its own claim of value for payment. … In response, Defendants continued the investigation by seeking documents and an examination under oath, as permitted by the Policy. Such conduct is not bad faith.”
Further, in once again rejecting the insured’s complaint over the document requests’ relevance, Judge Horan reiterates that “[e]xpecting an insurer to both investigate claims placed at issue by the insured and to do so only in a manner that is acceptable to the insured, is untenable.”
“Finally, as to the remaining allegations, they speak to a general disagreement over Defendants’ estimate of … damages. The Second Amended Complaint continues to support that an offer was made and that further effort at investigation was attempted by Defendants. These allegations of valuation and investigation disagreements do not support that Defendants engaged in bad faith.”
Date of Decision: April 30, 2021
Integral Scrap & Recycling, Inc. v. Conifer Holdings, Inc., U.S. District Court Western District of Pennsylvania No. 2:20-CV-00871-MJH, 2021 WL 1720713 (W.D. Pa. Apr. 30, 2021) (Horan, J.)
The insureds valued their UIM claim at $215,000, and settled with the tortfeasor’s insurer for $15,000. They demanded $200,000 policy limits from the UIM carrier, and transmitted a police report and medical records in support of their demand. The insurer offered $15,000 in response, and the insureds sued for breach of contract and bad faith.
The insurer successfully moved to dismiss the bad faith claim, but the insured was given leave to amend.
Western District Judge Horan found the insureds’ complaint failed to “provide any factual support regarding their bad faith claim, other than their allegations that [the] offer of $15,000 failed to cite any reasons for such offer. The [insureds] did not cite any other facts to support their allegation that [the insurer] acted in bad faith. These bare factual assertions, without more, do not state a plausible claim for which relief can be granted.”
Date of Decision: April 20, 2021
Long v. USAA Casualty Insurance Company, U.S. District Court Western District of Pennsylvania No. CV 20-2017, 2021 WL 1550094 (W.D. Pa. Apr. 20, 2021) (Horan, J.)
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.
In this case, like many others in the recent past, the UIM bad faith claims are dismissed with leave to amend.
The tortfeasor’s carrier payed the injured insured its $15,000 policy. The insured had $100,000 in UIM coverage from her own carrier. In seeking UIM coverage, the insured provided her carrier with “documentation of her losses including medical bills and other economic losses totaling more than $34,263.47.” In bringing breach of contract and bad faith claims, she alleges her carrier refused to make any “bona-fide good faith offers of settlement to the Plaintiff that contemplate those substantiated and verified losses and to the contrary, has made no offer for purposes of resolving Plaintiff’s Underinsured Motorist’s Claim.”
The insurer moved to dismiss the statutory bad faith claim on the basis the insured only pleaded conclusory allegations. In response, the insured argued her complaint included allegations “that (1) she promptly provided Defendant with proof of the amount of her damages, (2) Defendant has refused to make a settlement offer, (3) Plaintiff provided additional medical documentation at Defendant’s request, and that (4) Defendant has had “ample time to properly evaluate Plaintiff’s claim.” As he has in other cases, Eastern District Judge Baylson dismissed the bad faith claim, without prejudice.
Judge Baylson cited his prior opinions in Eley (2011) and Kelly (2019) in holding the instant allegations merely conclusory, lacking in the kind of factual detail that could support a plausible bad faith claim. He finds the insured did not provide “any explanation of how Defendant responded to her claim, or what facts, beyond its failure to pay her claim, indicate bad faith. The fact that she provided Defendant with supporting documents regarding her claim does not alone indicate bad faith. Plaintiff has not provided any information regarding Defendant’s response to her claim. She has simply stated that she considers any response on its part to be unsatisfactory.”
In granting the motion to dismiss without prejudice, Judge Baylson observed that the insurer only sought dismissal of the insured’s statutory bad faith claim. Thus, this dismissal did not affect any other portions of the complaint.
Date of Decision: January 15, 2021
Baxley v. State Farm Mutual Automobile Insurance Company, U.S. District Court Eastern District of Pennsylvania No. CV 20-5512, 2021 WL 149256 (E.D. Pa. Jan. 15, 2021) (Baylson, J.)
Note: It is only the beginning of the fourth full week in January, but this is our fifth UIM case posted to date this year.
The insured failed to plead a plausible claim in this UM bad faith case.
The 18-year old insured was rear-ended by an uninsured motorist, and suffered a long list of injuries. She had $100,000 in UM coverage. The carrier offered $11,300 to settle her claims, and rejected a policy limit demand. The insured brought breach of contract and statutory bad faith claims, and the insurer moved to dismiss the bad faith claim.
In determining whether a plaintiff states a plausible bad faith claim, a court must separate conclusory allegations from factual allegations, because conclusory allegations are not entitled to an assumption of truth for Rule 12(b)(6) purposes.
Here, the complaint alleges at least 16 bases for bad faith (listed below). Magistrate Judge Schwab found, however, the complaint “contains mostly conclusory statements that are not supported by factual allegations.” Thus, “[a]lthough long, [the insured’s] list of how the defendant allegedly acted in bad faith contains conclusions, rather than facts.”
Next, in looking at the factual allegations, the insured merely alleges she was diagnosed with certain injuries, went through physical therapy, gave the insurer notice of her claim, and forwarded various records for the insurer’s review. The insured’s counsel spoke with the insurer’s claims department, and made the carrier aware the insured was 18 at the time of the accident, continued to suffer from visual impairment and post-traumatic headaches, among other injuries, as a result of the head trauma she suffered, and that the insurer offered $11,300 to settle.
“These factual allegations, however, are not enough to state a bad faith claim upon which relief can be granted.”
A disagreement over a claim’s value, without the facts needed to show bad faith, cannot alone create bad faith. Here, the insured did not allege “facts to support an inference that the defendant did not have a reasonable basis for its settlement offer or that the defendant knew or recklessly disregarded any lack of a reasonable basis for such an offer.” Citing the Third Circuit’s Smith decision (above), Judge Caputo’s 2019 Clarke decision and 2019 Moran decision, Eastern District Judge Baylson’s June 2020 Dietz decision, Middle District Judge Kane’s 2019 Rosenthal decision, and the 2009 Superior Court Johnson decision, Magistrate Judge Schwab observes that low but reasonable settlement offers do not constitute bad faith, and that a “low-ball” offer, standing alone, cannot make out a bad faith claim.
Nor can refusing immediately to pay a policy limit demand by itself constitute bad faith. “Indeed, courts have consistently held that a dispute or discrepancy in the valuation of a claim between the insurer and the insured is not alone indicative of bad faith.” The insured simply did not plead facts “from which it can plausibly be inferred that the defendant’s offer was unreasonable and made in bad faith, rather than made as part of the ordinary course of negotiations between insurers and insureds.” (internal quotation marks omitted)
Magistrate Judge Schwab dismissed the bad faith claim, but with leave to amend. This allowed for a second amended complaint to be filed “if appropriate, to state a bad faith claim upon which relief can be granted.”
Durdach v. LM General Insurance Company, U.S. District Court Middle District of Pennsylvania No. 3:20-CV-00926, 2021 WL 84174 (M.D. Pa. Jan. 11, 2021) (Schwab, M.J.)
The litany of conclusory allegations referenced above, include:
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unreasonably delay[ing] the processing of a valid claim;
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kn[owingly] or recklessly disregard[ing] the fact that the delay was unreasonable;
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failing to objectively and fairly evaluate Plaintiff’s claim;
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engaging in dilatory and abusive claims handling;
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failing to adopt or implement reasonable standards in evaluating Plaintiff’s claim;
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acting unreasonably and unfairly in response to Plaintiff’s claim;
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not attempting in good faith to effectuate a fair, prompt, and equitable settlement of Plaintiff’s claim in which the Defendant’s liability under the policy had become reasonably clear;
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subordinating the interests of its insured and those entitled under its insured’s coverage to its own financial monetary interests;
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failing to promptly offer reasonable payment to the Plaintiff;
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failing to reasonably and adequately investigate Plaintiff’s claim; k. failing to reasonably and adequately evaluate or review the medical documentation in Defendant’s possession;
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violating the fiduciary duty owed to the Plaintiff;
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acting unreasonably and unfairly by withholding underinsured motorist benefits justly due and owing to the Plaintiff;
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failing to make an honest, intelligent, and objective settlement offer;
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causing Plaintiff to expend money on the presentation of her claim; and
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failing to make a reasonable settlement offer despite knowing the severity of a visual injury and post-traumatic headaches in an 18-year old.
[The insured] also alleges that the defendant failed to act in good faith and “engaged in wanton and reckless conduct….”
Judge Baylson had previously dismissed in this matter, summarized here, but allowed the insured leave to amend. The insured filed an amended complaint, and the carrier moved again to dismiss the bad faith claim.
The carrier had taken the position that there was no stacking available to the insured. Before suit, the insured asked the carrier for its underwriting file to confirm there were no UIM stacking benefits. The insurer refused to produce that file absent a court order.
The insured argued his bad faith claims were not premised on UIM coverage disputes, “but rather upon Defendant’s misrepresentation of that coverage and refusal to disclose the underwriting agreement.” The insured alleged the carrier refused to produce the underwriting file “because it contained information that would demonstrate Defendant falsely represented the coverage amount.” This alleged “concealment and misrepresentation by the Defendant constitute[d] an act of bad faith.” Judge Baylson disagreed and dismissed the bad faith claim with prejudice.
A bad faith claim requires plaintiff showing by clear and convincing evidence that a benefit denial was unreasonable, and that the insurer knew it was unreasonable or recklessly disregarded that fact. A bad faith claim cannot meet the plausible pleading standard, however, by simply pleading the insurer denied a coverage request. Rather, an insured-plaintiff must plead “factual specifics as to the ‘who, what, where, when, and how’ of the denial,” to make a cases for reckless indifference.
Judge Baylson found the insured plaintiff here alleged “no factual content indicating that Defendant (1) lacked a reasonable basis to deny coverage or (2) that Defendant knew or recklessly disregarded the lack of reasonable basis. Rather, Plaintiff essentially asks the Court to infer—without providing any supporting facts—that Defendant’s sole motivation in withholding the underwriting file was to deceive Plaintiff.”
In Judge Baylson’s first decision, he had “addressed reasons other than bad faith that might explain why Defendant refused to provide the underwriting document.” Specifically, he observes that “underwriting files often contain an insurer’s evaluation of the risks along with other confidential business information, to be in line with a wide swath of rational and competitive business strategy.” (Internal quotation marks omitted.) The amended complaint fails to allege “any facts that plausibly suggest Defendant had no reasonable basis to deny Plaintiff stacked coverage, nor that Defendant knew or disregarded the lack of any such basis.”
Date of Decision: December 30, 2020
Dietz v. Liberty Mutual Insurance Company, U.S. District Court Eastern District of Pennsylvania No. 20-1239, 2020 WL 7769933 (E.D. Pa. Dec. 30, 2020) (Baylson, J.)
The insureds allege they wanted a joint annuity policy, rather than an individual annuity policy. The carrier was fully aware of the insureds’ intent and request, but only issued them an individual annuity policy. They first received the annuity policy in 2008, but allege they only learned for the first time in 2020 that it was an individual annuity policy.
The carrier refused to treat the policy as a joint annuity, and the insured brought claims for breach of contract and bad faith, among others. The insurer successfully moved to dismiss the complaint on statute of limitations grounds.
The court found the breach of contract claim time-barred, as well beyond the four-year statute of limitations. The claim could not be salvaged by the discovery rule as the insureds did not act with reasonable diligence in discovering and pursuing their claims. The information alerting them to the alleged breach had been in front of them for 12 years, but they did not act.
Similarly, the bad faith claims were time-barred. The statutory bad faith claim has a two-year limitations period, which had long run. Further, any contract based bad faith claim was time-barred for the same reasons as the breach of contract claim. The court only assumed for the sake of argument that the discovery rule could even apply to bad faith claims, which again failed for lack of reasonable diligence.
The court also observed that the insureds failed to allege bad faith in accord with federal pleading standards, averring nothing more than a breach of contract accompanied by conclusory allegations of bad faith.
Date of Decision: January 7, 2021
Smith v. Pruco Life Insurance Company, U.S. District Court Eastern District of Pennsylvania No. CV 20-04098, 2021 WL 63266 (E.D. Pa. Jan. 7, 2021) (McHugh, J.)
