Archive for the 'PA – UIM/UM Cases' Category

COURT PERMITS SOME UNDERWRITING DISCOVERY EVEN IN THE ABSENCE OF A STATUTORY BAD FAITH CLAIM (Middle District)

Print Friendly, PDF & Email

The insurer denied coverage under a “regular use exclusion” in this UIM case. The complaint included a breach of contract claim, but no statutory bad faith claim. Plaintiff wanted to depose plaintiff’s corporate designee. The carrier argued the proposed deposition subjects were irrelevant to coverage, absent a bad faith claim, and moved for a protective order.

Middle District Magistrate Judge Saporito found that plaintiff could pursue certain limited discovery on underwriting, even absent a statutory bad faith claim. This was based primarily on the insurer raising the “regular use exclusion” as an affirmative defense, and the insureds alleging that the carrier owed “a fiduciary, contractual and statutory obligation to investigate, evaluate, and negotiate [her] UIM claim in good faith and to arrive at a prompt, fair, and equitable settlement.” [The reference to “statutory obligation” was not interpreted to mean plaintiffs were pleading a section 8371 statutory bad faith claim.]

Plaintiff had already deposed the carrier’s adjuster, but wanted a corporate designee to testify on the regular use exclusion and underwriting practices. This included the following subjects:

  1. The underwriting procedures in place … for the period January 1, 2017[,] through the current date;

  2. The underwriting regulations necessary to obtain the status of “preferred driver” under a … policy of insurance;

  3. The determinative factors and costs associated with UIM coverage …;

  4. The determinative factors and costs associated with UM coverage …;

  5. The determinative factors and costs associated with stacking of UIM coverage…;

  6. The determinative factors and costs associated with stacking of UM coverage …;

  7. The factors [the insurer] utilizes in determining whether a vehicle is available for the “regular use” of an insured;

  8. How the term “regular use” is defined in the applicable … policy and related documents;

  9. Whether the … regular use exclusion must be accompanied by a stacking waiver;

  10. All steps and measures [the insurer] takes to explain to its insureds the effect of the “regular use exclusion,” “household exclusion,” “family car exclusion,” and “unlisted driver exclusion”;

  11. How the regular use exclusion is discussed in the [insurer’s] Claims Manual; and

  12. Any facts supporting [the insurer’s] legal theories and defenses.

The court found that although the insureds did not allege statutory bad faith, they did plead breach of the contractual duty of good faith and fair dealing. Magistrate Judge Saporito found this sufficient to open the door to some greater discovery compared to a simple breach of contract case.  He relied on three cases permitting discovery on the carrier’s decisionmaking process, even in the absence of a statutory bad faith count. Rau v. Allstate, Swientisky v. American States, and Craker v. State Farm.

The court found the following areas of inquiry relevant and discoverable: factors used to determine “whether a vehicle is available for the ‘regular use’ of an insured”; “[h]ow the term ‘regular use’ is defined in the applicable … policy and related documents”; whether the “regular use exclusion must be accompanied by a stacking waiver”; “[h]ow the regular use exclusion is discussed in the [insurer’s] Claims Manual”; “[a]ny facts supporting [the insurer’s] legal theories and defenses”; and “[a]ll steps and measures [the insurer] takes to explain to its insureds the effect of the ‘regular use exclusion….”

On the other hand, discovery was not permitted on matters “irrelevant to the issue regarding the application of the ‘regular use exclusion,’ as they relate to underwriting procedures, underwriting regulations necessary to obtain the status of ‘preferred driver,’ and the determinative factors and costs associated with UIM and UM coverage as well as stacking for those coverages.” Discovery concerning other exclusions was also irrelevant.

Thus, discovery was specifically barred for “[t]he underwriting procedures in place … for the period January 1, 2017[,] through the current date”; underwriting regulations necessary to obtain preferred driver status;  “[t]he determinative factors and costs associated with UIM coverage”; “determinative factors and costs associated with UM coverage”; “determinative factors and costs associated with stacking of UIM coverage”; and “determinative factors and costs associated with stacking of UM coverage….”

Magistrate Judge Saporito further found the permitted discovery proportional, stating “the amount in controversy represents two-thirds of the total available insurance; [the insurer], as the drafter of the policy, has ready access to all relevant information especially regarding the denial of the claim; the importance of the discovery may be determinative of the issue whether the plaintiffs are entitled to any UIM benefits under the policy; and the burden of producing one witness is outweighed by the benefit in answering the questions about the validity of [the insurer’s] affirmative defense of the regular use exclusion.”

Date of Decision: November 4, 2020

Evanina v. The First Liberty Insurance Corporation, U.S. District Court Middle District of Pennsylvania No. 3:20-cv-00751, 2020 WL 6494883 (M.D. Pa. Nov. 4, 2020) (Saporito, Jr., M.J.)

BAD FAITH CLAIM DISMISSED FOR CONCLUSORY PLEADINGS; COURT REFUSES TO ALLOW AMENDMENT TO JOIN PARTIES THAT WOULD HAVE DESTROYED DIVERSITY (Western District)

Print Friendly, PDF & Email

This UIM case was removed to federal court, and the insured moved to remand this procedurally complex matter.  The carrier opposed remand and moved to dismiss the insureds’ bad faith claims.

Court rejects amended complaint adding new parties that would destroy diversity

The plaintiffs’ initial UIM suit was against non-diverse defendants and the case was removed to federal court. After removal, the plaintiffs filed an Amended Complaint adding non-diverse parties from a separate auto accident. They moved to remand for lack of jurisdiction.  The court refused to allow the joinder and retained jurisdiction, per 28 U.S.C. sec. 1447(e).

The court observed there was no Third Circuit precedent on section 1447(e), and like other district courts in this Circuit, the court followed the Fifth Circuit in applying a four-factor test to scrutinize remand motions under these circumstances. This balance of equities test adds heightened standards for allowing amendment that would destroy diversity. (The factors to be considered include “[1] the extent to which the purpose of the amendment is to defeat federal jurisdiction, [2] whether plaintiff has been dilatory in asking for amendment, [3] whether plaintiff will be significantly injured if amendment is not allowed, and [4] any other factors bearing on the equities.”).

Bad faith claims dismissed for pleading conclusory allegations

Having retained jurisdiction, the court then addressed the insured’s breach of contract and bad faith claims.

The insureds never allege “the amount of liability insurance available to the tortfeasors for the accident, the status of her claim against the insured, and they do not aver whether the liability limits of the tortfeasor’s coverage has been exhausted.” Thus, the insurer argued the UIM claim was not ripe. The insurer also argued the insureds never set out “the nature of [the] injuries, damages, or specific conduct in support of the statutory bad faith claim.”

The court found both the breach of contract and bad faith claims consisted “only of conclusory and boilerplate statements … and therefore, the motion to dismiss these claims will be granted.” It was significant to the court that plaintiffs did not attach the policy. Plaintiffs claimed they could not locate the policy, and as the court allowed amendment it encouraged the parties to work together expeditiously to get plaintiffs a copy of the policy.

More significantly, the plaintiffs did not plead any specific facts about the carrier’s conduct. The “merely alleged legal conclusions, and because the legal conclusions pled in the [amended complaint] are not facts, they are not assumed to be true and do not meet the Twombly/Iqbal standard.”

Date of Decision: October 9, 2020

Pierchalski v. Pryor, U.S. District Court Western District of Pennsylvania No. 2:19-CV-01352-RJC, 2020 WL 5994981 (W.D. Pa. Oct. 9, 2020) (Colville, J.)

(1) NO WANTON CONDUCT UNDER MVFRL INVOKING TREBLE DAMAGES AND SUPER INTEREST; (2) NO STATUTORY BAD FAITH WHERE (i) MVFRL PREEMPTS BAD FAITH STATUTE; (ii) THERE IS ONLY A VALUATION DISPUTE; (iii) INVESTIGATION REASONABLE; (4) BIAS CLAIMS ARE MERELY SUBJECTIVE (Philadelphia Federal)

Print Friendly, PDF & Email

Plaintiff was injured in an auto accident and made both PIP claims and underinsured motorist (UIM) claims. She found the carrier’s settlement offers and negotiations wholly inadequate, and brought statutory bad faith claims, and claims for damages under the Motor Vehicle Financial Responsibility Law (MVFRL) seeking treble damages and super interest for the insurer’s allegedly “wanton” conduct concerning her medical benefit claims.

MVFRL Claims

The court found the insured could proceed on her PIP claim under a breach of contract theory. However, the MVFRL claim for treble damages and 12% interest, under 75 Pa. C.S. § 1797(b)(4), was dismissed without prejudice. Judge Pappert held plaintiff had not pleaded “wanton” conduct, a predicate for gaining the extraordinary remedies under this statute.

The insurer also asserted the MVFRL count actually alleged a breach of the duty of good fair dealing, and moreover constituted an improper effort to get relief under the Bad Faith Statute. It asked the court to strike certain averments related to this putative backdoor bad faith claim.

The court rejected this argument: “Although Count II appears to assert a claim under the MVFRL … it also appears to assert a claim for … alleged breach of the implied contractual duty to act in good faith related to her PIP coverage. …  Because [the insured] may pursue a claim for breach of her policy’s PIP coverage obligations and because motions to strike are ‘not favored and usually will be denied unless the allegations have no possible relation to the controversy and may cause prejudice to one of the parties,’ the Court will not strike her allegations regarding the duty of good faith and fair dealing in Count II.”

MVFRL Claims and the Bad Faith Statute

The court then addressed the statutory bad faith claim.

The court first observed that unless the insurer’s “conduct falls outside of the scope of § 1797 of the MVFRL, 75 Pa. C.S. § 1797, and involves a bad faith abuse of the process challenging more than just the insurer’s denial of first party benefits, the MVFRL preempts any statutory bad faith claim concerning … PIP benefits.” The court made clear, “To the extent that the gravamen of [the] bad faith claim is the denial of first party medical benefits and nothing more, [the insurer’s] alleged conduct is within the scope of § 1797 of the MVFRL and therefore [she] is precluded from bringing such a claim.”

However, “[s]ection 8371 bad faith claims remain cognizable when the basis of a benefits denial does not relate to the reasonableness and necessity of treatment, or when an insurer’s conduct is obviously not amenable to resolution by the procedures set forth in Section 1797(b).”

Dispute Over Valuation not Bad Faith

The insured alleged the insurer delayed her claim and denied its value. The court found these allegations did not equate to allegations that the insurer actually deny the UIM or PIP. Rather, there was a dispute over valuation.

Analyzing the matter as a valuation dispute, Judge Pappert found the insured did not allege “facts sufficient to show [the insurer’s] valuation is unreasonable.” The insured’s subjective beliefs as to her claim’s value “is not indicative of bad faith because … subjective belief as to the value of the claim may reasonably, and permissibly, differ.”

Rather, “[t]o state a bad faith claim, [an insured] must do more than call [the insurer’s] offers low-ball.” These kind of conclusory and subjective allegations “suggest nothing more than a normal dispute between an insured and insurer.”

Low but Reasonable Offers Not Bad Faith

Bad faith does not exist “merely because an insurer makes a low but reasonable estimate of an insured’s damages.” Nor does a refusal “to immediately accede to a demand for the policy limit … without more, amount to bad faith.”

Insurer had Reasonable Basis to Deny Claim/No Adequate Claim of Bias

Next, Judge Pappert rejected the argument that the insured adequately pleaded the insurer lacked a reasonable basis to deny the claim’s value.  The insurer requested medical records and had an IME performed. It assessed the insured’s injuries based on that information.

The court did not give weight to conclusory allegations the doctor performing the IME was “a biased IME doctor” and “well-known as [someone] who provides so-called Independent Medical Examinations exclusively for and apparently to the liking of insurance companies….”  Further, that the plaintiff’s own doctor said she needed surgery did not, by itself, support a bad faith claim. The insurer was not unreasonable in relying  on the IME doctor’s assessment that the symptoms requiring surgery were unrelated to the accident at issue.

“In the absence of any supporting facts from which it might be inferred that [the] investigation was biased or unreasonable, this type of disagreement in an insurance case is not unusual, and cannot, without more, amount to bad faith.”

The court, however, permitted plaintiff to amend the statutory bad faith claim “to the extent it is not preempted by the MVFRL and to the extent she is able to allege facts stating a plausible claim for relief.”

Date of Decision: October 2, 2020

Canfield v. Amica Mutual Insurance Co., U.S. District Court Eastern District of Pennsylvania No. CV 20-2794, 2020 WL 5878261 (E.D. Pa. Oct. 2, 2020) (Pappert, J.)

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

Print Friendly, PDF & Email

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)

Print Friendly, PDF & Email

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.)

COMPLAINT ALLEGES SUFFICIENTLY DETAILED CHRONOLOGY OF FACTS TO SUPPORT PLAUSIBLE BAD FAITH CLAIM (Middle District)

Print Friendly, PDF & Email

The UIM plaintiff brought breach of contract and statutory bad faith claims. The insurer moved to dismiss the bad faith claim.

The complaint sets out 28 paragraphs with factual allegations.  In his decision, Magistrate Judge Carlson recites 15 of those paragraphs verbatim, along with one lengthy paragraph including a litany of conclusory bad faith allegations.

In addressing the motion on the merits, Magistrate Judge Carlson describes the means to measure the adequacy of a complaint’s factual allegations in determining whether a plaintiff makes out a plausible claim:

In practice, consideration of the legal sufficiency of a complaint entails a three-step analysis: “First, the court must ‘tak[e] note of the elements a plaintiff must plead to state a claim.’ … Second, the court should identify allegations that, ‘because they are no more than conclusions, are not entitled to the assumption of truth.’ … Finally, ‘where there are well-pleaded factual allegations, a court should assume their veracity and then determine whether they plausibly give rise to an entitlement for relief.’”

Assessing the complaint requires examining “the specificity of the pleadings and calls for recital of specific factual allegations from which bad faith may be inferred in order to defeat a motion to dismiss.” “Where a complaint’s § 8371 bad faith claim simply relies upon breach of contract allegations, coupled with a conclusory assertion that the failure to pay under an insurance policy was ‘unreasonable’ or made in bad faith, courts have dismissed such claims, but typically have afforded litigants an opportunity to further amend and articulate their bad faith claims.” On the other hand, “when a complaint couples general allegations of bad faith with well-pleaded assertions of unreasonable delay, unreasonable claims processing, and failures to communicate, a complaint adequately states a claim under § 8371 and is not subject to dismissal on the pleadings alone.”

In this “somewhat close case,” while one paragraph simply included a litany of conclusory bad faith allegations, “the complaint, taken as a whole, goes beyond a mere boilerplate recital of the elements of the statute.” It provides a chronology detailing the insurer’s alleged “failure to honor this underinsured motorist claim….”

“First, the plaintiff alleges that: “On countless occasions since Plaintiff[’]s underinsured motorist claim has been established, Plaintiff provided … medical records and reports concerning her injuries, condition, treatment, prognosis and recommended treatment plan.” “According to [the insured], this ‘documentation provided to [the insurer] clearly establishes Plaintiff continues to suffer from severe injuries, including but not limited to, complex regional pain syndrome.’”

The insured describes “months of indifference, delay, and failure to investigate … stating that: On June 27, 2019, a formal written demand for available policy limit was mailed to [the insurer]. On July 18, 2019, a [carrier] representative … confirmed via telephone he had received the aforementioned demand package. On September 6, 2019, [that representative] admitted he had not reviewed the demand package, but would make a formal settlement offer by September 17, 2019. On November 5, 2019, [plaintiff’s counsel] provided [that representative] with notice of our arbitrator (as is customary with automobile insurance policies in the Commonwealth of Pennsylvania) and requested [the insurer] provide notice of their arbitrator. [Plaintiff’s counsel] followed-up via certified letter dated November 12, 2019 which was received by [the insurer] on November 18, 2019.”

The insured adds “this course of conduct continued for many months, until February of 2020 when [the insurer] made an offer which … ‘does not fairly compensate Plaintiff for the injuries she has sustained’ and ‘has forced her to file litigation pursuant to the policy, in an effort to further delay payment of underinsured motorist benefits under the policy to which Plaintiff is rightly owed.’”

Magistrate Judge Carlson concludes, “these averments, while spare, go beyond the type of mere boilerplate allegations that courts have found to be too conclusory to sustain a bad faith claim.” “Moreover, fairly construed, the complaint alleges failures … to communicate and timely investigate this claim, coupled with allegations of unreasonable delay in claims processing and payment…. Such allegations as a matter of law are sufficient to state a bad faith claim under Pennsylvania law.”

Dates of Decision: July 27, 2020 (Report and Recommendation) and September 11, 2020 (Order adopting Report and Recommendation)

Yohn v. Selective Insurance Co. of America, U.S. District Court Middle District of Pennsylvania Civil No. 3:20-CV-565, 2020 U.S. Dist. LEXIS 133635 (M.D. Pa. July 27, 2020) (Carlson, M.J.) (Report and Recommendation), and District Court Order adopting Report and Recommendation (Sept. 11, 2020) (Mariani, J.)

PLEADING A DISPUTE OVER VALUE AND SUBMITTING MEDICAL RECORDS TO SUPPORT ONE VALUE DOES NOT MAKE OUT A BAD FAITH CLAIM (Western District)

Print Friendly, PDF & Email

This Western District UM bad faith decision aligns with recent Eastern and Middle District cases in finding that the insureds failed to plead a plausible bad faith claim.

Pleading Standards, General

Among other things, the court observed:

  1. Although a complaint does not need to allege detailed factual allegations to survive a Rule 12(b)(6) motion, a complaint must provide more than labels and conclusions.

  2. A “formulaic recitation of the elements of a cause of action will not do.”

  3. “Factual allegations must be enough to raise a right to relief above the speculative level” and be “sufficient to state a claim for relief that is plausible on its face.”

  4. Facial plausibility exists “when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.”

  5. “The plausibility standard is not akin to a ‘probability requirement,’ but it asks for more than a sheer possibility that a defendant has acted unlawfully. [ ] Where a complaint pleads facts that are ‘merely consistent with’ a defendant’s liability, it ‘stops short of the line between possibility and plausibility of ‘entitlement to relief.’”

Pleading Principles in Bad Faith Cases

The court also looked at prior case law in adducing pleading principles applied in insurance bad faith cases:

  1. In the bad faith context, district courts have required more than “conclusory” or “bare-bones” allegations that an insurance company acted in bad faith by listing a number of generalized accusations without sufficient factual support.

  2. Thus, the assessment of the sufficiency of a particular complaint often turns on the specificity of the pleadings and calls for recital of specific factual allegations from which bad faith may be inferred in order to defeat a motion to dismiss.

  3. Where a complaint’s § 8371 bad faith claim simply relies upon breach of contract allegations, coupled with a conclusory assertion that the failure to pay under an insurance policy was “unreasonable” or made in bad faith, courts have dismissed such claims, but typically have afforded litigants an opportunity to further amend and articulate their bad faith claims.

  4. A motion to dismiss will be granted where the “[p]laintiff’s generic invocation of statutory language is insufficient to satisfy his federal pleading burden.”

  5. There is no plausible claim stated in a statutory bad faith case where the complaint is devoid of “any facts that describe who, what, where, when, and how the alleged bad faith conduct occurred.”

Application of Law to Facts Pleaded Leads to Dismissal with Leave to Amend

The complaint alleges plaintiffs were injured by an uninsured motorist and sought UM coverage from the carrier. The policy had $100,000/$300,000 limits. Plaintiffs submitted a demand package, including relevant medical records.  The carrier offered a total of $23,000 to both plaintiffs. One plaintiff later submitted a lost wages claim of $18,000. The insurer increased the offer by another $3,000, but made clear it would not evaluate the lost wage claim.

Plaintiffs’ bad faith count relied on these factual allegations, which the court described as “breach of contract allegations,” and then added “a laundry list of generic allegations that may amount to bad faith….” This was not enough.

First, the court pointed out that plaintiffs failed to attach any exhibits to the complaint. Further, they did not plead “any facts to explain how or why the offer made by [the insurer] is nothing more than a legitimate dispute over the value of the claim.” The court made clear that disputes over value do “not necessarily give rise to bad faith; rather, a plaintiff must allege ‘factual content indicating that [the insurance company] lacked a reasonable basis for its tendered offer or that it knew or recklessly disregarded a lack of reasonable basis for the offer.”

The court dismissed the bad faith claim, with leave to amend.

Date of Decision: August 4, 2020

TAYLOR v. GEICO CHOICE INSURANCE COMPANY, No. 2:20-CV-00729-CRE, 2020 WL 4474926 (W.D. Pa. Aug. 4, 2020) (Reed Eddy, M.J.)

Our thanks to Attorney Daniel Cummins of the excellent Tort Talk Blog for bringing this case to our attention.

SIMPLY DENYING CLAIM OR REFUSING TO PRODUCE UNDERWRITING FILE NOT BAD FAITH; UIPA VIOLATIONS MUST BE A REGULAR BUSINESS PRACTICE TO BE CONSIDERED AS EVIDENCE (Philadelphia Federal)

Print Friendly, PDF & Email

This UIM bad faith opinion includes instructive points on factual allegations that only create possible, but not plausible, claims and on the use of alleged Unfair Insurance Practices Act (UIPA) violations as evidence. The opinion also includes the more common observations admonishing against conclusory pleading.

The bad faith claims in this case concern alleged misrepresentations of UIM coverage in connection with stacking, a refusal to provide the underwriting file, and a claim that the insurer forced the insured to file suit just to obtain documents. The court dismissed the bad faith claims, but with leave to amend.

ADEQUATE PLEADING STANDARDS

As with many other cases issuing out of the Eastern District this year, the court made clear that conclusory allegations are given no regard in supporting a bad faith pleading. Like many of those courts, Judge Baylson cited the Third Circuit’s Smith opinion on this point, as well as his own opinions in Eley and Robbins.

There were three factual allegations that went beyond mere conclusory pleading, though still not adequate to state a claim because they only made bad faith possible, not plausible.

Refusal to Pay Not Enough

  1. “Defendant denied Plaintiff’s claim for UIM stacking of benefits for five vehicles….” As to this allegation, Judge Baylson found that “a plaintiff cannot base a bad faith claim on the defendant’s refusal to pay. A disagreement over the amount of a UIM claim is not unusual, and the existence of such disagreement cannot by itself state a viable bad faith claim.” He relied on Johnson v. Progressive Ins. Co., for the proposition that “[t]he underlying facts involve nothing more than a normal dispute between an insured and insurer over the value of an UIM claim. The scenario under consideration occurs routinely in the processing of an insurance claim.”

Refusal to Turn Over Underwriting File

  1. “Defendant refused to provide the underwriting file upon request….” Judge Baylson found the insurer’s alleged “refusal to provide the underwriting document is comparable to the allegation of parallel conduct in Twombly, which ‘gets the complaint close to stating a claim, but without some further factual enhancement it stops short of the line between possibility and plausibility of entitlement to relief.’” He added that “[i]n insurance coverage disputes, underwriting files often contain an insurer’s evaluation of the risks presented on an insurance application, along with other confidential business information. Although a showing of Defendant’s refusal to disclose the underwriting file may be consistent with bad faith, it is also as much in line with ‘a wide swath of rational and competitive business strategy.’”

Don’t Make the Court Speculate that an Alleged Fact Might Possibly be Bad Faith

       3. “Defendant required Plaintiff to file a lawsuit in order to obtain the documents that will confirm the coverage.” Although not addressed separately, this allegation fell under the general concept the court will not infer bad faith because a possibility of bad faith exists. Rather, the factual allegations must stand by themselves as a plausible basis for a bad faith claim. Plausibility means the court does not have to speculate on what the allegation might imply.

UIPA Violations Must Show the Actions at Issue Occurred on a Regular Basis as a General Business Practice

The insured argued that he should be allowed to use UIPA violations as evidence of bad faith. The carrier countered that UIPA violations might only be evidence of bad faith “when the actions in question were a general business practice,” and the insured did not make any allegations to this effect. Judge Baylson found the complaint was devoid of specific factual allegations concerning putative UIPA violations.

Judge Baylson stated that “31 Pa. Code § 146.1 (1978) provides that such violations ‘will be deemed to constitute unfair claims settlement practices’ if they occur with “a frequency that indicates a general business practice.’” Judge Baylson relied on his 2017 Jack decision, to support his conclusion that the insured “pleaded no factual allegations showing that Defendant’s actions occur on a regular basis that constitutes a general business practice.”

Date of Decision: June 22, 2020

Dietz v. Liberty Mutual Insurance Co., U.S. District Court Eastern District of Pennsylvania No. 2:20-cv-1239-MMB, 2020 U.S. Dist. LEXIS 108559 (E.D. Pa. June 22, 2020) (Baylson, J.)

NO UM BAD FAITH CLAIM PLEADED; FIDUCIARY DUTY ALLEGATIONS STRICKEN FROM COMPLAINT (Middle District)

Print Friendly, PDF & Email

As in the two Eastern District cases summarized earlier this week, Middle District Judge Jennifer P. Wilson dismissed a bad faith claim with leave to amend. Judge Wilson also struck fiduciary duty allegations from the complaint in this uninsured motorist case.

The complaint fails to allege bad faith

The insured alleged the insurer was “supplied with documentation sufficient to fully and fairly evaluate the uninsured motorist claim, but [the insurer] failed to do so.” Judge Wilson found the insured failed to plead specific facts as to what might qualify as bad faith conduct. Plaintiff simply alleges the bad faith elements, and “does not lay out ‘any facts that describe who, what, where, when, and how the alleged bad faith conduct occurred.’” Judge Wilson cited Western District Judge Bissoon’s Mondron opinion to support her conclusion, though she did allow plaintiff leave to amend.

No fiduciary duty in UM/UIM context

The insurer also successfully moved to strike allegations that it owed a fiduciary duty.

The court observed that the insured’s breach of contract claim was based on the UM policy benefits. In Pennsylvania, there is no fiduciary duty arising out of insurance contracts that goes beyond the duty of good faith and fair dealing “until an insurer asserts a stated right under the policy to handle all claims asserted against the insured. … These are not the circumstances in an uninsured motorist claim.”

Rather, the Pennsylvania Supreme Court makes clear in the UM/UIM context “an insurance company’s duty to its insured is one of good faith and fair dealing. It goes without saying that this duty does not allow an insurer to protect its own interests at the expense of its insured’s interests. Nor does it require an insurer to sacrifice its own interests by blindly paying each and every claim submitted by an insured in order to avoid a bad faith lawsuit.”

Thus, plaintiff’s allegations of a fiduciary duty were “not pertinent to her breach of contract claim, which only requires an insurer to act in good faith and fair dealing towards the insured.” As allowing the fiduciary duty allegations would only confuse the actual issues in the case, the motion to strike those allegations was granted.

Date of Decision: June 17, 2020

Miller v. State Farm Mutual Automobile Insurance Co., U.S. District Court Middle District of Pennsylvania Civil No. 1:20-CV-00367, 2020 U.S. Dist. LEXIS 105766 (M.D. Pa. June 17, 2020) (Wilson, J.)

TWO BAD FAITH CLAIMS DISMISSED FOR EITHER MAKING CONCLUSORY ALLEGATIONS OR ALLEGING FACTS THAT DO NOT CONSTITUTE BAD FAITH (Philadelphia Federal)

Print Friendly, PDF & Email

In these two Philadelphia federal opinions issued last week, bad faith claims were dismissed without prejudice. In one case, this was based on a set of pleadings that has been repeatedly held conclusory in nature. In the other, after stripping away the conclusory allegations, the court found that the remaining factual allegations simply did not make out a bad faith case.

There have been at least 10 prior opinions out of Pennsylvania’s Eastern District this year similarly dismissing bad faith claims for inadequate pleading.

  1. Lopez v. Selective Insurance Co. of South Carolina (Judge Schiller, Eastern District)

In Lopez v. Selective Insurance, Judge Schiller found the complaint set out only conclusory allegations, and that these allegations “did not logically follow from any facts alleged in the Complaint.” These included the following 13 separate allegations, all of which failed:

“[S]ending correspondence falsely representing that Plaintiff’s loss caused by a peril insured against under the Policy was not entitled to benefits due and owing under the policy . . . failing to complete a prompt and thorough investigation of Plaintiff’s claim before representing that such claim is not covered under the Policy . . . failing to pay Plaintiff’s covered loss in a prompt and timely manner . . . failing to objectively and fairly evaluate Plaintiff’s claim . . . conducting an unfair and unreasonable investigation of Plaintiff’s claim . . . asserting Policy defenses without a reasonable basis in fact . . . flatly misrepresenting pertinent facts or policy provisions relating to coverages at issue and placing unduly restrictive interpretations on the Policy and/or claim forms . . . failing to keep Plaintiff or their representatives fairly and adequately advised as to the status of the claim . . . unreasonably valuing the loss and failing to fairly negotiate the amount of the loss with Plaintiff or their representatives . . . failing to promptly provide a reasonable factual explanation of the basis for the denial of Plaintiff’s claim . . . unreasonably withholding policy benefits . . . acting unreasonably and unfairly in response to Plaintiff’s claim . . . unnecessarily and unreasonably compelling Plaintiff to institute this lawsuit to obtain policy benefits for a covered loss, that Defendant should have paid promptly and without the necessity of litigation.”

In describing what the complaint lacked, Judge Schiller observed, “[t]he Complaint does not contain any factual allegations that relate to why or how Defendant’s basis for denying the claim was unreasonable. Indeed, the Complaint does not include any facts related to Defendant’s purported basis for denying the claim or Defendant’s actions or omissions in conducting an investigation. Plaintiff’s Complaint does not describe the cause or extent of the alleged loss, the provisions of the insurance policy at issue, the date on which Plaintiff made Defendant aware of the loss, or the date on which Defendant initially denied the claim. Plaintiff’s conclusory allegations are not supported by specific facts sufficient to state a plausible claim for relief. Courts consistently hold that bare-bones allegations of bad faith such as these, without more, are insufficient to survive a motion to dismiss.”

As with a number of other recent opinions, including his own opinion in Park v. Evanston, Judge Schiller relies on the Third Circuit’s Smith decision, as well as Judge Leeson’s McDonough decision, and Judge Gardner’s Atiyeh decision.

Plaintiffs relied on the 1009 Clinton Properties opinion, but consistent with a number of other recent decisions, Judge Schiller found Clinton Properties to be an “outlier” and rejected the insureds’ argument. Clinton Properties has similarly been deemed an outlier by Judge Marston in her Cappuccio decision, Judge Darnell Jones in Clapps, and Judge Leeson in Shetayh. These cases rejected very similar allegations in each instance.

Date of Decision: June 17, 2020

Lopez v. Selective Insurance Co., U.S. District Court Eastern District of Pennsylvania CIVIL ACTION No. 20-1260, 2020 U.S. Dist. LEXIS 105733 (E.D. Pa. June 17, 2020) (Schiller, J.)

  1. Graves v. USAA General Indemnity Co. (Judge Gallagher, Eastern District)

The insureds brought UIM breach of contract and bad faith claims. The court dismissed for failing to plead anything other than conclusory allegations or facts that could not constitute bad faith.

After stripping away the conclusory allegations, the court found the following factual allegations, even assuming their truth, failed “to support a claim that Defendant adjusted the UIM claim in bad faith.”

“1) Plaintiff was operating a motor vehicle which was insured under a USAA insurance contract and which provided for UIM benefits; 2) the accident was caused by the third party; 3) Plaintiff suffered severe injuries as a result of the accident; 4) Plaintiff submitted a claim for UIM benefits; 5) Plaintiff complied with the policy’s requirement to obtain Defendant’s consent to settle her claim against the third party; 6) Plaintiff forwarded her medical documentation to Defendant; and 7) Defendant has not paid the UIM claim.”

Graves v. USAA General Indemnity Co., U.S. District Court Eastern District of Pennsylvania Civil No. 2:20-cv-00786-JMG, 2020 U.S. Dist. LEXIS 105123 (June 16, 2020) (Gallagher, J.)