Archive for the 'PA – Procedural Issues' Category
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.)
This case involved the arbitrability of statutory bad faith claims. The Superior Court relied upon its 23-year old decision in Nealy v. State Farm Mutual Auto Insurance Co., 695 A.2d 79 (Pa. Super. Ct. 1997) to resolve the issue, rather than looking at the usual principles regarding arbitrability.
The court states, “we need not address [the insurer’s] contention the bad faith claim fell within the scope of the arbitration agreement. The record does not demonstrate that the trial court found the claim to be outside the scope of the agreement; rather, it found Nealy to be binding.”
In Nealy, the Superior Court stated, “bad faith claims pursuant to Section 8371, ‘are distinct from the underlying contractual insurance claims from which the dispute arose.’” Thus, “section 8371 ‘provide[s] an independent cause of action to an insured that is not [dependent] upon success on the merits, or trial at all, of the contract claim.’”
The Nealy court then held, “Both this Court and our sister federal courts have decided a myriad of cases that impinge in some respect upon the workings of § 8371. No court, however, has squarely decided the question of whether an arbitration panel is vested with the jurisdiction to entertain such a claim. After careful consideration, we conclude that original jurisdiction to decide issues of § 8371 bad faith is vested in our trial courts.”
The court then rejected the insurer’s arguments against Nealy’s application. First, it found Nealy was not limited to UM/UIM cases. Next, the court found the complaint clearly pleaded bad faith bad on post-breach conduct, “and thus is temporally and factually distinct from its breach of contract claim.” Finally, the court ruled Nealy remained good law.
Date of Decision: September 29, 2020
KEB Hana Bank USA v. Fidelity National Title Insurance Company, Superior Court of Pennsylvania No. 207 EDA 2020, 2020 WL 5796159 (Pa. Super. Ct. Sept. 29, 2020) (Colins, McLaughlin, Panella, JJ.)
Published on
September 24, 2020 in
PA - Bifurcate/Sever & Stays, PA - Claims Handling (unreasonable), PA - Communication with insured, PA - Coverage Issues, PA - Delay (Investigation/Claims handling), PA - Delay (Payment), PA - Discovery and Evidence, PA - Federal Pleading Adequate, PA - No coverage due, bad faith still possible, PA - Procedural Issues, PA - Settlement related issues, PA - UIM/UM Cases and PA - Work Product.
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.)
In this non-precedential decision, Pennsylvania’s Superior Court followed federal case law out of the Eastern District, Feingold v. Liberty Mutual, in holding that a client’s bad faith claim could not be assigned to her former attorney. [Note: In Allstate v. Wolfe, Pennsylvania’s Supreme Court did find it possible to assign bad faith claims within certain parameters. The holding in that case identified two proper classes of assignees: “We conclude that the entitlement to assert damages under Section 8371 may be assigned by an insured to an injured plaintiff and judgment creditor….”]
The court also found that “the complaint does not include sufficient factual averments regarding how [the insurer] acted unreasonably and in bad faith. … the complaint contains ‘either simple reiterations of the standard of proving bad faith or bald allegations that the standard has been breached.’”
Date of Decision: August 14, 2020
Feingold v. McCormick & Priore PC, Superior Court of Pennsylvania No. 3273 EDA 2019, 2020 WL 4728111 (Pa. Super. Ct. Aug. 14, 2020) (King, Lazarus, Strassburger, JJ.) (Not precedential)
In this case, the insurer moved for summary judgment on bad faith, and the insured did not respond to the motion. After a review of the record and legal arguments, the Court granted the insurer’s motion.
The case involved a personal injury. The insurer had an independent medical review performed on the insured’s medical records. The carrier’s doctor concluded that the injuries the insured alleged were not the result of the accident at issue. Rather, those injuries were caused by a prior accident. The carrier argued this alone was sufficient to establish a reasonable basis to deny coverage.
As stated, the insured did not respond to the carrier’s motion, and thus put forward no evidence that the insurer acted in bad faith by failing to consider the relevant medical records. Judge Brody agreed:
“After reviewing [the] motion and evidence, I conclude that [the insurer] has satisfied its summary-judgment burden, shifting the burden to Plaintiff to demonstrate the existence of genuine disputes of material fact that preclude summary judgment. Plaintiff has failed to carry his burden. Despite several chances to do so, Plaintiff never filed any objection to [the] Motion for Partial Summary Judgment. He has not pointed to any evidence that [the insurer] behaved in bad faith, nor has he offered any evidence to refute the evidence [the insurer] offered in support of its motion.”
Date of Decision: August 13, 2020
Dwyer v. Nationwide Property and Casualty Insurance Company, U.S. District Court Eastern District of Pennsylvania No. CV 19-2814, 2020 WL 4699047 (E.D. Pa. Aug. 13, 2020) (Brody, J.)
The Third Circuit affirmed Middle District Judge Robert Mariani’s grant of summary judgment to the insurer on a bad faith claim. A summary of the trial court opinion can be found here.
In this UIM case, the tortfeasor paid $95,000 out of a $100,000 policy. The insurer initially valued the claim at $110,000 to $115,000 and offered $10,000 to settle (after deducting the $100,000 for the tortfeasor’s policy). The insured demanded the full $200,000 UIM policy limits, and filed suit when her demand was not met. The insurer upped its offer to $50,000, and the parties finally agreed to a high low arbitration ($200,000/$10,000). The arbitrator found the “total claim was worth $306,345, and calculated [the insurer’s] responsibility under the UIM policy to be $160,786.78.”
Insured’s Responses to Undisputed Facts Found Inadequate
First, the appeals court rejected the argument that the trial court improperly accepted certain of the insurer’s statements of undisputed fact as undisputed. The insured failed to set forth detailed facts contradicting the insurer’s specifically described undisputed facts. Rather, she generally denied the insurer’s undisputed facts and responded with facts that did not actually go to the issues presented in the insurer’s statements of fact. The Third Circuit found these failings amounted to admissions.
[This is a clear warning to parties opposing summary judgment that simply denying an alleged undisputed fact, without also setting out specific facts of record directly casting doubt on the putative undisputed facts, will result in an admission.]
Next, the appellate court affirmed the trial court’s discretion to disregard an additional 289 counterstatements of fact that went beyond the insured’s responsive paragraphs to the insurer’s allegations of undisputed facts. Under local district court rules, the trial court had broad discretion in reviewing such supplementary counterstatements of fact, and determined they were outside the scope of the evidentiary issues presented in the insurer’s statement of undisputed facts.
Low but Reasonable Estimate not Bad Faith
Finally, the Third Circuit observed that “[w]hile successful bad faith claims do not need to show fraudulent behavior, negligence or bad judgment will not support a bad faith claim. … Nor will ‘a low but reasonable estimate of the insured’s losses.’”
The Third Circuit found “[t]he District Court properly applied this standard and granted summary judgment because the undisputed facts in the record show that [the insurer] had a reasonable basis for contesting [the insured’s] UIM claim. The record shows that (1) a large portion of [the insured’s] valuation of her claim was attributable to potential future surgery, (2) an independent medical examination disputed [her] claim that she needed the future surgery, (3) [she] had additional health coverage that would defray the cost of future surgery, and (4) [the carrier] believed [the insured] was exaggerating her symptoms in her deposition during the underlying UIM litigation.”
Even taking any remaining factual disputes in the insured’s favor, she could not demonstrate the absence of a reasonable basis to deny benefits. As there was a reasonable basis to deny benefits, the court did not have to address the second bad faith element of knowing or reckless disregard.
Date of Decision: November 27, 2019
Rau v. Allstate Fire & Casualty Insurance Co., U. S. Court of Appeals for the Third Circuit No. 19-1078, 2019 U.S. App. LEXIS 35560 (3d Cir. Nov. 27, 2019) (Chagares, Jordan, Restrepo, JJ.)
This UIM breach of contract and bad faith case was removed to federal court. The court sua sponte remanded the matter to state court. Significantly for this action, the tortfeasor driver was also named as a defendant.
The ad damnum clauses in the complaint’s various counts expressly state damages do not exceed $50,000. The bad faith count’s ad damnun clause specifically only seek an “’award of compensatory and punitive damages in an amount not in excess of Fifty Thousand Dollars ($50,000).’” The civil cover sheet states the damages were not in excess of $50,000. Pennsylvania’s Rules provide compulsory arbitration for cases at or below $50,000.
Any federal jurisdiction would have to be based on (1) diversity of citizenship, and (2) a jurisdictional minimum amount-in-controversy above $75,000. The removing party bears the burden of proving these two jurisdictional elements, and doubts concerning jurisdiction are resolved in favor of remand. Because subject matter jurisdiction is involved, the court always has the power to review diversity jurisdiction, and can raise the issue sua sponte.
The court first ruled there was no diversity. The plaintiff insureds and defendant tortfeasor driver were all Pennsylvania citizens. The court rejected the notion that because the non-diverse tortfeasor defendant had not been served, the diverse insurer defendant could remove the case. [This is not the situation where diversity otherwise exists, and a non-forum defendant can remove because the forum defendant has not been served, as in the Third Circuit’s 2018 Encompass case.]
Second, the $75,000 jurisdictional minimum amount-in-controversy was not established. A plaintiff is the master of its own claim and may limit a claim so it falls below the jurisdictional threshold. In those circumstances “’a defendant seeking removal must prove to a legal certainty that plaintiff[s] can recover the jurisdictional amount.’” Three principles guide a court under these circumstances:
“(1) The party wishing to establish subject matter jurisdiction has the burden to prove to a legal certainty that the amount in controversy exceeds the statutory threshold;
(2) A plaintiff, if permitted by state laws, may limit her monetary claims to avoid the amount in controversy threshold; and
(3) Even if a plaintiff states that her claims fall below the threshold, this Court must look to see if the plaintiff’s actual monetary demands in the aggregate exceed the threshold, irrespective of whether the plaintiff states that the demands do not.”
The insurer failed to makes its case here. First, the insureds limited their demand below $50,000, putting themselves within the state court’s compulsory arbitration threshold. Eastern District courts have found that a plaintiff expressly limiting damages to $50,000, so as to fall within the compulsory arbitration limit, does not meet the $75,000 federal jurisdiction minimum.
The court looked further into whether the facts pleaded could result in more than $75,000 in damages, to a legal certainty. Here the UIM $15,000 policy limit fell well below $75,000, but the insurer argued punitive damages could bring the case above that sum, implying a punitive damages multiplier of four times compensatory damages. The court rejected that argument (1) because the insurer provided no basis why a multiplier of four would be applied and (2) a multiplier of four would bring the case up to $75,000, but federal jurisdiction requires the damages exceed $75,000.
In sum, the insurer could not prove to a legal certainty the amount in controversy would exceed $75,000.
Date of Decision: November 5, 2019
Mordecai v. Progressive Casualty Insurance Co., U. S. District Court Eastern District of Pennsylvania, CIVIL ACTION NO. 19-4351, 2019 U.S. Dist. LEXIS 192331 (E.D. Pa. Nov. 5, 2019) (Younge, J.)
This breach of contract and bad faith action outlines what a court may consider in addressing a motion for judgment on the pleadings. In this case, the documents attached to an answer were not “written instruments” that a court could consider in deciding a motion for judgment on the pleadings.
There was an undisputed fire loss, but there was an issue of whether at least one of the insureds resided in the home at the time of the loss. If neither insured resided at the property, there would be no coverage.
The complaint alleged facts supporting the position that one of the insureds did live in the home at the time of the loss. In answering the complaint, the insurer attached that insured’s statement under oath, the insurer’s investigative report, an EMT form, and an electric usage bill. The insurer relied on the facts in these documents to argue that both insureds did not reside at the home.
The court ruled these documents could not be used in support of a motion for judgment on the pleadings. The court found these were not the kind of “written instruments” that could be incorporated into a pleading, as contemplated by the Rules of Civil Procedure. Instead, they were “lengthy exhibits containing evidentiary matter [that] should not be attached to the pleadings.”
For example, the court observed “[e]xhibits solely containing evidentiary matter, such as depositions, are not considered ‘written instruments’ under Rule 10(c) and are typically excluded from consideration of the pleadings.”
Thus, “[b]ecause the Statements Under Oath consist of only evidentiary matters, they cannot be considered at this juncture.” The same principle applied to the investigative reports and electric bills.
Date of Decision: October 9, 2019
Bloxham v. Allstate Ins. Co., U. S. District Court Middle District of Pennsylvania NO. 3:19-CV-0481, 2019 U.S. Dist. LEXIS 175198 (M.D. Pa. Oct. 9, 2019) (Caputo, J.)
Published on
August 20, 2019 in
PA - Claims Handling (unreasonable), PA - Common Law Bad Faith (contractual or fiduciary basis), PA - Communication with insured, PA - Damages, PA - Declaratory Judgment, PA - Delay (Investigation/Claims handling), PA - Federal Pleading Adequate, PA - Negligence not bad faith, PA - Procedural Issues, PA - Punitive Damages, PA - Removal & Remand and PA - UIPA & UCSP.
In this Opinion, Eastern District Judge Tucker addresses a wide range of fundamental legal issues in the context of ruling on a motion to dismiss the insured’s 11 count complaint. The complaint includes not only breach of contract and bad faith claims, but tort claims, UIPA claims, declaratory judgment claims, and injunctive relief claims, all arising out of the alleged failure to pay on an insurance claim. The court also addresses a motion to remand after removal.
We do not address all of the issues Judge Tucker discusses, but highlight a few of the key principles adduced in her opinion. Her full opinion can be found here.
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Motion to remand denied. (i) In determining the jurisdictional minimum amount-in-controversy, the court may consider the possibility of punitive damages under the bad faith statute. (ii) Diversity of citizenship can be established by showing the defendant is not a citizen of plaintiff’s state, just as well as by affirmatively showing the state(s) in which defendant is a citizen.
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The gist of the action doctrine and/or the economic loss doctrine will typically bar tort claims based on violations of an insurance contract.
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Violating the Unfair Insurance Practices Act (UIPA) (i) does not create a private right of action, and (ii) some courts hold it may not be used to establish violation of statutory bad faith.
As the court states: “Plaintiff’s claim is also barred to the extent that it relies on an alleged violation of the Pennsylvania Unfair Insurance Practices Act (‘UIPA’) because the UIPA does not permit private recovery for a violation of its provisions. Plaintiff advances a claim for damages based, in part, on a theory that [the insurer] was negligent having breached duties imposed upon it by the UIPA, 40 Pa Const. Stat. Ann. § 1171.1, et seq. ‘Courts within the Third Circuit and the Commonwealth of Pennsylvania continue to recognize [, however,] that the UIPA does not provide plaintiffs with a private cause of action.’ Tippett, 2015 U.S. Dist. LEXIS 37513, 2015 WL 1345442 at *2 (quoting Weinberg v. Nationwide Cas. and Ins. Co., 949 F. Supp. 2d 588, 598 (E.D. Pa. 2013)) (internal quotation marks omitted). Indeed, in Tippett, the district court not only rejected a plaintiff’s attempt to state a separate claim under the UIPA, but also rejected the plaintiff’s arguments that proof of a UIPA violation might otherwise provide support for the plaintiff’s independent bad faith claim. Id. Plaintiff’s claim under the UIPA in this case is similarly barred.”
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Breach of the common law duty of good faith and fair dealing is subsumed in the breach of contract claim.
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The Unfair Trade Practices and Consumer Protection Law applies to the sale of insurance policies, not claims handling.
As the court states: “While Plaintiff rightly notes that the ‘UTPCPL creates a private right of action in persons upon whom unfair methods of competition and/or unfair or deceptive acts or practices are employed and who, as a result, sustain an ascertainable loss,’ … Plaintiff fails to note that ‘the UTPCPL applies to the sale of an insurance policy [but] does not apply to the handling of insurance claims.’” Thus, as the alleged “wrongful conduct under the UTPCPL relate[s] solely to [the insurer’s] actions after the execution of the homeowner’s insurance policy,” the UTPCPL claim was dismissed.
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Declaratory judgment count not permitted in light of breach of contract claim.
The court states: “Federal courts routinely dismiss actions seeking declaratory judgment that, if entered, would be duplicative of a judgment on an underlying breach of contract claim.” Judge Tucker cites case law for the propositions that “granting a defendant’s motion to dismiss a plaintiff’s independent cause of action for declaratory judgment because the claim for declaratory judgment was duplicative of an underlying breach of contract claim,” and “dismissing a plaintiff’s duplicative claim for declaratory judgment in the face of an underlying breach of insurance contract claim and observing that ‘pursuant to discretionary declaratory judgment authority, district courts have dismissed declaratory judgment claims at the motion to dismiss stage when they duplicate breach of contract claims within the same action.’”
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The insured pleads a plausible bad faith claim.
Judge Tucker highlighted the following allegations in ruling that the bad faith claim could proceed:
i the insurer “attempted to close her insurance claim despite never having sent an adjuster or inspector to evaluate the damage to the Property.”;
ii the insurer “engaged in intentional ‘telephone tag’ to delay and deny Plaintiff coverage under the homeowner’s insurance policy.”;
iii. the insurer never “scheduled an inspection of the Property or otherwise [took] any action to deny or grant coverage under the homeowner’s insurance policy.”
Thus, at the end of the day, after reviewing all of the claims and motion to remand, the insured was allowed to proceed on the breach of contract and bad faith claims.
Date of Decision: August 13, 2019
Neri v. State Farm Fire & Cas. Co., U. S. District Court Eastern District of Pennsylvania CIVIL ACTION NO. 19-0355, 2019 U.S. Dist. LEXIS 136820 (E.D. Pa. Aug. 13, 2019) (Tucker, J.)
In this bad faith action, Eastern District Judge Slomsky addressed three disputed discovery issues: (1) reserves; (2) claim adjuster work product; and (3) trade secrets.
Reserves are Discoverable
District courts within the Third Circuit are split on whether reserves are discoverable in bad faith cases. In this action, Judge Slomsky stood with those judges who find reserves relevant and discoverable.
Work Product Privilege not Eviscerated Simply by Bringing a Bad Faith Action
On the other hand, he refused to require production of a claim adjuster’s mental impressions simply because it was a bad faith case. As the court states: “In essence, Plaintiff’s sole argument to compel production of [the adjuster’s] mental impressions is that [the mental impressions] are relevant merely because this case contains a bad faith claim. It is well-settled that this argument is insufficient to disregard the work-product privilege set forth in Rule 26.”
Trade Secret Objections Fail When (1) Insurer Does not Move for Protective Order, and (2) Does not Lay Out Nature of Trade Secrets in Opposing Motion to Compel
The insurer made redactions to document production based on trade secret objections. The court first observed that Pennsylvania Civil Rule 4012 governed this trade secrets issue, rather than the Federal Rules. The interpreted Pa.R.C.P. 4012 to require a party objecting on this basis to bring a motion for a protective order in the first instance, which the insurer did not do in this case. The court then observed that the insurer failed to address the insured’s arguments against the presence of trade secret protections, which could have been done without revealing any trade secrets. Still, after granting the motion to compel on this issue, the court gave leave for the insurer to file an “appropriate” motion for a protective order.
Date of Decision: July 16, 2019
Penn-Dion Corp. v. Great American Insurance Co. of N.Y., U. S. District Court Eastern District of Pennsylvania CIVIL ACTION NO. 17-4634, 2019 U.S. Dist. LEXIS 117635, 2019 WL 3202503 (E.D. Pa. July 16, 2019) (Slomsky, J.)
