Archive for the 'PA – Procedural Issues' Category
Eastern District Judge Younge denied the insurer’s summary judgment motion on bad faith, and its motion to bifurcate the bad faith claim.
Plaintiff sought coverage based on auto theft and damage to the vehicle. The carrier investigated the claim, and took the vehicle into its custody during the investigation. The carrier never paid on the claim. Rather, it assigned the claim to its Special Investigation Unit (SIU) because of “red flags” it allegedly uncovered. The carrier argued these red flags supported its decision to further investigate the claim and then to deny coverage, making the process reasonable and thus beyond the scope of a bad faith claim.
Summary Judgment Denied on the Merits
Judge Younge gives a thorough exposition of bad faith law, and specifically the law concerning the reasonableness of investigations and red flags. Despite the carrier’s arguments that its investigation, and denial based thereon, were reasonable, Judge Younge ruled that the carrier’s arguments were insufficient to get summary judgment under this case law. The insured adduced “several holes” in the carrier’s investigation that could be indicia of an unreasonable investigation, despite the putative red flags. Further, the record was lacking in evidence that the insured “had any motive to damage, destroy or fake the theft of her Vehicle.”
[Judge Younge cited legal principles from the April 2021 Fuentes case, summarized here, which cited the 2019 Merrone case, summarized here, where “red flags” were sufficient to make to carrier’s investigation reasonable. For those litigating “red flag” cases, it will be useful to compare and contrast Judge Younge’s Bermudez opinion with these two cases.]
Motion to Bifurcate Denied
In denying the motion to bifurcate, Judge Younge found:
-
The insurer “failed to establish the level of prejudice necessary to warrant bifurcation.”
-
“[I]t would appear that the evidence related to Plaintiff’s breach of contract claim will overlap evidence presented in relationship to Plaintiff’s insurance bad faith claim.” “For example, both claims will focus on whether Plaintiff was involved in the theft of her own Vehicle and/or whether Plaintiff made a material misrepresentation to her insurance company in connection with her claim.”
-
“Defendant’s investigatory process, its interpretation of the evidence and impression of witnesses which would ordinarily be relevant to an insurance bad faith claim will be equally relevant to the breach of contract claim under the facts of this case. Defendant’s reason for refusing to provide coverage for the Vehicle will be at issue in the breach of contract claim.”
-
“From the perspective of judicial economy, bifurcation of trial on separate claims could prove inefficient and inconvenient.”
-
“Bifurcation could result in the unnecessary need to call the same witnesses twice to testify before the same jury on two separate occasions which would extend the amount of time necessary for the jury to resolve this litigation.”
Judge Younge did recognize the insurer had some legitimate concerns, and stated: “Based on overlapping evidence and the intertwined nature of the two claims, the prejudice that Defendant will suffer from trying these two claims together remains to be seen. However, to mitigate any potential concerns, the Court could provide curative instructions and/or implement a staged verdict sheet that would ask the jury to resolve the breach of contract claim prior to reaching the insurance bad faith claim. The varying burdens of proof for breach of contract and insurance bad faith could be explained to the jury and described on the verdict sheet. Potentially, evidence related to damages under insurance bad faith, and specifically punitive damages, could be presented to the jury after it resolves issues related to liability. These issues can be fairly addressed at a pretrial conference prior to jury selection.”
Date of Decision: July 19, 2021
Bermudez v. Progressive Insurance Co., U.S. District Court Eastern District of Pennsylvania No. 19-CV-4085-JMY, 2021 WL 3033757 (E.D. Pa. July 19, 2021) (Younge, J.)
Here are quick summaries of two recent Pennsylvania Eastern District bad faith cases.
TAKING CONTRARY POSITIONS IN SUBROGATION AND UNINSURED MOTORIST CASES ON INSURED’S CULPABILITY NOT BAD FAITH PER SE
The carrier denied the insured’s uninsured motorist claim on the basis that the insured was at fault. However, the carrier brought a property damage subrogation action against the other driver, claiming the other driver was solely at fault.
The insured brought breach of contract and bad faith claims on the basis the carrier admitted or conceded via the subrogation action that the other driver was wholly at fault, and could not now argue its insured was at fault. The insured moved for summary judgment on this basis. Eastern District Judge Younge denied the motion.
Judge Younge rejected the idea that either judicial estoppel or collateral estoppel applied to bind the carrier to its legal assertions in the subrogation action. Absent their application, he found summary judgment inappropriate as the insured had not met the clear and convincing evidence standard of proof for bad faith.
Finally, Judge Younge rejected the argument that the carrier breached its contract or acted in bad faith by not making a partial payment. “Plaintiff also failed to establish that he is entitled to an advance of proceeds under policy provisions. Under Pennsylvania law, the Court is not aware of any duty on the part of an insurer to make a partial payment on a UIM claim in the absence of a contractual provision requiring a partial payment or an agreement between the parties as to the value of a UIM claim.”
Date of Decision: June 29, 2021
Marrone v. Geico Insurance Company, U.S. District Court Eastern District of Pennsylvania No. 20-CV-4405-JMY, 2021 WL 2681388 (E.D. Pa. June 29, 2021) (Younge, J.)
ESTATE HAS STANDING TO PURSUE LIFE INSURANCE BAD FAITH CLAIM
In this life insurance bad faith case, Eastern District Judge Surrick held that the estate has standing to bring the bad faith claim, even though the decedent was not a beneficiary.
Date of Decision: July 6, 2021
Hudson v. Columbia Life Insurance Company, U.S. District Court Eastern District of Pennsylvania No. CV 20-5252, 2021 WL 2823074 (E.D. Pa. July 6, 2021) (Surrick, J.)
This case involves a first party fire loss to the insured’s home. The insured’s public adjuster estimated damages at over $300,000. The insurer’s adjuster issued a number of reports that consecutively lowered the damage estimate. The final report was less than a ¼ of the plaintiff’s estimate. These differences resulted in the carrier invoking the appraisal process, which was pending at the time this suit was filed.
The insured sued the insurer for breach of contract, bad faith, fraud, conspiracy to commit fraud and violation of the Unfair Trade Practices and Consumer Protection Law (UTPCPL). The last three claims also were made against the carrier’s independent adjuster.
The court dismissed the breach of contract claim because the matter was subject to the ongoing appraisal process. Judge Padova observed that while there is some right of appeal from the completed appraisal process, the scope of appeal is limited. Dismissal was without prejudice to pursue those limited appellate rights after the appraisal process ended. Judge Padova rejected the insured’s argument that this was actually a coverage dispute, rather than a valuation dispute.
Next, Judge Padova stayed the bad faith claim as premature. Because the appraisal process was ongoing, the carrier had never actually denied the claim. Judge Padova did appear to recognize, however, the insured had pleaded a potential bad faith claim. This was based on allegations concerning the insurer’s involvement in the various decreasing loss estimates, which it allegedly knew were incorrect.
The fraud and UTPCPL claims failed to allege justifiable reliance, and were dismissed.
In addition, as to the UTPCPL claims, Judge Padova states:
Moreover, we note that recent Pennsylvania caselaw has stated that “[t]he UTPCPL applies to consumer transactions, which are statutorily defined[, and] the handling of an insurance claim does not meet the statutory definition.” … Under this authority, “[t]he UTPCPL applies to the sale of an insurance policy, it does not apply to the handling of insurance claims,” and the bad faith statute, 42 Pa. Cons. Stat. § 8371, “provides the exclusive statutory remedy applicable to claims handling.” … Accordingly, for this reason as well, we conclude that Plaintiff’s UTPCPL claim, which is grounded on deceptive conduct in the handling of her insurance claim, cannot state a claim upon which relief can be granted.
Date of Decision: June 1, 2021
Bussie v. American Security Insurance Company, U.S. District Court Eastern District of Pennsylvania No. CV 20-3519, 2021 WL 2206282 (E.D. Pa. June 1, 2021) (Padova, J.)
The insurer denied auto theft coverage based on an exclusion. The insured sued for breach of contract and bad faith, and also alleged breach of a fiduciary duty. The carrier moved to dismiss the breach of contract and bad faith claims, and to strike the fiduciary duty language.
The court dismissed the breach of contract claim for failing to bring action within the time period required under the policy.
The court, however, allowed the insured’s bad faith claim to proceed. The bad faith claim was based on an unreasonable investigation theory. The court stated:
“On the existing record at this early stage of the litigation, [the insured] states a plausible claim for coverage and, while he will have to prove his bad faith claim by ‘clear and convincing evidence,’ … the allegations in the Complaint that [the insurer] failed to investigate his claim and knowingly set the date of loss outside the policy period “may … show bad faith.’ … Because [the] well-pleaded assertions of unreasonable claims processing and investigation adequately state a plausible bad faith claim under Section 8371, dismissal is not warranted and the Motion to Dismiss Count II of the Complaint is denied.”
The court did strike the allegation that the carrier’s breach of fiduciary duty constituted bad faith, observing:
In Keefe v. Prudential Prop. & Cas. Ins. Co., 203 F.3d 218, 227–28 (3d Cir. 2000), the United States Court of Appeals for the Third Circuit held that an insurer’s fiduciary obligations to an insured are limited to claims handling and resolution of third-party claims against an insured. “Under Pennsylvania law, a fiduciary duty higher than the duty of good faith and fair dealing does not arise out of an insurance contract until an insurer asserts a stated right under the policy to handle all claims asserted against the insured.” … Keefe has been applied to the cancellation of a life insurance policy and to policyholders’ uninsured and underinsured motorist claims where, like the present claim, the insurer has not asserted a right to resolve third-party claims against the insured. … Accordingly, given [the insured’s] failure to respond to the Motion to Strike, and the weight of precedential authority limiting an insurer’s fiduciary obligations to the resolution of third-party claims against an insured, the Motion to Strike is granted.
Date of Decision: May 11, 2021
Peltz v. State Farm Mutual Automobile Insurance Company, U.S. District Court Western District of Pennsylvania No. 21-0005, 2021 WL 1893125 (W.D. Pa. May 11, 2021) (Kelly, M.J.)
This fact-driver UIM bad faith case resulted in a non-jury verdict for the insurer. Pennsylvania’s Superior Court affirmed.
[This is the second non-precedential Superior Court opinion reviewing bad faith verdicts that we’ve summarized in last three weeks, demonstrating the increasing role these non-precedential appellate decisions may come to play in briefing bad faith issues. Per Pennsylvania Rule of Appellate Procedure 126(b), such decisions issued after May 19, 2019 can be cited for their persuasive authority. This decision is also noteworthy in reiterating that it is not the court’s job on appeal to flesh out arguments or find support in the record that is not adduced by a party in its briefing.]
Factual and procedural background
Plaintiff was injured as a bus passenger, when another vehicle hit the bus. The plaintiff’s symptoms and treatment concluded six months after the collision.
The tortfeasor only had $15,000 in coverage, and plaintiff sought UIM benefits under his brother’s policy. Plaintiff did not seek this UIM coverage, however, until 19 months after the collision.
The brother’s carrier began its investigation the same month the claim was reported. Both brothers were interviewed and provided evidence that would lead to there being no coverage, but plaintiff provided other evidence favoring coverage. After two months, the insurer completed its investigation, and concluded it would provide UIM coverage.
Shortly after, the insured provided a document package. The carrier evaluated the information and soon offered $5,000, additionally telling plaintiff’s counsel the insurer needed proof that plaintiff’s work loss was due to the collision and not any other causes. Instead of replying, 17 days later plaintiff filed his bad faith suit.
The complaint alleged bad faith based only on “low ball offers and the investigation as being excessively long….” No loss of consortium claim was ever pleaded, though it was mentioned in some correspondence between counsel.
The arbitration award and the arbitrator’s doubts
The underlying claim went to binding arbitration, while the bad faith claim was pursued in court. Before the arbitration hearing, the insurer offered $12,500, and then $30,000, to settle. Plaintiff never lowered his demand below the $100,000 policy limit. The arbitrator’s award “was not far above the final offer of $30,000.00.”
Although the arbitrator awarded money damages, he expressed doubts about plaintiff’s case. He observed the contradiction between plaintiff’s telling medical personnel in October 2013 that his medical issues had resolved, while later claiming they did not resolve but continued to get worse. The arbitrator also expressed concern over apparent conflicts between the plaintiff’s claim he could not, and did not, work, compared to the actual work and medical history. Among other things, the arbitrator recited details as to the funds plaintiff alleged he and his wife lived on for years, and how it appeared highly unlikely they could actually have survived on this amount without plaintiff himself having also worked (despite his assertions that he could not work).
In later reviewing the arbitration award for loss of consortium, the court expressed concerned that while the arbitrator observed the complaint failed to actually include any claim for loss of consortium, he still awarded $15,000 in loss of consortium damages. The arbitrator did so because the wife’s name was in the caption and the policy provided for loss of consortium damages.
The Superior Court was also concerned that the arbitrator never explained the basis for its other damage awards. “While the arbitrator awarded [plaintiff] $21,905.00 for lost wages and $35,000 for pain and suffering, this Court is again unable to determine the bases for these figures.”
The trial court’s verdict and reasoning, and Superior Court’s affirmance
The trial court ruled against plaintiffs on the merits. First, the passenger’s wife claimed bad faith for the carrier failing to pay on the loss of consortium claim. But the trial court only learned of this loss of consortium claim the day of trial, and it refused to consider that belated claim. The Superior Court ultimately found this issue waived on appeal.
As to the bad faith claims for delays in the investigation and low ball offers, the trial court observed that plaintiff and his wife did not even appear at trial to support their claims. Rather they relied on witnesses associated with the insured to focus on the allegedly improper claims handling, and apparently an expert witness (whose testimony or report was not persuasive to the trial court judge). The trial court found plaintiff failed to meet his burden by putting on clear and convincing evidence of bad faith.
The Superior Court affirmed.
The “low ball” offer claim fails
In addressing the “low ball offer” bad faith claim, the court contrasted the instant facts with those in the seminal Boneberger case. In Boneberger, the trial court found the insurer’s witnesses lacked credibility, did not conduct at IME when challenging medical records, actively promoted unethical claim handling practices, and that the insureds only brought suit after long negotiations and an arbitration award. In the present case, there were no similar credibility rulings against the insurer, there was an IME, and there was no finding the carrier promoted an unethical philosophy. Further, instead of allowing the investigation to develop, the bad faith suit was filed in short order, without any prolonged negotiations and before the arbitration award.
The Superior Court also rejected the argument that the arbitration award was evidence of bad faith “low ball” offers. As the court observed, the arbitrator did not find plaintiff and his wife credible, found their medical and wage evidence unreliable, and failed to explain sufficiently the basis for his damage awards. “The fact that the arbitrator awarded damages which were less than those sought … but more than what [was] offered does not support a finding that [the insurer] acted in bad faith.”
The claim handling argument fails
The court then rejected the argument for bad faith in evaluating the information plaintiff provided to the insurer. In rejecting this argument, the court not only found it “scattershot, unsupported by legal authority and undeveloped[,]” but made clear what courts will not do in reviewing cases on appeal.
The Superior Court will not play the role of advocate
-
“Arguments not appropriately developed include those where the party has failed to cite any authority in support of a contention. This Court will not act as counsel and will not develop arguments on behalf of an appellant. Moreover, we observe that the Commonwealth Court, our sister appellate court, has aptly noted that [m]ere issue spotting without analysis or legal citation to support an assertion precludes our appellate review of [a] matter.”
-
“While the [insureds] complain that [the insurer] failed to properly evaluate certain medical and wage evidence they provided, they do not specify the evidence, explain its relevance, or state where it is in the record. … The certified record, including transcripts, is nearly 6000 pages. While we have undertaken careful review, it is not our responsibility to comb through the record seeking the factual underpinnings of a claim. Commonwealth v. Mulholland, 702 A.2d 1027, 1034 n.5 (Pa. Super. 1997) (‘In a record containing thousands of pages, this court will not search every page to substantiate a party’s incomplete argument’).”
Superior Court would not reverse trial court credibility determination on expert
The Superior Court also ruled plaintiff had waived the argument that the trial court failed to properly consider expert testimony, while still observing that the “trial court, as the finder of fact, is free to believe all, part or none of the evidence presented. Issues of credibility and conflicts in evidence are for the trial court to resolve; this Court is not permitted to reexamine the weight and credibility determination or substitute our judgment for that of the fact finder.”
Date of Decision: February 26, 2021
Gavasto v. 21st Century Indem. Ins. Co., Superior Court of Pennsylvania No. 1625 WDA 2019, 2021 WL 754026 (Pa. Super. Ct. Feb. 26, 2021) (McCaffery, Murray, Olson, JJ.)
The marine insurance policy at issue had a New York choice-of-law provision. The insured attempted to assert claims under Pennsylvania law, including claims for breach of fiduciary duty, statutory bad faith under 42 Pa.C.S. § 8371, and violations of Pennsylvania’s Unfair Trade Practices and Consumer Protection Law.
Because marine insurance is governed by federal admiralty law, federal choice-of-law principles apply. Under federal choice-of-law principles, and in light of the fact there were sufficient contacts with New York, the court enforced the choice-of-law provision and found the case subject to New York substantive law. In addition, the court concluded, “that the public policy of a state where a case was filed cannot override the presumptive validity, under federal maritime choice-of-law principles, of a provision in a marine insurance contract where the chosen forum has a substantial relationship to the parties or the transaction.”
Thus, the court granted the insurer judgment on the pleadings, and dismissed the two Pennsylvania statutory claims, since they did not arise under New York law. The court also dismissed the breach of fiduciary duty claim, as no such cause of action exists under New York law for the mere breach of an insurance contract.
Date of Decision: February 22, 2021
Great Lakes Ins. SE v. Raiders Retreat Realty Co., LLC, U.S. District Court Eastern District of Pennsylvania No. CV 19-04466, 2021 WL 668806 (E.D. Pa. Feb. 22, 2021) (Robreno, J.)
At trial, the Pennsylvania court permitted plaintiff orally to amend her claims to add a count for bad faith under New Jersey law, after the insurer had closed its case. The trial court had earlier dismissed a Pennsylvania statutory bad faith claim, without prejudice. That claim was never re-asserted.
The Superior Court reversed.
After carefully reviewing the case history and trial proceedings, the appellate court found the trial court abused its discretion in permitting this late amendment in light of the prejudice to the insurer. “Prior to trial, [the insured] never amended her complaint to bring a bad faith claim under New Jersey law following the dismissal of her Pennsylvania bad faith claim. As a result, [the insurer] stipulated to certain damages and chose its trial strategy believing that the only claim it was defending against was for breach of contract.” The insured unfairly used this stipulation at trial by claiming that the insurer chose not to put on evidence regarding the reasonableness of its conduct. However, “it did not present evidence on reasonableness because its conduct was not at issue.”
“Given that [the insurer] based its trial strategy on defending against a breach-of-contract claim only, the trial court abused its discretion in allowing [the insured] to amend her complaint to add a bad faith claim under New Jersey law after [the insurer] had rested its case. Accordingly, we reverse the trial court’s decision to permit that amendment. Consequently, we also reverse the trial court’s award of punitive damages and attorney’s fees … which were based upon a finding of bad faith.”
Date of Decision: February 22, 2021
Salmon v. The Philadelphia Contributionship Insurance Company, Superior Court of Pennsylvania No. 416 EDA 2020, 2021 WL 653030 (Pa. Super. Ct. Feb. 19, 2021) (Bender, Lazarus, Stephens, JJ.) (Non-precedential)
Plaintiff sued his dental insurer in federal court for breach of contract, bad faith, and various other claims. He moved for permission to proceed in forma pauperis, and while the court granted that motion, it dismissed the claims for lack of subject matter jurisdiction. Specifically, the complaint could not make out a claim in excess of $75,000.
The actual damages alleged were $1,200. The court recognized the bad faith statute allowed for punitive damages, which could be considered toward establishing the $75,000 jurisdictional minimum amount in controversy. Judge Marston found this to mean the insured was seeking at least $73,800 in punitive damages on his $1,200 compensatory damages claim, an approximate 61:1 ratio.
“But, as the Supreme Court has explained, ‘in practice, few awards exceeding a single-digit ratio between punitive and compensatory damages will satisfy due process.’” In this case, even allowing a punitive damages award nine times compensatory damages “is a mere $10,800—far below the jurisdictional amount.”
Relying on the Third Circuit’s unpublished opinion in Kalick v. Northwest Airlines, Judge Marston found there was no plausible claim that could reach $75,000, and dismissed for lack of subject matter jurisdiction.
Date of Decision: January 22, 2021
Berkery v. Metropolitan Life Ins. Co., U.S. District Court Eastern District of Pennsylvania No. CV 21-26-KSM, 2021 WL 229320 (E.D. Pa. Jan. 22, 2021) (Marston, J.)
This case involves a discrepancy over whether an insured timely renewed his life insurance policy, two months before his death. There was a dispute of fact over the date when the premium payment was mailed and received.
The carrier insisted the premium check was not mailed and received before the date necessary to maintain the policy. It deposited the insured’s payment check, but later returned the payment sum and deemed the policy lapsed on the basis the payment was outside the policy’s grace period. The beneficiary children, through their mother, alleged the check in fact was mailed and received within the grace period for premium payments. They sued for breach of contract and bad faith.
The insurer moved for judgment on the pleadings as to both counts.
First, the court denied judgment on the pleadings regarding the breach of contract claim. There was a dispute of fact over the mailing and receipt dates that could not be resolved via a motion for judgment on the pleadings.
Judge Slomsky then rejected the motion to dismiss the bad faith claim.
The plaintiffs alleged the insurer denied their claims without a reasonable basis, knowing that it had in fact received the insured’s premium payment during the grace period for continuing the policy. Further, the plaintiffs adequately alleged the insurer “knew of or recklessly disregarded the lack of reasonable basis because it knew [payment was timely] when it received and deposited the July Payment [from the deceased insured].” Despite this knowledge, the insurer “refused to pay the Policy’s benefits and never issued a denial letter.”
In denying the motion, Judge Slomsky concluded that, “[a]t this stage, viewing the facts in the light most favorable to Plaintiffs, they are sufficient to raise an inference that [the insurer] refused to pay under the Policy in bad faith.”
Date of Decision: January 21, 2021
Mullin v. Reliastar Life Insurance Company, U.S. District Court Eastern District of Pennsylvania No. CV 20-1438, 2021 WL 210962 (E.D. Pa. Jan. 21, 2021) (Slomsky, J.)
The Montgomery County Court of Common Pleas granted partial summary judgment on declaratory judgment claims concerning coverage, and an appeal was taken. The Superior Court quashed the interlocutory appeal as other claims remained undecided. In supporting its decision, the Superior Court observed, among other things:
“This Court has repeatedly applied Bolmgren [v. State Farm Fire and Cas. Co., 758 A.2d 689 (Pa.Super. 2000)],when discussing the appealability of orders that resolve declaratory judgment claims but leave other claims outstanding. See, e.g., Bombar v. West American Ins. Co., 932 A.2d 78, 85-86 (Pa.Super. 2007) (holding that trial court’s initial January 19, 2005 order granting summary judgment on declaratory judgment count of complaint was not final and appealable, where that order did not determine amount of damages for remaining bad faith claim; appeal from later December 30, 2005 order resolving outstanding bad faith claim was proper); Cresswell v. Pennsylvania Nat. Mut. Cas. Ins. Co., 820 A.2d 172, 176 n.2 (Pa.Super. 2003) (determining trial court’s initial December 20, 2001 order granting partial summary judgment in favor of appellee on declaratory judgment claim was interlocutory and unappealable, where court’s order left unresolved additional bad faith claim; trial court’s later order of May 28, 2002, which disposed of sole remaining bad faith claim, was final and appealable)….”
Date of Decision: January 11, 2021
Schmitt v. State Farm Mut. Auto. Ins. Co., Superior Court of Pennsylvania No. 1767 EDA 2019, 2021 WL 79808 (Jan. 11, 2021) (King, Stabile, Stevens, JJ.)
