Archive for the 'PA – Reverse Bad Faith' Category


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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:

  1. The insurer “failed to establish the level of prejudice necessary to warrant bifurcation.”

  2. “[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.”

  3. “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.”

  4. “From the perspective of judicial economy, bifurcation of trial on separate claims could prove inefficient and inconvenient.”

  5. “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.)


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The insurer denied plaintiff’s first party fire loss claim because it concluded that the insured set the fire himself.  The insured brought breach of contract and bad faith claims, and the insurer counterclaimed for insurance fraud.

Eastern District Judge Surrick granted the insurer summary judgment on the bad faith claim, and denied plaintiff summary judgment on coverage and the insurance fraud counterclaim.

A bad faith plaintiff must show that an insurer acted unreasonably in denying a benefit, and either knew or recklessly disregarded the fact that its position was unreasonable.  The insured must prove bad faith by clear and convincing evidence.  The reasonable basis prong is measured objectively, i.e., would a reasonable insurer have denied payment under the facts at issue.  In making this determination, courts “examine the factors that the insurer relied on in evaluating a claim to determine whether the insurer had a reasonable basis for denying benefits.”

Judge Surrick closely examined the record and concluded the insurer has a reasonable basis to conclude the insured himself started the fire.  He found “substantial evidence in that record that reasonably leads to the conclusion that the fire was intentionally set, and that Plaintiff had both the motive and the opportunity to intentionally set it.” Thus, “based on all the information before Defendant at the time, Defendant’s conclusion that Plaintiff had intentionally set the fire was not unreasonable.”

Conversely, Judge Surrick denied the insured’s motion for summary judgment on coverage and the insurance fraud counterclaim.  “Having determined that it was not unreasonable for Defendant to conclude that Plaintiff had intentionally set his property on fire, the issue of coverage is not appropriate for this Court to decide on summary judgment. Nor is there a basis for dismissing Defendant’s counterclaim of insurance fraud at this juncture. These issues are more appropriate for a jury.”

Date of decision:  May 7, 2021

Ly v. Universal Property & Casualty Insurance Company, U.S. District Court Eastern District of Pennsylvania No. CV 19-1239, 2021 WL 1837468 (E.D. Pa. May 7, 2021) (Surrick, J.)



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The insured admittedly altered vendor invoices that inflated the replacement value of damaged items in this first party property damage claim, and submitted those false invoices to the insurer in making its claim for property damage losses.

The insurer brought a declaratory judgment action arguing there was no coverage due because of these misrepresentations, along with claims for “violations of Pennsylvania’s Insurance Fraud Act, common law fraud, and reverse bad faith.” The insured brought a statutory bad faith counterclaim, which the court earlier dismissed.

The parties cross-moved for summary judgment, and the insured asked Eastern District Judge Robreno to vacate his dismissal of its bad faith counterclaim.  Judge Robreno granted summary judgment to the insurer for declaratory relief and violation of the Insurance Fraud Act (IFA), and refused to vacate his dismissal of the bad faith counterclaim.

Fraud and concealment as a basis to void the policy and preclude recovery

The declaratory judgment count focused on the argument that the insured violated the Concealment, Misrepresentation or Fraud Condition in the policy.

Judge Robreno observed that:

  1.  “[T]o void an insurance policy under Pennsylvania law, an insurer must prove the following factors by clear and convincing evidence: “(1) the insured made a false representation; (2) the insured knew the representation was false when it was made or the insured made the representation in bad faith; and (3) the representation was material to the risk being insured.”

  2. “The clear and convincing evidence standard requires evidence that is ‘so clear, direct, weighty, and convincing as to enable the [trier of fact] to come to a clear conviction, without hesitancy, of the truth of the precise facts [in] issue.’”

  3. “Pennsylvania courts have long ruled that a violation of the fraud and concealment provision of an insurance policy … serves as a complete bar to the insured’s recovery under the policy.”

There was no question that the insured knowingly made misrepresentations to the insurer through the altered invoices.  The issue was whether these misrepresentations were material.

Misrepresentations are material “if a reasonable insurance company, in determining its course of action, would attach importance to the facts misrepresented.” Judge Robreno found the misrepresentations material. The false invoices were provided in direct response to the insurer’s requesting proof of the valuations the insured’s adjusters submitted. He accepted the insurer’s argument that the insured was aware the insurer “would use the invoices to determine and verify the amount of loss.”

Thus, Judge Robreno voided the policy, and found no coverage due.

Court grants insurer summary judgment under the Insurance Fraud Act

The insurer also sought relief under Pennsylvania’s Insurance Fraud Act, 18 Pa. Stat. and Cons. Stat. Ann § 4117(g). There are three elements to an IFA claim: “1) presenting false, incomplete, or misleading statements to [the insurer]; 2) that were material to the claim; and 3) which were knowingly made with an intent to defraud.” The courts are split on whether the burden of proof is clear and convincing evidence or preponderance of the evidence.

The court had just ruled, however, under the clear and convincing evidence standard, that the insured made material misrepresentations that voided the policy for fraud.  Thus, the only issue in obtaining civil relief under the IFA was whether the insurer court prove the insured’s actions were taken with an intent to defraud.  Judge Robreno adduced examples from the record demonstrating the insured’s conduct was intentional and knowing.  Thus, he granted the insurer summary judgment on this count as well.

Common law fraud not established without showing justifiable reliance

Unlike the other two fraud based counts, common law fraud requires proof of justifiable reliance on the misrepresentations.  The insurer did not provide evidence of record to meet that element, and summary judgment was denied.  Judge Robreno noted, that the insurer “could, of course, pursue this claim at a trial. However, it does not appear that [it] would be entitled to compensatory damages beyond the litigation and investigation costs it may seek to recover as a result of prevailing on [the Insurance Fraud Act claim], nor does it appear that punitive damages would be appropriate in this case.”

Finally, Judge Robreno denied the insured’s motion to vacate the order dismissing its bad faith claims against the insured.  Further, in light of its success on the first two counts, the reverse bad faith claim was dismissed without prejudice in light of the insurer’s position that it had no reason to proceed with that claim.

Date of Decision:  April 12, 2021

State Auto Property & Casualty Insurance Co. v. Sigismondi Foreign Car Specialists, Inc., U.S. District Court Eastern District of Pennsylvania No. CV 19-5578, 2021 WL 1343116 (E.D. Pa. Apr. 12, 2021) (Robreno, J.)


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This case involved an auto accident death, and whether the deceased was an insured “family member” under his stepfather’s auto policy.  Coverage depends on whether the deceased resided with the named insured/step-father at the time of the accident.  The stepfather brought breach of contract and bad faith claims, on behalf of his stepson’s estate.

The court denied summary judgment to both parties on the coverage issues, as material facts remained open on the coverage issued.  As Judge Mannion states, “[i]n short, there exist too many disputed material facts as to whether [the stepson] was a ‘family member’ of plaintiff’s household at the time of the accident.”

The court did grant the insurer summary judgment on the bad faith claim, as plaintiff could not meet the clear and convincing evidence standard necessary to prove bad faith.

Judge Mannion observed that during its investigation, the insurer discovered that the stepson might not have met the definition of “family member” under the policy.  There were statements from two people that the stepson with living with his girlfriend and her mother, not the stepfather; that the stepfather had removed the stepson from the policy at issue; and that the deceased had purchased his own vehicle with its own insurance policy, and that policy had an address other than the stepfather’s address at the time of the accident.

While the stepson’s driver’s license and tax returns did indicate he resided with his stepfather, the insurer “certainly had sufficient evidence that showed [the stepson’s] physical residence was at [the girlfriend’s] house.”

Red flags oblige the insurer to investigate thoroughly

Looking at all the circumstances, Judge Mannion observed that “[u]nder Pennsylvania law, insurers are permitted to ‘conduct a thorough investigation’ of a questionable claim without acting in bad faith”, and “[w]here an insurer sees red flags’ that cause concern of insurance fraud and prompt an investigation, the insurer has a reasonable basis for investigation, and is therefore not liable for claims of bad faith.”  Here, the insurer “had more than a reasonable basis to investigate where [the stepson] was really residing at the time of the accident since it had ample evidence to show that he may have moved out of plaintiff’s house months before the accident.”

Under these circumstances, the insurer was “entitled to conduct its own investigation and its finding that [the stepson] was not residing with plaintiff and was not a covered family member as defined in plaintiff’s Policy was reasonably based on evidence it uncovered. Thus, defendant’s denial [of] plaintiff’s UIM claim made on behalf of [the stepson’s] Estate was not an act in reckless disregard of its obligations under plaintiff’s Policy.”

Rule to file a complaint not bad faith

The court also rejected the notion that the insurer acted “outrageously” in filing a rule to file a complaint, after plaintiff had initiated the action by way of writ of summons.  The insurer sought to have a complaint filed because it lacked information, and “instructed plaintiff to file a complaint so that it could develop the facts as to [the stepson’s] residence.” Judge Mannion added, “[i]ndeed, as defendant points out, the court held in Fabrikant v. State Farm Fire and Cas. Co., [a summary of which can be found here] …. that ‘an insurer’s exercising its procedural right to serve a Rule to File Complaint is not bad faith, absent a showing of clear and convincing evidence that such action was taken in bad faith.’” Here the insurer “was obliged to investigate where [the deceased] was physically residing at the time of the accident in order to properly consider plaintiff’s UIM claim, especially since there was evidence that his residence was at [another] house.” [Emphasis added]

Date of Decision:  April 1, 2021

Fuentes v. USAA General Indemnity Co., U.S. District Court Middle District of Pennsylvania, No. CV 3:19-1111, 2021 WL 1225934 (M.D. Pa. Apr. 1, 2021) (Mannion, J.)


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The homeowner insured’s amended complaint asserted a breach of contract claim after the carrier denied coverage for a fire loss. The original complaint included a bad faith count that was dismissed without prejudice. The insured did not pursue that bad faith claim in his amended complaint. A summary of the earlier decision can be found here. The court had also rejected an earlier motion for judgment on the pleadings, a summary of which can be found here.

The insurer sought summary judgment on the amended breach of contract claim. Among other grounds for summary judgment, the insurer claimed there was “no duty to cover losses under the Policy” because the insured and his mother made misrepresentations of material facts relevant to coverage.

The policy only provided coverage if the insured resided at the property. The insurer asserted both that the plaintiff did not reside at the property, and made misrepresentations of material facts as to residence, ownership and the property’s condition. The insured took the position he did reside at the property and made no such misrepresentations.

Magistrate Judge Mehalchick conducted a thorough analysis of Pennsylvania case law on the meaning of “residence”, and applied that case law to the detailed facts in the case. She concluded, “[k]eeping in mind that the term ‘residence’ carries a more transitory meaning than the term ‘domicile,’ the record evidence is sufficient to allow a reasonable jury to conclude that Plaintiff resided at the Property at the time of the fire.” Thus, summary judgment was denied on the basic coverage issue.

Alternatively, the insurer sought summary judgment for material misrepresentation on the basis that the mother and son’s statements that he resided with the mother must have been false, if he in fact resided at the property.  Put another way, the carrier argued that there was no coverage because the insured did not reside at the premises. If he did reside at that premises, however, there would still be no coverage because the insured and his mother made false statements that he did not reside at the premises.

“For an insurance carrier to avoid coverage due to misrepresentation, the insurer must establish that the insured’s representation: (1) was false, (2) was made with the knowledge that the representation was false when made or was made in bad faith, and (3) was material to the risk being insured.” Moreover, “[t]he insurer must show that the insured made the misrepresentation with a deliberate intent to deceive.”

There were sworn and unsworn statements from the insured and his mother indicating that plaintiff resided with his mother at certain times, while also sleeping over at the property during other times.  The insurer attempted to construe these statements to mean the insured and his mother told the carrier that the insured did not reside at the property, which was false if he did in fact reside at the property, as pleaded in the amended complaint.

The court found the insurer failed to establish that the mother and son knowingly made false statements that he did not reside at the property, and failed to show such statements were made with a deliberate intent to deceive.

“Defining and determining the term ‘reside’ is a complicated endeavor. … [The insurer] identifies no record evidence that the [insured and his mother] knew the meaning of ‘reside.’ …  It is unknown if the [insured and his mother] even knew that an individual could simultaneously reside at two locations.”

Thus, statements that his mother’s home was the insured’s full time residence, rather than the property at issue, is not definitive because it is unclear that the insured or his mother knew that to be false. As such, there would also be no intent to deceive.

Moreover, as stated above, it remains for the jury to decide if the insured resided at the property. Thus, the insurer could not even establish at this point whether any alleged misrepresentation about the insured’s residence was false.

Therefore, summary judgment was denied on the issue of material misrepresentation.

Date of Decision: November 16, 2020

Bloxham v. Allstate Insurance Company, U.S. District Court Middle District of Pennsylvania No. 3:19-CV-00481, 2020 WL 6710427 (M.D. Pa. Nov. 16, 2020)



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The carrier sought rescission of a medical professional liability policy, and brought a motion for summary judgment. The court denied that motion.

In the application process the insureds (a doctor and medical center) were asked about existing incidents, adverse outcomes, or other circumstances that the insureds expected could give rise to future claims against the insured. The insureds answered no. In a supplemental application for prior acts coverage, the insureds were asked if they knew of “’any pending claims, incidents or activities, including any request for patient records that might give rise to any claim in the future?’” They again answered no.

Within two months of the original application and less than one month after the supplemental application, the insured doctors was sued for medical malpractice. Six months later a separate second suit was filed. All of the conduct at issue occurred before the application process.

“Under Pennsylvania law, ‘an insurance policy is void ab initio for misrepresentation when the insurer can establish that (1) the representation was false, (2) the insured knew it to be false when made or acted in bad faith, and (3) the representation was material to the risk being insured.’”

The insurer relied upon the facts that as to the first suit, the plaintiff’s attorney sent four requests for that plaintiff’s medical records between seven and eleven months before the insurance applications. As to the second suit, there was a request for that plaintiff’s medical records five months before the applications. The insurer argued that it had to be clear these requests were in connection with future litigation.

On summary judgment, the court identified the relevant questions as “(i) whether the applicant was ‘aware of any medical incidents, adverse outcomes or other circumstances that you expect to give rise to a claim in the future’; and (ii) whether the applicant knew ‘of any pending claims, incidents or activities, including any request for patient records that might give rise to any claim in the future.’”

The court denied the carrier’s motion for summary judgment.

  1. The court could not determine the insureds’ subjective opinion about the patients’ intentions, i.e., whether the doctor actually expected his patients to bring future suits, and then made knowingly false statements on the applications that he did not hold those expectations. The same was true as to what “might give rise” to future claims. There was evidence in the record that the insured doctor did not or would not have expected or anticipated there would ever be a suit in either of these two cases. Thus, summary judgment was inappropriate.

  2. An adjuster interviewed the doctor and included a statement in her summary memorandum that the doctor fully expected to be sued. However, the doctor disputed the accuracy of the memorandum’s contents, and adduced other facts of record to contradict its accuracy.

  3. Contrary to the insurer’s arguments, the doctor’s deposition testimony in one of the underlying actions did not indisputably establish that the doctor expected to be sued.

  4. The court rejected the argument that the medical outcomes in the two cases were sufficient to establish by themselves that the doctor must have known he would be sued in the future.

For all of these reasons, the insurer could not meet its “burden of establishing the lack of a genuine factual dispute as to whether the [insureds] made a knowingly false representation when completing the relevant insurance application forms.”

Date of Decision: March 31, 2020

MDAdvantage Insurance Co. v. Hasiuk, U.S. District Court Eastern District of Pennsylvania CIVIL ACTION NO. 16-969, 2020 U.S. Dist. LEXIS 55614 (E.D. Pa. Mar. 31, 2020) (Jones, II, J.)


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The insured’s representatives sued the insured’s carrier and its claims adjuster for bad faith. The complaint alleged bad faith in claims handling and in refusing to defend the insured.

The claims adjuster, though the carrier, brought a Dragonetti action against the insured’s representative and her counsel for bringing the bad faith claim against the adjuster. The court described it as a wrongful use of civil proceedings claim. The trial court dismissed the wrongful use claim on preliminary objections, and the matter was on appeal in the Superior Court.

First, the appellate court found that the insurer/adjuster waived all issues on appeal regarding dismissal of the Dragonetti action.

Next, even if not waived, the Superior Court ruled dismissal was proper.

The trial court found that because the allegations against the adjuster were based on the adjuster’s conduct as a claims handler, and not as a private citizen, the wrongful use claim should be dismissed. The Superior Court agreed under these circumstances that “it was not unreasonable … to name the insurance claims adjuster who denied [the] claims for coverage.”

[Note: The court apparently was not faced with the issue that a statutory bad faith claim against an adjuster must be dismissed in the first instance because the bad faith statute does not apply to adjusters, only insurers themselves. For example, see Judge Savage’s opinion in Reto, Judge Nealon’s opinion in Fertig, Judge Surrick’s opinion in Kofsky, and Judge Bartle’s decision in the 2013 Feingold case.]

Date of Decision: February 28, 2020

Philadelphia Contributionship Ins. Co. v. Kiely, Superior Court of Pennsylvania No. 3111 EDA 2018, 2020 Pa. Super. Unpub. LEXIS 725 (Pa. Super. Ct. Feb. 28, 2020) (Colins, Panella, Strassburger, JJ.)


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This case involves a head-spinning array of factual discrepancies between the insured’s claims to the carrier and the results of the insurer’s investigation. These range from whether the insured actually owned the property to whether the structure at issue collapsed from a sudden event or collapsed because of (uncovered) faulty construction. We leave you to the court’s lengthy and detailed narrative concerning these discrepancies, and the various coverage issues invoked by their presence. Of particular interest here is that in addition to involving an adjuster, SIU adjuster, supervisor and engineering expert, the insurer also puts its outside counsel’s coverage opinion on the record.  

The insured brought a bad faith claim, and the insurer moved for summary judgment after making a detailed record.  The insurer asserted various bases for why it was entitled to summary judgment. In granting summary judgment, the court stated that, at a minimum, there was a reasonable basis to deny coverage:

“The record indicates that [the insurer] conducted a thorough investigation of the claim and ultimately decided that coverage should be denied. Indeed, [a] property adjuster and an SIU adjuster inspected Plaintiff’s loss; the claim was reviewed by [a] supervisor; [the insurer] took the recorded statement of Plaintiff and reviewed relevant property documentation from the City of Philadelphia; [the insurer] obtained the services of a structural engineer; and [the insurer] then sent the structural engineer’s report, which opined on the cause of the loss, to independent legal counsel for an opinion on the coverage. Finally, relying upon independent legal counsel’s conclusion that coverage did not exist for Plaintiff’s loss, [the insurer] denied Plaintiff’s insurance claim. It cannot be said that [the insurer]’s investigation and decision-making process was ‘frivolous or unfounded,’ as required under Pennsylvania law to succeed on a bad faith claim.”

The court added, “the factual record is devoid of any ‘clear, direct, weighty and convincing’ evidence that would allow a factfinder to find ‘without hesitation’ that [the insurer] acted in bad faith in investigating and ultimately denying Plaintiff’s insurance claim.”

Moreover, even if the insured could make a case for unreasonableness, “the record is devoid of any evidence that [the insurer] either knew it had an unreasonable basis for denying coverage or recklessly disregarded its lack of a reasonable basis in denying Plaintiff’s claim or in the manner in which it investigated Plaintiff’s claimed loss.” The record shows the contrary. The insurer not only engaged a structural engineer, but also independent legal counsel to analyze coverage. It then “relied on the independent findings of both the expert and legal counsel in its ultimate decision to deny” the claim.

Date of Decision: February 14, 2020

Nguyen v. Allstate Insurance Co., U.S. District Court Eastern District of Pennsylvania CIVIL ACTION No. 18-5019, 2020 U.S. Dist. LEXIS 25789 (E.D. Pa. Feb. 14, 2020) (Kenney, J.)



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This case involves a homeowners’ fire loss claim. The carrier refused to pay on the basis that the insureds made material misrepresentations in applying for their policy. The insurer asserted affirmative defenses that the homeowners falsely stated that they did not have knob and tube wiring and that no insurer had ever cancelled the homeowners’ coverage, when in fact, they did have knob and tube wiring and a prior policy was cancelled.

The matters before the court were the insureds’ motion to strike the affirmative defenses as inadequately pleaded, and the insurer’s motion to sever and stay the insureds’ bad faith claim.

The Insurer Adequately Pleaded Fraud as an Affirmative Defense

The court denied the motion to strike. It found that affirmative defenses are measured by Rule 8(c) and do not have to be rigorously articulated. That being said, because fraud is pleaded, there are additional pleading requirements under Rule 9(b) to plead with particularity (other than intent).

Still, measured by these standards, the affirmative defenses are adequate. The insurer pleads that the insureds made written misrepresentations on the application, and that it would never have issued the policy if the insureds stated the true facts in their application. This was sufficiently specific to put the insureds on notice of the grounds for the affirmative defenses.

The Court Refuses to Sever and Stay the Bad Faith Claims

The insurer sought to sever the insureds’ bad faith claims from their breach of contract claim. The court found this unwarranted for the following reasons:

  1. The underlying issues in the two claims overlapped. The court recognized the ultimate issues were distinct on breach of contract and bad faith, but found “they are subject to the same sources of proof and concern the same underlying issues.”

  2. Trying the claims together would not unduly prejudice the insurer. The insurer “failed to show exactly how it would be prejudiced if [the insureds’] claims are tried together.” Further, if discovery disputes arise, the court could properly resolve them at that future time.

  3. Trying the claims together would promote judicial economy. The court stated that “judicial economy strongly disfavors severance in this case.” Turning one case into two cases “would require the Court to schedule deadlines separately for each case and hold two separate trials on claims stemming from the same dispute.” Moreover, the insurer did not provide any valid reason for severance.

Date of Decision: February 6, 2020

Walls v. American Modern Select Insurance Co., U.S. District Court Western District of Pennsylvania Case No. 3:19-cv-80, 2020 U.S. Dist. LEXIS 20088 (W.D. Pa. Feb. 6, 2020) (Gibson, J.)


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The court earlier found the insured, an attorney, prosecuted her suit against the carrier in bad faith. This case addressed sanctions against the insured and her one-time co-counsel under 28 U.S.C. § 1927, after finding Rule 11 inapplicable.

The Court had identified fifty-two filings evincing “an unreasonable and vexatious multiplication of the proceedings.” It ordered the insured and co-counsel “to pay the carrier’s reasonable excess costs, expenses and attorneys’ fees associated with those filings….”

The court found 217.3 hours of the insurer’s legal fees reasonable, totaling $39,114. The court, however, rejected the argument expert fees could be awarded under section 1927. It left open for a later date a request for court costs.

The court then looked at whether it should reduce the sanctions, after balancing the equities between the parties. The court found no basis to reduce the fee award, stating that the insured and her co-counsel “acted in bad faith by perpetuating a nonsensical lawsuit at every turn.” By contrast, the insurer handled itself with “professionalism”.

The court then looked at the respective equities as between the insured and her co-counsel in dividing their payment obligations. The court described the insured as “the ring master of this circus.” The court found: “She devised this suit ‘to try to con [the insurer] into paying for damage most likely caused by [her] own neglect of her properties.’”Moreover, the court found the insured’s “bad-faith conduct was borne of malice.”

On the other hand, the court observed: “To be sure, [co-counsel] willingly enabled [the insured’s] worst instincts, and he is neither as naïve nor as guiltless as he pretends to be.” However, counsel lacked the insured’s “malice, and his misconduct pales in comparison to [the insured’s].” The court also considered that co-counsel already had been disbarred for unrelated conduct, blunting the deterrent effect of present sanctions. By contrast, the court stated, the insured “will exploit her law license and continue abusing the civil justice system unless and until she is discouraged from doing so.”

For all of the court’s stated reasons, it required the insured to pay $35,000 and co-counsel to pay $4,114.

A motion to seal the insurer’s time record’s was denied without prejudice, as the insurer neither specified what documents should be placed under seal, nor provided the good cause basis for sealing any documents.

Date of Decision: December 17, 2019

Doherty v. Allstate Indem. Co., U. S. District Court Eastern District of Pennsylvania CIVIL ACTION NO. 15-05165, 2019 U.S. Dist. LEXIS 216253 (E.D. Pa. Dec. 17, 2019) (Pappert, J.)

Earlier Blog summaries concerning this case can be here (2016), and here (2017).