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In these two UIM cases, Eastern District Judge Joseph F. Leeson, Jr. addressed motions to dismiss bad faith claims. In Krantz v. Peerless, he dismissed the bad faith claim and remanded the action to state court, but in Perez-Garcia v. State Farm, the bad faith claim survived a motion to dismiss. The pleading differences in these two cases are described below.

Failure to plead to supporting facts results in dismissal of bad faith claim.

In Krantz, the UIM bad faith plaintiff argued that the insurer improperly interpreted the policy in refusing to pay full policy limits. The complaint alleged the insurer relied upon an invalid and unlawful setoff provision in withholding $37,500 out of the $100,000 policy limit. Judge Leeson found, however, the insured failed to plead facts showing the setoff provision was invalid, “or, more importantly, that [the insurer] knew or should have known that it was denying the full amount of benefits based on an invalid provision.”

In granting the motion to dismiss the bad faith claim, Judge Leeson also found the following allegations conclusory because the complaint lacked any other supporting factual allegations that could make these statement plausible:

(1) the insurer did not make any good faith offers to settle despite repeated demands;

(2) the insurer “failed to objectively and fairly evaluate his claim”;

(3) the insurer “failed to promptly tender payment of the fair value of the claim”; and

(4) the insurer failed to reasonably investigate the claim.

Judge Leeson gave examples of the kind of facts needed to support these sorts of conclusory allegations, but such facts were absent from the complaint. He concluded:  “’Essentially, Plaintiff’s cursory allegations assert that Defendant lacked a reasonable basis for denying Plaintiff’s claim for benefits, but do not provide any factual allegations from which the Court could make a plausible inference that Defendant knew or recklessly disregarded its lack of a reasonable basis for denying benefits.’”

The case had been removed from the Court of Common Pleas of Lancaster County. After dismissing the bad faith count, plaintiff’s damage claims no longer exceeded $75,000. Thus, Judge Leeson remanded the case.

Date of Decision: March 11, 2019

Krantz v. Peerless Indemnity Insurance Co., U. S. District Court Eastern District of Pennsylvania No. 18-cv-3450, 2019 U.S. Dist. LEXIS 38923, 2019 WL 1123150 (E.D. Pa. Mar. 11, 2019) (Leeson, Jr., J.)

Factual details support the bad faith claim, but UTPCPL claim dismissed.

In Perez-Garcia, the insured alleged he “incurred medical bills and wage loss following an automobile accident caused by an underinsured driver….” The complaint alleged the insured provided “medical documentation clearly setting forth injuries to [his] right knee and injuries to the left ankle caused by the motor vehicle accident….” [Emphasis added.]

To support his bad faith claims, plaintiff further alleged the insurer’s claim specialist “asserted, without medical support, that none of the injuries that Plaintiff sustained were the result of the motor vehicle accident” at issue. The complaint alleged the insurer refused to pay any benefits on the basis on this adjuster’s medical conclusions, despite medical reports to the contrary which had been provided to the adjuster.

The insurer unsuccessfully moved to dismiss the bad faith claim. Judge Leeson first rejected the notion that this was merely a bald claim that the insurer refused to pay UIM benefits after having paid first-party benefits. Rather, the complaint specifically alleged that the insurer had medical documentation in hand that supported the insured’s version of events, but rejected that evidence without any medical evidence to the contrary.

The complaint alleged the insurer did not conduct a proper investigation into the medical history. Rather, the insurer allowed its own claim adjuster — described as “a non-medical reviewer” — to substitute the adjuster’s medical judgment for the judgment of actual medical professionals. These facts were sufficient to state a bad faith claim.

Judge Leeson did dismiss plaintiff’s Unfair Trade Practices and Consumer Protection Law (UTPCPL) claim on two bases: (1) there were no allegations that plaintiff relied upon the conduct at issue in suffering any damages; and (2) the UTPCPL can only address claims surrounding formation of the insurance contract, not post-contract claim denial.

Date of Decision: March 15, 2019

Perez-Garcia v. State Farm Mutual Automobile Insurance Co., U. S. District Court Eastern District of Pennsylvania No. 5:18-cv-03783, 2019 U.S. Dist. LEXIS 42327 (E.D. Pa. Mar. 15, 2019) (Leeson, Jr., J.)