INSURED SETS OUT BAD FAITH DELAY CLAIM, AS WELL AS CLAIM FOR ATTORNEY’S FEES (Philadelphia Federal)
This UIM case involved a claim for full policy limits, amounting to $45,000. The insured alleged serious permanent injuries.
Over two years passed from the time the insured gave notice until the time of suit, with the claim neither paid nor denied. The insured filed suit for declaratory judgment, breach of contract, and bad faith. The insurer moved to dismiss the bad faith claim and attorney’s fee claim, and the court denied the motion.
Bad Faith Claim Based on Delay Adequately Pleaded
The court recognized at least two sources of statutory bad faith: (1) failure to pay and (2) delay in making payment. As to the first, “[w]here a claim of bad faith is based on a refusal to pay benefits under a policy, ‘the plaintiff must show that the defendant did not have a reasonable basis for denying benefits under the policy and that defendant knew or recklessly disregarded its lack of reasonable basis in denying the claim.’” As to the second, “[t]o sufficiently plead bad faith by way of delay, ‘a plaintiff must allege that a defendant had no reasonable basis for the delay in coverage, and that the defendant delayed coverage with knowing or reckless disregard for the unreasonableness of its action.’”
The court found bad faith delay pleaded, based on the following factual allegations:
The insurer “was put on notice of [the] underinsured motorist benefits claim in March 2017.”
“In January 2018, [the insurer] waived its subrogation rights and consented to … settlement with the third-party insurance carrier.”
“On March 30, 2018, [the insurer] advised [the insured] that her claim for underinsured motorist benefits was being evaluated.”
“From April to July 2018, the parties communicated regarding scheduling an EUO, which took place on July 9, 2018.” As pleaded, it was the insurer that sought an EUO in July, and the insured asked to move it up.
“On July 26, 2018, [the insurer] advised [the insured] that it would likely require her to undergo an IME, however, [the insurer] never moved forward with the IME.”
“Between August 2018 and February 2019, [the insured] provided medical records to [the insurer], both unsolicited and at their request.”
“Between February and June 2019, [the insurer] did not notify [the insured] as to the status of her claim, and at the time of the filing of the instant Complaint in September 2019, [the insurer] had neither paid [the] claim, nor denied it.”
The court summarized how these factual allegations made out a bad faith claim. The insured repeatedly tried to have her claim evaluated. She complied with requests for information, provided unsolicited information, and inquired as to the claim status. However, “despite having over two years to conduct its investigation, [the insurer] has unreasonably and without justification failed to approve or deny her claim.” Based on these factual allegations, there appears no reasonable basis to delay the claim evaluation, which the court equated with a failure to evaluate. The knowing/reckless bad faith element was met because the insured had given notice to the insurer through her inquiries and providing information that the claim had not been paid or rejected.
The court cited the Ridolfi, Kelly, and Smerdon cases concerning a delay-based bad faith analysis.
Clear and Convincing Evidence Standard Held Irrelevant at Pleading Stage
The court rejected the argument that the factual pleadings had to be measured against the clear and convincing evidence standard at the motion to dismiss stage. The court stated this standard is relevant, e.g., to trial, but not at the pleading stage. Rather, pleadings are governed by the plausibility standard. Thus, the insured “need not ‘establish’ anything at this early point in the proceedings, let alone ‘by clear and convincing evidence.’” “Whether sufficient facts will be discovered for [the insured] to survive a motion for summary judgment is unknown and may be addressed at a later date.”
Attorney’s Fees Possible under Bad Faith Statute or MVFRL
Finally, the court refused to dismiss the attorney’s fee claim based on both the bad faith statute, and the possibility that attorney’s fees might be permitted under section 1716 of the Motor Vehicle Financial Responsibility Law.