JANUARY 2006 BAD FAITH CASES DISPUTING CAUSATION IN CONNECTION WITH UIM THIRD PARTY CLAIM, WHILE PAYING BENEFITS UNDER FIRST PARTY CLAIM, NOT PER SE EVIDENCE OF BAD FAITH (Superior Court)
In Pantelis v. Erie Insurance Exchange, plaintiff was injured in a single-vehicle accident, resulting in her insurance paying first-party medical benefits to her. Three months later, she was involved in a second accident, yet reported no physical injury; however, she later filed a claim for first-party medical benefits caused by the second accident, which the insurer also paid. Plaintiff then filed an additional claim for uninsured motorist benefits under the same policy, after which the insurer denied third party coverage.
The Superior Court of Pennsylvania expressly rejected plaintiff’s argument that disputing causation in connection with a third party claim while paying benefits under a first party claim constitutes per se evidence of bad faith. Instead, the court held that payment of first-party benefits does not preclude an insurer from later denying third-party uninsured motorist/underinsured motorist benefits. Furthermore, the court found that plaintiff’s cited case law only stood for the well accepted rule that where an insurer’s payment of first-party benefits is followed by denial of third-party coverage, this can support a claim for bad faith where the denial is ultimately found to be for frivolous or unfounded reasons.