JANUARY 2018 BAD FAITH CASES: INSURER’S EMPLOYEES NOT SUBJECT TO BAD FAITH OR BREACH OF INSURANCE CONTRACT CLAIMS; INSURER CANNOT BE LIABLE UNDER UTPCPL FOR FAILURE TO PAY BENEFITS (Philadelphia Federal)
Plaintiff is the beneficiary to two life insurance policies issued to her late husband. After the insured’s death, the insurer issued a check to the plaintiff, made payments to a funeral home, and withheld funds for purportedly outstanding debt. The plaintiff argues that the insurer owes her at least $70,000 in additional benefits under the two policies. After the insurer refused to pay further benefits, the plaintiff sued the insurer and three of its employees for breach of contract, violations of Pennsylvania’s Unfair Trade Practices and Consumer Protection Law (“UTPCPL”), and bad faith.
The action was removed to federal court, and the insurer and two of the employees argue that plaintiff fraudulently joined various non-diverse defendants to evade federal jurisdiction. The plaintiff moved to remand the action back to state court for lack of subject-matter jurisdiction, and the insurer moved to dismiss the UTPCPL claim per Rule 12(b)(6).
The Court first addressed the fraudulent joinder issue. The Court stated, “if there is a possibility that a state court could find that the complaint states a cause of action against any one of the non-diverse defendants, remand is necessary.” It held that none of the plaintiff’s claims could succeed against any of the non-diverse defendants.
There can be no breach of contract claim against the non-diverse defendants because the plaintiff only alleges a contract with the insurer, not its employees. No UTPCPL claim exists against the non-diverse employee defendants because the complaint contains no allegations of deceptive conduct committed by them. Lastly, regarding the bad faith claim, the non-diverse employee defendants are not “insurers” within the meaning of Pennsylvania’s bad faith statute. The Court thus denied the plaintiff’s motion to remand, dismissed the claims without prejudice against the non-diverse defendants, and retained jurisdiction to hear the insurer’s 12(b)(6) motion.
“As a matter of law, an insured may not bring a UTPCPL claim based on an insurer’s failure to pay a claim.” The complaint essentially alleged that the insurer did not pay benefits in an amount owed to the plaintiff. Because this allegation is not proper to allege a UTPCPL violation, the Court granted the insurer’s motion to dismiss the UTPCPL claim while giving the plaintiff leave to amend.