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In Sypeck v. State Farm Mut. Auto. Ins. Co., the court heard a carrier’s motion to dismiss an insured’s claim for bad faith and breach of contract. The suit stemmed from a 2007 car accident which left the insured severely and permanently injured. The negligent driver who caused the accident had a $100,000 bodily injury policy. The driver’s carrier tendered those limits, but the amount was inadequate to compensate the victim for the injuries she sustained.

As a result of the shortfall, the victim filed a claim for underinsured motorist benefits with her carrier. After the carrier offered the insured $5,000 to settle her claim, she filed suit in state court. The carrier removed the case to federal court shortly thereafter and filed the instant motion to dismiss.

First, the court rejected the carrier’s motion to dismiss the insured’s breach of contract action. Contrary to the carrier’s argument, the court reasoned, the insured alleged sufficient facts to support her allegations. For instance, the carrier was obligated to investigate her claim, but failed to do so, causing the insured to suffer financial losses. The carrier also claimed that the insured’s suit was time-barred, a defense that was deemed meritless. The court therefore held that the insured’s breach of contract claim would not be dismissed.

Second, the court granted the carrier’s motion to dismiss the insured’s bad faith allegations. The court reasoned that the insured failed to state a proper bad faith claim. Her allegation that the carrier made a “facially unreasonable” offer does not mean that the carrier acted in bad faith or failed to investigate her claim. Moreover, the insured claimed that the carrier “knew or should have known” that its defenses were meritless. The court reasoned that such a claim only “offers the possibility of negligence,” which is not enough to establish bad faith under Pennsylvania law.

The court also rejected the insured’s request for leave to amend its bad faith claims. The insured had previously been granted leave to amend and later submitted an amended complaint that was nearly identical to her first complaint. The court therefore ruled that granting the insured leave to amend her bad faith claims would be futile.

Lastly, the court remanded the remaining breach of contract action to state court because the insured’s demand no longer exceeded the jurisdictional amount of $75,000. The court reasoned that, because neither punitive damages, nor attorney’s fees are available in breach of contract suits, along with the fact that the insured’s bad faith claim was dismissed, a reasonable estimation of damages was around $44,000.00 ($24,000.00 in medical expenses and $20,000.00 in lost wages).

Date of Decision: June 15, 2012

Sypeck v. State Farm Mut. Auto. Ins. Co., No. 3:12-CV-324, 2012 U.S. Dist. LEXIS 83326, U.S. District Court for the Middle District of Pennsylvania (M.D. Pa. June 15, 2012) (Caputo, J.)