JULY 2012 BAD FAITH CASES: COURT RULES THAT CARRIER’S ALLEGED MISREPRESENTATION OF POLICY LIMITS WARRANTS DENIAL OF ITS MOTION TO DISMISS (Middle District)
In Stricker v. State Farm Mut. Auto. Ins. Co., a carrier filed a motion to dismiss its insured’s claim for the alleged bad faith denial of insurance benefits. The case arose from an accident involving a car in which the insured was a passenger. After sustaining injuries as a result of the accident, the insured filed a claim for $100,000 which represented the limits of her underinsured motorist policy. The insured received a letter three months later from the carrier stating that she was only entitled to $50,000, a figure they claimed as the limit.
After hiring an attorney, the insured informed the carrier that she was told she would be able to “stack” her benefits in the amount of $150,000. The carrier then tendered an additional $50,000 under the insured’s policy. After the carrier declined to offer a third payment of $50,000, the insured filed suit for bad faith.
Specifically, the insured argued that pursuant to her policies, one providing $100,000 in primary underinsured motorist coverage and another providing $50,000 in excess underinsured motorist coverage, she was entitled to a combined total of $150,000. The insured argued that the carrier’s actions in sending her a letter, before she had obtained counsel, that she was only entitled to $50,000 in coverage pursuant to her policy, combined with the carrier’s position after she retained counsel that she was only entitled to $100,000, constituted bad faith.
The carrier argued that the insured misunderstood her policy and that a provision in the contract stating that “[w]e may choose one or more policies from which to make payment” was dispositive of the outcome.
The court held that the carrier’s motion should be denied and that the case should proceed. It reasoned that the insured pleaded that the carrier told her that the initial $50,000 offer constituted her “policy limits.” Moreover, another provision in the insured’s policy states that, “[i]f underinsured motor vehicle coverage for bodily injury is available to an insured from more than one policy provided by us or any other insurer, any coverage applicable . . . under this policy shall apply on an excess basis if the insured sustains bodily injury while occupying a vehicle other than your car.”
As such, the court stated, it is not clear that the carrier’s position is reasonable as to the insured’s excess underinsured motorist policy, denying the carrier’s motion.