JULY 2014 BAD FAITH CASES: INSUREDS FAILED TO PLEAD ANY FACTS TO SUPPORT A PLAUSIBLE BAD FAITH CLAIM IN UIM CASE, COURT GIVING EXAMPLES OF FAILURES IN PLEADING, BUT GIVES LEAVE TO AMEND; COURT STATES FIDUCIARY RELATIONSHIP ONLY EXISTS BETWEEN INSURED AND INSURER IN LIMITED CIRCUMSTANCES (Middle District)
In Flynn v. Nationwide Insurance Company of America, the insured brought a UIM claim, alleging breach of contract, lost wages and bad faith, and included within his complaint allegations that the carrier breached its fiduciary duty. The carrier moved to dismiss the bad faith claim, and to strike references to its alleged fiduciary duty.
Although the insured alleged 15 kinds of bad faith the claim was dismissed, as the Court found all of these were only legal conclusions, and were not factual allegations sufficient to make out a plausible bad faith claim. Examples given by the court included “failing objectively and fairly to evaluate plaintiffs’ claim,” “failing to adopt and implement reasonable standards in evaluating plaintiffs’ claim,” “failing to promptly offer reasonably payments to the plaintiffs,” and “failing to make an honest, intelligent, and objective settlement offer.”
Thus, e.g., “plaintiffs claim that [the insured] engaged in ‘abusive claims handling’ without explaining what the abusive behavior was. Plaintiffs also make the perfunctory allegation that [the insurer]’s payment offers weren’t reasonable, but does not disclose what those offers were, what his damages were, or how defendant’s offers were inadequate and unreasonable.”
The insureds argued that they established the carrier did not have a reasonable basis to deny coverage and recklessly disregarded evidence in the insured’s file; but they failed to explain what evidence was disregarded and how disregarding it was reckless. The court found that the insureds did “little more than state that they have a contract dispute, and assert that because the dispute has not yet ended in a manner favorable to them, that defendant has engaged in bad faith behavior.”
However, the Court did give the plaintiff leave to amend if it could plead a plausible bad faith claim with facts.
The Court then essentially granted the motion to strike references to fiduciary duty as the insureds did not oppose that motion; however, the Court did state that under Pennsylvania law, “a fiduciary relationship between an insurer and policyholder arises only in limited circumstances.”