MARCH 2013 BAD FAITH CASES: COURT DENIES MOTION TO DISMISS ASSIGNEE’S BAD FAITH CLAIMS, DESPITE CONTENTION THAT CARRIER IS NOT AN INSURER UNDER PENNSYLVANIA LAW (Middle District)

In Dolph v. Ill. Nat’l Ins. Co., two insurance companies were sued for bad faith and breach of contract by assignees who were initially plaintiffs in an underlying tort suit stemming from injuries they sustained in a car accident. After liability was established in the underlying case against the estate of the defendant-insured in that action, the estate assigned to plaintiffs all claims related to one of the insurer’s alleged mishandling of the underlying settlement process.

The assignees filed suit against two insurers – the named carrier and another insurer that now claims to be a holding company. In this action, the assignees argue that the insured had a contract of insurance with the second insurer, entitling the assignees to proceed with their bad faith and breach of contract suit. However, the insurer filed a motion to dismiss, arguing that it is not an “insurer” under Pennsylvania’s bad faith statute, but a holding company that does not issue policies or collect premiums.

The court recognized that dismissal may be appropriate if that entity is not found to be an insurer, but denied the party’s motion because the assignees sufficiently alleged that an agent of both insurer-defendants handled the investigation of the assignor’s claims following the underlying personal injury trial. The court did, however, recognize that a record needs to be developed to define corporate status of the moving defendant.

Date of Decision: February 11, 2013

Dolph v. Ill. Nat’l Ins. Co., NO. 3:12-2167, 2013 U.S. Dist. LEXIS 20158, U.S. District Court for the Middle District of Pennsylvania (M.D. Pa. Feb. 11, 2013) (Mannion, J.)