NOVEMBER 2011 BAD FAITH CASES BAD FAITH COULD EXIST EVEN IF SETTLEMENT OFFER MADE, THOUGH NOT IN THIS CASE; DISCUSSIONS WITH UNREPRESENTED WITNESS WERE NOT IMPROPER(Philadelphia Federal)
The court considered a carrier’s motion for summary judgment to dispose of an insured’s claim for breach of contract and bad faith. The suit stemmed from an automobile accident in which the insured’s son was struck and killed by an unidentified driver while walking on the side of the road. The decedent was with his girlfriend at the time of the accident.
In September 2007, the insured filed an uninsured motorist claim with the carrier. During the following two years, the carrier investigated the claim. First, the carrier requested proof of the decedent’s residency, proof of death, papers of administration, the police report, and a witness statement from the decedent’s girlfriend.
The insured provided this information to the carrier in mid-2008. In 2009, the carrier was advised that the insured had changed attorneys. The carrier later spoke with the insured’s former attorney, who told the carrier that neither the decedent, nor his girlfriend, were living with the insured’s family at the time of the accident. This information would affect the insured’s entitlement to benefits.
In June of 2009, the carrier offered $75,000. Days later, the insured filed this suit. The carrier responded with a $100,000 offer and moved for summary judgment on the insured’s bad faith claim.
The insured’s suit alleged three counts of bad faith, claiming that (1) the carrier offered less than 25% of the insured’s original $400,000 claim, (2) the carrier spoke with the insured’s former attorney after its new attorney had taken over representation, and (3) the carrier’s attorney engaged in bad faith by speaking with the decedent’s girlfriend before her deposition, where she would have had counsel present.
The carrier first argued that a bad faith claim requires that it refused to pay the insured’s claim. However, the court disagreed, stating that bad faith claims do not require the carrier’s refusal to pay an insured’s claim. The court cited Third Circuit case law where bad faith claims were considered, regardless of a carrier’s refusal to pay a claim. The court reasoned that this case really turned upon the reasonable basis behind the carrier’s decision-making, not its payment or non-payment of the insured’s claim. As such, the court ruled, a jury could not conclude that the carrier acted in bad faith.
First, the carrier was aware of the decedent’s limited income prior to his death and the fact that he did not live with his family when he died, raising questions about coverage. Furthermore, there was evidence that the decedent may have been negligent at the time of the accident. The court therefore found that the $100,000 offer was not made in bad faith.
As to the other two counts, the parties’ reports of the events that occurred prior to the girlfriend’s deposition were not contradictory and the court accepted the representations as true. There was some confusion about whether a third party witness would or would not speak to the carrier’s counsel without having her own lawyer present. Defense counsel had told the witness she could speak to him without her a lawyer present if she wanted, at which point either she or the insured became upset and Plaintiff’s counsel joined them. The conversation between the witness and the carrier’s counsel seems to have gone no further than whether she wanted to speak to him with counsel or not. The court ruled that these actions did not amount to an impropriety or bad faith.