NOVEMBER 2013 BAD FAITH CASES: FORMER SUPERIOR COURT JUDGE’S CLAIM FOR BAD FAITH AGAINST INSURER DISMISSED ON IN PARI DELICTO GROUNDS; FEDERAL CONVICTION PREVENTED CIVIL ACTION (Pennsylvania Superior Court)
The case arises out of a claim for damages, paid out by the insurers, and then ordered to be repaid to the insurer by plaintiff in restitution following his conviction for mail fraud and money laundering associated with the claim payment.
Plaintiff brought suit against the insurers seeking to recover the money he was ordered to repay in restitution, alleging, amongst other claims, bad faith against one of the insurers. The insurer filed a preliminary objection asserting failure to state a claim for bad faith, and the trial court sustained the objection. The entire complaint was dismissed on grounds of in pari delicto, as plaintiff’s claim arose out of his own illegal actions. Plaintiff appealed, alleging the trial court erred in applying the doctrine and sustaining the objection to the bad faith claim.
The Superior Court first evaluated the trial court’s dismissal of plaintiff’s complaint on in pari delicto grounds. Plaintiff argued the doctrine was inapplicable because his federal conviction did not involve the same incident and activities at issue in his civil litigation. The insurer argued the claims were grounded in plaintiff’s illegal actions, plaintiff’s claim under the policy, making the doctrine applicable.
The Court found plaintiff’s civil suit was necessarily grounded in the same conduct, representations to and interactions with insurance personnel, which his federal conviction was based on. Therefore, the doctrine was properly applied, rendering the bad faith claim moot.