OCTOBER 2018 BAD FAITH CASES: (1) NO BAD FAITH FOR ASSERTING FAILED LEGAL THEORY AS A DEFENSE; (2) NO BAD FAITH DELAY IN CLAIM HANDLING WHERE INSURER IS ACTIVELY INVESTIGATING CLAIM (Middle District)
In this UIM bad faith case, the insured was injured during the pursuit of a robber. The insured and others chased after the robber, pursuing him to his getaway car. While two of the pursuers attempted to subdue him, the insured reached into the car while attempting to remove the car keys. The robber drove off and caused serious injury to the insured.
The insurer asserted an affirmative defense that the insured assumed the risk. The insured argued this ultimately unsuccessful defense, was asserted in bad faith. Further, the insured alleged there was a bad faith delay in handling her claim.
A failed legal theory is not bad faith per se
Even though the insurer erred in relying on an assumption of the risk defense, the court held the insurer “had a reasonable basis to question coverage because assumption of the risk remains a valid defense under Pennsylvania law.” Moreover, “the presence or absence of bad faith does not turn on the legal correctness of the basis for an insurer’s denial of an insured’s claim.”
Assuming arguendo the insurer lacked a reasonable basis to assert this defense, the insured still could not meet her substantial burden and “point to clear and convincing evidence that [the insurer] knew or recklessly disregarded that lack of a reasonable basis.” The court observed the insured’s apparent insinuation that changing from comparative negligence defense to an assumption of the risk defense was bad faith. The court stated that such “insinuations alone do not permit her to surmount the high burden she faces.”
Finally, as to the argument that an “erroneous legal determination alone amounted to recklessness, Pennsylvania courts have made clear that bad judgment does not equate to bad faith.”
There was no delay in claim handling amounting to bad faith
The court recognized that “[u]nreasonable delay amounts to bad faith if an insurer knows of or recklessly disregards the lack of any reasonable basis for its delay.” There was no unreasonable delay based on the facts of this case. The parties were in communication for months in an effort to resolve the dispute. The insured told the insured it needed a police report and surveillance video to evaluate the claim. She filed the complaint before receiving the police report. As a matter of law, a jury could not find this to be an unreasonable delay, and summary judgment was granted for the insurer.
Date of Decision: September 21, 2018
Smerdon v. Geico Casualty Company, U. S. District Court Middle District of Pennsylvania No. 4:16-CV-02122, 2018 U.S. Dist. LEXIS 161344 (M.D. Pa. Sept. 21, 2018) (Brann, J.)