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In this UIM case, the court separated out the actual facts pleaded from the complaint’s conclusory legal allegations, to determine if those facts could plausibly support the legal conclusions. They could not.

After a few months of the insurer’s involvement with the plaintiff’s injury and treatment, the matter was not resolved. The insurer did pay certain medical benefits, but not all of the UIM injury claims. It took the position that the scope of injury investigation was ongoing, without denying the insured’s claims. The insured sued for breach of contract and bad faith, and the insurer moved to dismiss.

The court observed that it must first accept all well-pleaded facts as true, while disregarding legal conclusions, to determine if a plausible claim is pleaded. A court may consider the allegations in the complaint, attached exhibits, matters of public record, and the contents of documents identified in the complaint.

The court stated that an insurer has a right to investigate and evaluate UIM claims, and need not immediately accede to the insured’s policy limits demand. Delay is relevant, but even if lengthy, must be measured under the circumstances of each case to determine whether it is unreasonable and in bad faith.

In this case, the insurer responded to the insured’s demand package within 3 months, and suit was filed 2 months later. This did not indicate bad faith. Nor were there facts to show an unreasonable delay in payment. The court contrasted this 5-month period with cases where the delays went on for 10 months and 2 years.

The court granted the motion to dismiss, because the insurer “has not had a substantial amount of time to investigate the claim, unlike the insurer in the cases Plaintiff relies on; and (2) has not denied the claim, but has indicated it needs to further investigate.”

The court also found the following allegations to be legal conclusions, which it need not consider as setting out a plausible claim unless supported by independent factual allegations:

  1. Refused to engage in good faith settlement discussions with Plaintiff;

  2. Refused to offer an amount in settlement of Plaintiff’s UIM claim that was commensurate with the gravity of his injuries and damages;

  3. Failed to engage in reasonable and proper settlement practices or protect the interests of its insured;

  4. Making an unreasonably low/no settlement offer;

  5. Failing to act in good faith to effectuate a prompt, fair, and equitable settlement of Plaintiff’s claim in which the company’s liability was clear;

  6. Violated the Unfair Insurance Practices Act, 40 P.S. § 1171.5(a)(10);

  7. Failing and refusing to properly evaluate Plaintiff’s claim for settlement purposes;

  8. Failing to act in good faith and fair dealing in the handling of Plaintiff’s claim for UIM benefits; and

  9. Refusing to pay Plaintiff the amount he was legally entitled to recover from a driver of an underinsured vehicle.

The court rejected the argument that the complaint’s factual allegations redeemed this conclusory language. The court looked at the factual allegations closely, and concluded that the neither the insured or insurer could have known the extent of the insured’s injuries for some period of time after treatment. Thus, the insurer did not refuse to pay a known claim, and further investigation was reasonable.

While a court is obligated to draw reasonable inferences from the facts pleaded in favor of the insured, it is “not required to accept allegations that are belied by logic.” In sum, the alleged facts did not flesh out the legal conclusions that the insurer failed to properly evaluate or handle the claims.

The court also found the insured chose to file suit before the insurer fully investigated the claim, or even issued a denial. This choice precluded settlement discussions or offers. Thus, these facts undermined the legal conclusions of failure to engage in proper settlement practices and negotiations.

Finally, the court found the bare allegation that the insurer violated the Unfair Insurance Practices act was “not a factual allegation of bad faith conduct, but rather, an unsupported conclusion of law as to a claim not pled, and is completely lacking any factual support.”

The complaint was dismissed without prejudice, to allow plaintiff to set out sufficient facts to state a plausible claim (if possible).

Date of Decision: October 22, 2018

Higman v. State Farm Mutual Automobile Insurance Cos., U. S. District Court Western District of Pennsylvania Civil Action No. 2:18-cv-00662, 2018 U.S. Dist. LEXIS 180282 (W.D. Pa. Oct. 22, 2018) (Lenihan, M.J.)