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In Graham v. Progressive Direct Insurance Company, one insured was in an automobile accident with another driver, who had failed to stop at a stop sign and collided with the insured’s vehicle and caused her injuries.  The other driver was underinsured, and her insurer concluded that it was her fault.  The driver’s insurer paid the insureds (the female who was not at fault and her husband) its policy limits in exchange for a release of future claims, but the insureds reserved their right to pursue a claim for underinsured motorists benefits under their policy with their insurer, a “stacked policy” under which the policy limits were $500,000.

The insureds made an underinsured motorists claim to their insurer, and the insurer offered them $55,000 over two months later.  The insureds filed a Complaint alleging bad faith on the part of the insurer, asserting that it waited too long to offer a settlement and it offered a value far less than a fair and reasonable amount.  Among the bad faith arguments was that the insurer removed an un-insured/underinsured arbitration clause from the policy without a corresponding reduction in premium or providing notice.

After the deadline for discovery passed, the insureds filed an a Motion for Leave to File a Second Amended Complaint, attaching a Proposed Second Amended Complaint.  They attempted to change the action from an individual action against their insurer to a class action suit against their insurer, where the plaintiffs were all Pennsylvania residents who purchased an auto policy from the insurer which included an arbitration provision wherein that provision was eliminated from the policy at renewal without notice as required by Pennsylvania state law.  The insurer opposed this motion, and the court’s opinion addressed the issue of whether the insured could convert the action to a class action suit.

The court analyzed the motion under Rules 16 and 15 of the Federal Rules of Civil Procedure.  Rule 16 authorizes a district court to enter orders for deadlines for discovery, amending pleadings, and the joinder of parties.  The rule states that a “schedule may be modified only for good cause and with the judge’s consent.”  The court determined that the insureds had not demonstrated that they acted diligently in pursuing the proposed class action claims, and they failed to establish good cause for the court to amend its prior orders.  Rule 16, therefore, could not permit the action to proceed as a class action.

Rule 15 permits a plaintiff to “amend its pleading only with the opposing party’s written consent or the court’s leave.  The court should freely grant leave when justice so requires.”  Here, the insurer successfully demonstrated to the court that the insured has unduly delayed the filing of its Proposed Second Amended Complaint, and that it would be prejudiced if the amendment was permitted after the close of discovery.  Rule 15 also would therefore not permit the class action to proceed.  Because Rules 16 and 15 both weighed against amending their Complaint to a class action suit, the court denied the insureds’ Motion for Leave to File a Second Amended Complaint.

Date of Decision:  September 15, 2010

Graham v. Progressive Direct Ins. Co., Civil Action No. 09-969, United States District Court for the Western District of Pennsylvania, 2010 U.S. Dist. LEXIS 96324 (Sept. 15, 2010) (Fischer, J.)