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In Amica Mutual Insurance Company v. Fogel, the insureds owned an automobile insurance policy with the insurer which included underinsured motorist coverage of $300,000 for each accident.  After obtaining the policy, the insureds moved from New Jersey to Pennsylvania, whereupon they requested that the policy be adjusted to a Pennsylvania policy or they be issued a new one.  The insurer notified the insureds that it would not issue a Pennsylvania automobile insurance policy until the husband obtained a Pennsylvania driver’s license and registered his vehicles in Pennsylvania.  The insurer did bill the insured for premiums at the Pennsylvania address even though the insureds had not changed their licenses and registrations yet.

Before he obtained a Pennsylvania license, the husband insured and three of his children were in a car accident in Pennsylvania, killing one of his daughters.  There was a dispute whether Pennsylvania law (where the insureds resided) or New Jersey law (the law of the state where the policy was formed) should apply.  Under Pennsylvania law, the two insureds’ $300,000 limits for coverage would be stacked, and the total coverage for the accident would be $600,000.  However, under the policy and New Jersey law, the coverage would be limited to $300,000.  The insurer paid the insureds $200,000, which represented the undisputed $300,000 owed to them minus the $100,000 that the accident-causer’s insurer paid (under New Jersey law, an insurer is entitled to offset the amount of underinsured motorist benefits  it is obligated to pay against any amounts that the insured receives from other sources).

Because the insureds insisted that they were due $600,000, the insurer filed an action seeking a declaration that its obligations under the policy in effect at the time of the accident were those that it owed pursuant to the language of the policy and New Jersey law.  The insureds filed a motion for summary judgment and a counterclaim for bad faith.

In the insureds’ counterclaim, they alleged that the insurer failed adequately to investigate their claims, and that it improperly and unlawfully denied them benefits under the policy.  The court eventually determined that the insurer was correct in its determination that New Jersey law governed the policy.  Therefore, it would be impossible to hold that the insureds could proceed on a claim that alleged that the insurer’s claims adjuster engaged in bad faith by construing the Policy under New Jersey law.

The court also noted that “there exist numerous judicial decisions that offer varying degrees of support for the positions taken by both parties in this case,” and the fact that there is such a dispute means that the insurer could not be penalized for acting in bad faith when it was not clear that it should have made the opposite decision.  The magistrate judge therefore recommended that summary judgment be granted for the insurer on the bad faith claim.

Date of Decision:  June 7, 2010

Amica Mut. Ins. Co. v. Fogel, Civil Action No. 1:09-CV-674, United States District Court for the Middle District of Pennsylvania, 2010 U.S. Dist. LEXIS 89522 (June 7, 2010) (Carlson, U.S.M.J.)

The District Court issued an Opinion adopting the Report and Recommendation on July 29, 2010.

This case was affirmed on appeal.