Daily Archive for July 3rd, 2008

JULY 2008 BAD FAITH CASES
PLAINTIFF SUFFICIENTLY PLEADED BAD FAITH CLAIMS TO SURVIVE AS TO MOTIVE AND INVESTIGATION (Philadelphia Federal)

Published on July 3, 2008 in PA - Delay (Investigation/Claims handling). Closed

Plaintiff filed a first party income loss claim in connection with a motor vehicle accident in which plaintiff suffered injuries. Plaintiff was the driver of a vehicle that was rear ended. Plaintiff’s policy provided coverage for first party medical expenses up to the amount of $10,000, and for first party income loss benefits in the amount of $50,000.

Plaintiff made a claim for first party medical expenses which were paid by the insurer. However, plaintiff’s claim for income loss coverage was not paid.

The insurer’s claims adjustor admitted that she failed to send forms for wage verification to the insured’s treating physicians and did not request the exact dates of disability from the doctors. She also failed to send the insureds’ tax return to a claims auditor after being on notice that the insureds were submitting the return in an attempt to prove wage loss. Two years later, the insureds counsel contacted the insurer and requested that it pay the wage loss claim. A new claims adjustor was assigned, but the claim remained unresolved.

Plaintiff filed a bad faith and breach of contract claim. The insurer filed a motion for summary judgment and argued that it acted in full compliance with the terms of its policy, and properly investigated and paid expenses to this claim.

For the Breach of Contract claim, the insurer argued for summary judgment because plaintiff had not presented evidence of specific days of work missed, or actual loss of gross income, to support her claim. However, the court found that the plaintiff had presented evidence in support of her claim that she lost real income.

The court stated that when analyzing a motion for summary judgment the court must view the facts in the light most favorable to the non moving party. Based on the evidence presented by the plaintiff, a reasonable jury could conclude that as a result of the accident the plaintiff suffered an actual loss of gross income. Therefore, the court denied the insurer’s motion for summary judgment on the breach of contract claim.

For the Bad faith claim, the court also held that there was a genuine issue of material fact as to the insurer’s motives, and that the long delay and mishandling of the income loss claim could rise above mere negligence to bad faith. Therefore since a reasonable jury could find that the insurer acted in bad faith, the insurer’s motion for summary judgment with regard to the bad faith claim was denied.

Date of Decision: March 26, 2008

Brown v. Liberty Mut. Fire Ins., 2008 U.S. Dist. LEXIS 24215 (E.D. Pa. Mar. 26, 2008)(Stengel, J.)

J.M.A.

JULY 2008 BAD FAITH CASES
INSURER DID NOT HAVE DUTY TO DEFEND OR INDEMNIFY AND THEREFORE DID NOT ACT IN BAD FAITH BECAUSE THE POLICY COVERAGE LANGUAGE WAS CLEAR AND UNAMBIGUOUS (Third Circuit)

Published on July 3, 2008 in PA - No coverage duty, no bad faith. Closed

The insured filed a complaint against their insurer for the insurer’s failure to defend and indemnify the insured against products liability suits. Appellant Henkel corporation was formerly knows as Locite Corporation. Locite acquired Permatex Company, Inc. in 1972. In 1978, Permatex company merged into Locite Corporation. Between 1976 and 1985, the insurer issued to Locite comprehensive general liability insurance policies of completed operations and products liability. In the policies, Hartford agreed to provide defense and indemnity coverage for bodily injury or property damage.

After these policies were issued, Henkel purchased Locite and the companies merged. Lawsuits have been filed in New Jersey, New York, and Pennsylvania state courts by plaintiffs, alleging injuries as a result of exposure to asbestos containing products, including Permatex brand products.

However, none of these suits named Henkel, Locite, or Permatex Company as a defendant. The suits named a wholly owned subsidiary of Henkel, and another entity completely unrelated to Henkel, as defendants. However, Henkel still had previously incurred costs defending and settling some of these Underlying Suits even though it was not named as a defendant. Henkel filed a claim with the insurer, and the insurer refused to provide defense and indemnity coverage.

The insured filed suit for breach of contract and bad faith. The complaint sought damages and also requests a declaration that the insurer is obligated to defend and indemnify the insured in all pending and future cases alleging injury as a result of exposure to Permatex-brand asbestos containing products.

The District Court dismissed the complaint finding that the insurer had no duty to defend Henkel in the Underlying Suits because it had only agreed to defend and indemnify Locite in cases where Locite or a successor in interest was named as a defendant in the action.

The insured then sought relief in the United States Court of Appeals for the Third Circuit. The insured argued that the District Court erred in dismissing their complaint. The appellate court found that the contractual provision at issue was clear and not ambiguous. The duty to defend and indemnify was only triggered if the insured entity was named as a defendant in the suit.

The court therefore held that the insurer had no duty to defend because an insured entity was not named as a defendant in any of the Underlying Suits. Therefore the insurer did not breach the contract or act in bad faith by refusing to defend or indemnify the insured.

Date of Decision: March 27, 2008

Henkel Corp. v. Hartford Accident & Indem. Co., 2008 U.S. App. LEXIS 6496 (3d Cir. Pa. Mar. 27, 2008) (Barry, J.)

J.M.A.