Daily Archive for July 10th, 2008

JULY 2008 BAD FAITH CASES
INSURER’S MOTION GRANTED TO PRECLUDE INQUIRY INTO POST ARBITRATION CONDUCT OF THE INSURER WITH REGARD TO BAD FAITH CLAIM (Philadelphia Federal)

Published on July 10, 2008 in PA - Discovery and Evidence and PA - UIM/UM Cases. Closed

Plaintiff initiated suit against the insurer stemming from an automobile accident in which he sustained injuries. Plaintiff was involved in an automobile accident. Plaintiff had an insurance policy with the insurer which provided for uninsured motorist coverage. Plaintiff filed a claim with his insurer. The insurer made an initial offer which plaintiff rejected and then made another offer.

However, plaintiff chose to have his claim evaluated by an arbitration panel. The panel awarded him $500,000 for the claim. The award was molded to fit plaintiff’s policy and the insurer paid plaintiff $100,000, plaintiff’s policy limit.

Plaintiff filed a bad faith and breach of contract action against the insurer. The plaintiff alleged that the insurer acted in bad faith with regard to his claim by frustrating, delaying, and hindering his receipt of benefits and forcing him to arbitration. Plaintiff claimed that the insurer did not have a reasonable basis to refuse to pay his policy limit before the arbitration panel rendered its decision. The case is currently in discovery.

The insurer filed a motion for a protective order in the United States District Court for the Eastern District of Pennsylvania with regard to a situation that occurred during the deposition of an employee of the insurer. The insurer argued that inquiries regarding its post arbitration activity should not be permitted because the questions are irrelevant to the issues in a bad faith claim. The plaintiff claimed that these questions will provide relevant evidence and are reasonably calculated to lead to discovery of admissible impeachment evidence.

The court found that information regarding the insurer’s actions after arbitration is not relevant to the bad faith claim and would not be admissible into evidence. The court held that there is not a reasonable likelihood that inquiries into post arbitration actions would lead to admissible impeachment evidence against the insurer’s employee.

Therefore the court granted the insurer’s motion for a protective order precluding plaintiff from asking deponents about post arbitration conduct.

Date of Decision: April 30, 2008

Kakule v. Progressive Cas. Ins. Co., U.S. District Court Eastern District of Pennsylvania No. 06-cv-4995, 2008 U.S. Dist. LEXIS 35178 (E.D. Pa. Apr. 30, 2008)(Kelly, J.)

J.M.A.

JULY 2008 BAD FAITH CASES
INSURER’S MOTION FOR SUMMARY JUDGMENT GRANTED IN PART BASED ON ALLEGATIONS OUTSIDE THE SCOPE OF THE BAD FAITH STATUTE; DENIED AS TO COGNIZABLE CLAIMS (Middle District)

Published on July 10, 2008 in PA - Claims Handling (unreasonable), PA - Federal Pleading Adequate and PA - Standing, Assignment or Outside Scope. Closed

Plaintiff’s claim arose out of the collapse of a milk silo on plaintiff’s property. Plaintiff purchased a milk silo and obtained an insurance policy for the silo with the insurer. The plaintiff informed the insurer that the silo had collapsed before. The insurer conducted a loss risk assessment and did not find any defect in the silo’s design. Subsequently, the milk silo collapsed and plaintiff filed a claim for the loss.

The insurer hired an engineer who determined the collapse was caused by a design defect in the silo. The insurer denied the claim because the collapse was caused by a design defect which is specifically excluded from coverage by the terms of the policy. Plaintiff claimed that it did not receive a copy of the additional policy form with this exclusion until after the collapse.

Plaintiff filed a two count suit against the insurer and alleged that the insurer acted in bad faith. The insurer then filed a motion to dismiss the bad faith claim. The court found that that plaintiff’s complaint was sufficient to state a claim of bad faith.

Plaintiff alleged that the insurer denied the claim on the basis of a policy exclusion not previously disclosed to plaintiff and thus not enforceable. Also plaintiff alleged that the insurer hired an inspector charged with the duty of classifying plaintiff’s loss under the policy exclusion. Both of these allegations in the complaint involve unreasonable conduct on the part of the insurer arising out of the insurance policy.

Thus to the extent that plaintiff alleges the insurer acted in bad faith by breaching the terms of the policy, this claim is cognizable under the bad faith statute.

However, plaintiff also advanced bad faith allegations outside the scope of the bad faith statute. Plaintiff claimed that the insurer had an obligation to inform them that the silo was defectively designed or provide coverage for design defects leading to collapse. This claim is not cognizable under the bad faith statute because it relates to actions prior to issuing the policy, and the bad faith statute only applies to actions arising out of the insurance company’s performance pursuant to the insurance contract.

Therefore the court granted the insurer’s motion for summary judgment in part with regard to the allegations outside the scope of the bad faith statute and denied the motion in part with regard to the cognizable bad faith claims.

Date of Decision: April 23, 2008

Harrisburg Dairies, Inc. v. Selective Ins. Co. of Am., 2008 U.S. Dist. LEXIS 33381 (M.D. Pa. Apr. 23, 2008)(Rambo, J.)

J.M.A.