Daily Archive for July 15th, 2008

JULY 2008 BAD FAITH CASES
INSURER’S MOTION TO DISMISS DENIED BECAUSE COURT FOUND THAT THE INSURED HAD TIMELY FILED THE CLAIM (Middle District)

Published on July 15, 2008 in PA - Limitations Period and PA - Mediation. Closed

This bad faith claim arose from an automobile accident involving Bowers and another driver. Bowers was struck by another car and sustained severe and permanent injuries leaving him disabled and unable to work. Bowers had an automobile policy with the insurer. Bowers suffered damages in excess of $800,000 yet the other driver had liability insurance with a limit of $15,000.

Bowers filed a claim with the insurer for underinsured motorist benefits. Bowers sought $500,000 in coverage which was the limit available under his policy. The insurer offered $35,000. Bowers agreed to mediate the claim but the mediation was unsuccessful. Bowers then agreed to settle the claim for $300,000 but again the insurer continued to only offer $35,000. Bowers then instituted litigation seeking to recover $500,000 in underinsured motorist benefits. The matter went before an arbitration panel and Bowers was awarded $551,673.

After obtaining this award, Bowers filed a complaint alleging that the insurer acted in bad faith by failing to conduct a reasonable investigation before engaging in procedures to resolve his claim. Bowers claimed that the insurer’s medical investigation of his condition was insufficient and they relied on an economic expert who was unqualified. Bowers filed a motion of removal and then filed a motion to dismiss or in the alternative to strike portions of the complaint.

The insurer argued that the claim should be dismissed because the statute of limitations had run on the insurer’s action because it had been more than two years. The insurer claimed that the statute of limitations accrued either in November 2004 or January 2005. Bowers responded that at the time of the 2004 mediation, he was not aware that the insurer had acted in bad faith. Only at the hearing in March 2005 did Bowers become aware of the insurer’s potential bad faith. Therefore Bowers claimed that the statute of limitations accrued when he realized the insurer had made no effort to examine his allegations.

The court found that the appropriate statute of limitations for a PA statutory bad faith claim is two years. The court stated that such a claim accrues when the insurer denies liability because this is when the refusal to pay first occurs. The court found that the insurer’s offer of $35,000 did not amount to a denial of coverage that would cause the statute of limitations to begin to run. The insurer’s position could not be considered final and therefore the claim did not begin to accrue during the 2004 mediation.

In addition the letter from Bowers counsel in January 2005, which complained of the insurer’s unwillingness to offer more than $35,000 to settle the claim, failed to provide conclusive evidence that the insurer had refused coverage. The court held that the claim had not accrued after either of these incidents but instead accrued at Bowers arbitration hearing in March 2005.

The court found that even if the initial claims based on the initial refusal by the insurer were time barred , the insurer’s actions at the arbitration hearing gave rise to a claim for bad faith unrelated to the initial refusal which was not time barred. Therefore the court found that Bowers claim was timely filed and denied the insurer’s motion to dismiss.

The court also denied the insurer’s motion to strike portions of the complaint because the insurer’s motion to did not provide proper grounds for such a motion and instead alleged incorrect statements of law by Bowers, which the insurer can address when answering the complaint.

Date of Decision: January 18, 2008

Bowers v. Nationwide Ins. Co., U.S. District Court Middle District of Pennsylvania No. 07-cv-1134, 2008 U.S. Dist. LEXIS 4025 (M.D. Pa. Jan. 18, 2008)(Munley, J.)

J.M.A.

JULY 2008 BAD FAITH CASES
MOTION TO REMAND COMPLAINT TO STATE COURT GRANTED WHERE AT LEAST ONE COLORABLE CLAIM EXISTED AGAINST NON-DIVERSE PARTIES (Middle District)

Published on July 15, 2008 in PA - Removal & Remand and PA - UIM/UM Cases. Closed

In Kenia v. Nationwide Mutual Insurance Company the insured initiated a complaint against the insurer, for among other things, bad faith relating to the processing of the insured’s claim for underinsured motorist benefits. Kenia alleged he was injured in a motor vehicle accident and named the insurer, an Ohio corporation with its principal place of business in Ohio, and several alleged claims representatives of the insurer, who were all residents of Pennsylvania. Kenia initiated the action by filing a complaint in the Court of Common Pleas of Luzerne County.

The insurer then filed a notice of removal contending that the United States District Court for the Middle District of Pennsylvania had jurisdiction. Kenia then filed a motion to remand. A Magistrate Judge issued a report and recommendation that Kenia’s motion be granted because the complaint states colorable claims against the non diverse parties and therefore complete diversity jurisdiction does not exist.

If a non diverse party has been joined as a defendant a removing defendant may avoid remand only by demonstrating that the non diverse party was fraudulently joined. Joinder is fraudulent if there is no reasonable basis in fact or colorable ground supporting the claim against the joined defendant. However, if there is even a possibility that a state court would find that the complaint states a cause of action against any one of the resident defendants the joinder must be found proper and the federal court must remand back to the state court.

Kenia argued that there are colorable claims against all the defendants, including the non-diverse claims representatives, and all were properly named in the action. The Insurer argued that the non-diverse parties were fraudulently joined to defeat federal diversity jurisdiction.

The court found that the insurer did not satisfy its heavy burdent of showing that the non-diverse parties were fraudulently joined. Kenia’s complaint advanced at least one claim, the alleged violation of Pennsylvania’s Unfair Trade Practices and Consumer Protection Law, that is not wholly insubstantial or frivolous against the non-diverse parties. Therefore this court did not have diversity jurisdiction over this action and so the court granted Kenia’s motion to remand.

Date of Decision: January 25, 2008

Kenia v. Nationwide Mut. Ins. Co., U.S. District Court Eastern District of Pennsylvania NO. 07-cv-1067, 2008 U.S. Dist. LEXIS 5547 (M.D. Pa. Jan. 25, 2008)(Jones, J.)

J.M.A.