APRIL 2007 BAD FAITH CASES
CLAIM FOR BREACH OF CONTRACT STEMMING FROM BAD FAITH HANDLING OF INSURANCE CLAIM IS VIABLE (Western District)

The insured plaintiff suffered injuries in a motor vehicle accident and received $200,000 in payments under insurance policies held by both drivers involved in the accident.

The insured plaintiff also sought the $100,000 policy limits of her own insurance through the defendant insurer, who refused to make payments. An arbitration panel awarded the insured plaintiff the full $100,000 under the policy. The defendant insurer paid the arbitration award and the insured plaintiff then filed an action for breach of an insurance contract as well as a violation of Pennsylvania’s bad faith statute.

The insurer defendant filed a motion to dismiss plaintiff’s breach of contract count as well as a paragraph of the complaint referring to a breach of a fiduciary duty. The insurer defendant argued that the breach of contract claim was foreclosed because defendant eventually paid the uninsured motorist benefits and that the insured plaintiff was not entitled to attorneys fees, costs and interests as such damages are not available under the insurance contract. In addition, the insurer defendant argued that allegations regarding breach of fiduciary duty must be dismissed

The court denied the insurer defendant’s motion to dismiss the bad faith aspects of the claims, holding that breach of contract actions stemming from bad faith handling of insurance claims are viable, even when combined with a claim under Pennsylvania’s bad faith statute. The court looked to The Birth Center v. The St. Paul Companies, Inc., which recognized both types of bad faith claims.

In addition, the insured Plaintiff might be entitled to compensatory damages for her bad faith claims. Finally, the court refused to dismiss the insured plaintiff’s allegation as to defendant insurer’s fiduciary duty, since the phrase fiduciary duty was merely used to describe the relationship between the insured and the insurer. Therefore, the insured defendant’s motion was denied.

Date of Decision: March 21, 2007

McCrory v. State Farm Mutual Automobile Insurance Company, United State District Court for the Western District of Pennsylvania, CV-07-0039, 2007 U.S. Dist. LEXIS 20981 (W.D. Pa. Mar. 21, 2007)(Lancaster, J.)