MARCH 2016 BAD FAITH CASES: SUMMARY JUDGMENT ON BAD FAITH WHERE: (1) INSURED HAD NO POLICIES IN EFFECT AT TIME OF INCIDENT AND (2) REMOVAL TO FEDERAL COURT NOT BAD FAITH AS INSURED CONFUSED INSURER DEFENDANTS WHICH LATER DESTROYED DIVERSITY (Philadelphia Court of Common Pleas)

In Racioppi v. Progressive Insurance Company, the case arose out of a collision that occurred when an automobile struck the insured as she was riding her bicycle. The driver’s insurer offered its liability policy limit of $15,000.00. However, as the insured’s damages exceeded this policy limit, the insured sought recovery through underinsured benefits of her alleged automobile insurance policy, which was denied.

For background purposes, the insured was originally covered under a policy that included underinsured motorist coverage, and informed her insurer before the expiration of the policy that she was moving from New Jersey to Philadelphia. The insurer issued a change in the policy information and subsequently offered the insured a renewal policy, which the insured never paid to purchase. Thus, coverage ended. The insured had another insurance policy with a different insurer that included underinsured motorist coverage for a period beginning the day after her accident.

The insured’s bad faith claim rested on three acts of the insurer(s): (1) the denial of coverage under the contract with the first insurer; (2) the failure to provide consent to settle with the negligent driver’s insurer; and (3) the removal of this case to federal court without justification.

The court rejected the insured’s first argument after finding that the insured was not covered under a policy with the first insurer since she had not paid to renew the policy. The court also rejected the insured’s second argument, reasoning that the first insurer did not have authority to issue consent to settle since the insured had no coverage.

Lastly, the court found that the insurer did not act in bad faith in removing the suit to federal court. The insured’s original complaint, not the operative one, listed the insurer with an Ohio address. The insured was living in New Jersey at the time, so the insurer removed the case to federal court. The case was remanded back to state court, upon agreement of the parties, once it was discovered that the insured was trying to sue her other insurer, which was also a New Jersey citizen for diversity purposes, thus destroying diversity. Accordingly, the court found no evidence of bad faith, and affirmed summary judgment in favor of the insurer on all claims against it.

Date of Decision: December 14, 2015

Racioppi v. Progressive Ins. Co., November Term 2013, No. 1783, 2015 Phila. Ct. Com. Pl. LEXIS 415 (Phila. C.C.P. December 14, 2015) (Shreeves-Johns, J.)