MARCH 2015 BAD FAITH CASES: INSURED’S BAD FAITH CLAIM COULD NOT BE DISMISSED SOLELY ON BASIS THAT EXAMINATION UNDER OATH HAD NOT OCCURRED PRIOR TO FILING SUIT, UNDER THE CIRCUMSTANCES OF THIS CASE (Western District)

In Johnson v. State Farm Mutual Automobile Insurance Company, the insured wife was hit by an underinsured motorist while jogging. The insureds’ own UIM limits were $250,000. The injuries were diagnosed as serious and she sought policy limits.

During negotiations in early 2014, the insurer made offers of less than policy limits, and when the matter did not settle, sought an examination under oath (“EUO”) and/or statement under oath. The insured’s counsel responded that the matter clearly was headed to litigation, and the EUO could be done in the form of a deposition. Breach of contract and bad faith litigation was instituted about two months later.

The insurer moved to dismiss the bad faith claim on the basis of the insureds’ declining to submit to EUOs prior to filing suit: approximately 20 months after their filing the original UIM claim with the insurer; 8 months after the ongoing provision of significant and uncontroverted record medical evidence to the insurer; and 2 months after the insurer’s request for the injured wife’s EUO.

The court denied the motion as to both claims. As to the contract claim, it observed case law that a refusal to submit to an examination under oath could be the basis to deny a claim in some circumstances; but here, the insured had offered to present herself for a deposition and the insurer had not taken up that offer. Thus, the EUO was not a condition precedent to bringing suit.

As to the bad faith claim, the Court found that the insureds had pleaded more than bare bones allegations, by providing specific allegations as to the nature of the injury, medical evidence provided to the insurer, a chronology of events, a description of the parties’ course of conduct, and the bases for the allegation of statutory bad faith, “e.g., that the ‘uncontradicted medical evidence provided’ of the ‘totality and permanency’ of Plaintiff Wife’s injury was sufficient, in the circumstances of the case, to require[]payment in full of UMC benefits under its ‘obligation and duty of good faith and fair dealing.’” The court contrasted this with earlier case law where a plaintiff failed to clearly plead that injuries were from the accident at issue, and the plaintiff had refused to submit to a further IME which apparently could have provided some clarity on that issue.

Thus, the motion to dismiss the bad faith claim was denied, the court observing that the insurer had the ability to attack that claim later, after discovery had been taken. Moreover, instead of simply ordering the insurer to answer, the court stated that the matter would proceed to “Answer and deposition”.

Date of Decision: February 24, 2015

Johnson v. State Farm Mut. Auto. Ins. Co., Civil Action No. 14 - 928, 2015 U.S. Dist. LEXIS 21786 (W.D. Pa. February 24, 2015) (Lenihan, U.S.M.J.)