Monthly Archive for February, 2009

FEBRUARY 2009 BAD FAITH CASES
BAD FAITH CASE REMANDED FOR FAILING TO MEET AMOUNT IN CONTROVERSY REQUIREMENT, DESPITE INSURED’S REFUSAL TO STIPULATE LIMIT ON AMOUNT (Philadelphia Federal)

Published on February 28, 2009 in PA - Procedural Issues. Closed

In Rutherford v. Progressive Northern Insurance Company, the court remanded the case to the Court of Common Pleas of Philadelphia County because the amount in controversy did not meet the requirement of being more than $75,000, despite there being no stipulation to that effect.

The insured originally filed claims in state court for breach of contract, bad faith, and violations of the Pennsylvania Unfair Trade Practices and Consumer Protection Law, 73 P.S. § 201-1, et seq., the Pennsylvania Motor Vehicle Financial Responsibility Law, 75 Pa. C.S.A. § 1731 et seq., and the Pennsylvania Unfair Insurance Practices Act, 40 P.S. 1171.1 et seq. after the insurer refused to pay the uninsured motorist benefits under the policy.

The insurer removed to federal court on the basis of diversity.  It argued, in response to the insured’s objection, that the complaint could reasonably be read to show claims exceeding $75,000 and that the insured did not execute a stipulation limiting the damages to $75,000 or less.

The court determined that, although the complaint sought punitive damages under the bad faith claim that could possibly cause the amount in controversy to exceed $75,000, the insured had limited the case to $50,000 or less on the cover sheet to the original civil complaint.  Under local rule in the Court of Common Pleas of Philadelphia County, this designation on the cover sheet results in the case being referred to compulsory arbitration.  The court did not find anything in the complaint to contradict that, and cited precedent for considering the effect of the compulsory arbitration designation as being supportive of limiting the amount in controversy.  Consequently, the lack of a stipulation limiting the amount was irrelevant.

The court remanded the case for lack of diversity jurisdiction based on the amount in controversy requirement not being met.

Date of Decision:  December 9, 2008

Rutherford v. Progressive N. Ins. Co., CIVIL ACTION No. 08-4850, , 2008 U.S. Dist. LEXIS 99350 (E.D. Pa. Dec. 9, 2008)(McLaughlin, J.)

 

FEBRUARY 2009 BAD FAITH CASES
NO BAD FAITH CLAIM WHERE THERE IS NO COVERAGE UNDER THE POLICY IN MED MAL CASE(Western District)

Published on February 23, 2009 in PA - Coverage Issues. Closed

In Selective Way Insurance Company v. RHJ Medical Center, Inc., the court found there was no coverage under the unambiguous terms of the insurance policy.  Thus, the insurer could not be in breach of its insurance agreement when there was no duty to indemnify or defend, and could not act in bad faith by refusing to indemnify or defend the insured because there was no coverage for the insured under the policy terms. 

This case is related to a pending wrongful death action in which damages are sought against RHJ Medical Center, Inc. and one of its physician employees, both insured under the same policies.  The wrongful death action alleges that the clinic patient who murdered the decedent did so due to the insured’s malpractice in treating him.  The insured’s CGL carrier obtained judgment in its favor because its policy did not cover any claims in the wrongful death action and because the policy excluded such coverage.

Subsequently, the insured sought benefits for the wrongful death action against a second carrier, under its medical professional liability insurance policy with Evanston Ins. Co. (“Insurer II”).  Upon that claim’s denial, the insured joined Insurer II, asserting breach of contract for refusal to defend or indemnify and bad faith for breach of duty of good faith and fair dealing and violating the Pennsylvania Unfair Insurance Practices Act.  Insurer II’s answer included a counterclaim seeking a declaratory judgment that it has no duty to defend, indemnify, or provide coverage for the wrongful death action and no obligation to reimburse legal fees or expenses incurred in that action.  Insurer II moved for summary judgment on its counterclaim and for dismissal of the insured’s complaint. 

The court found the policy language to be unambiguous, reading the contract as a whole and construing it according to its plain meaning, as required under Pennsylvania insurance contract law.  The court determined that the policy covered only claims for any injury to or death of a patient, not claims arising from injury to or death of a patient.  Although the wrongful death action alleges an injury to the patient (from the insured’s malpractice), it does not assert any claims on behalf of (for) the patient for such injury.  The wrongful death action, therefore, does not fall under the covered claims so the insured is not covered in the wrongful death action. 

The physician employee is not covered, additionally, because a clause in the policy specifically excludes claims against any insured physician arising out of rendering or failing to render professional services.  

In the absence of coverage, Insurer II has no duty to defend or indemnify either insured and its motion was granted.

Without a duty to defend, the insured’s bad faith claim can not stand.

Date of Decision: December 8, 2008

Selective Way Ins. Co. v. RHJ Med. Ctr., Inc., CIVIL ACTION No. 06-1211, 2008 U.S. Dist. LEXIS 98950 (W.D. Pa. Dec. 8, 2008)(Ambrose, C.J.)

FEBRUARY 2009 BAD FAITH CASES
BAD FAITH CLAIM DISMISSED BECAUSE OF INSURED’S OWN BAD FAITH IN FAILING TO PURSUE CASE, DESPITE POSSIBLY MERITORIOUS CLAIM (Middle District)

Published on February 16, 2009 in PA - Reverse Bad Faith. Closed

In Bromily Inc., t/a Bankers v. State National Insurance Company, Inc., the insured filed a complaint asserting breach of contract and statutory bad faith against its insurer for wrongfully denying a claim for benefits under its insurance policy for property damage sustained.

After several procedural actions that transferred venue, the case finally resided in the United States District Court for the Middle District of Pennsylvania where the court granted a motion to withdraw by the insured’s counsel because the insured had failed to respond to counsel’s telephone calls and letters, failed to sign verification forms regarding outstanding responses to the insurer’s discovery requests as ordered by the court, and had never signed a fee agreement.  The insured’s sole owner also failed to attend the oral argument on the withdrawal motion, in violation of the court’s order.  As a Pennsylvania corporation, the insured must be represented in court by counsel and was given time to secure new counsel, but neither the insured, nor its sole owner, had any subsequent contact with the court. 

The insurer moved to dismiss the complaint under Fed. R. Civ. P. 41(b) and 37(b), with prejudice.  The insured did not timely respond, and, after a month, the court ordered the insured to file an opposition brief and gave it more time to obtain new counsel.  Again, the insured failed to comply with the court’s order. 

The court then made the required explicit findings as to each of the six factors from the balancing test in Poulis v. State Farm Fire & Cas. Co., 747 F.2d 863, 867-68 (3d Cir. 1984) in addressing the insurer’s motion.  The court found the first five factors weighed against the insured: it was, through its owner, responsible for violating the rules; its conduct caused prejudice by failing to meet scheduling orders and respond to discovery; it had a history of dilatoriness; its conduct was willful and evidence of bad faith; and other sanctions, such as a monetary sanction, would be pointless because the owner willfully failed to comply with previous court orders.  As to the sixth factor, the meritoriousness of the claim, the court found in the insured’s favor: based upon the pleadings (including the insurer’s answer and affirmative defenses), the insured’s claim may have had merit.  Since, however, all six factors do not need to be met to dismiss a plaintiff’s complaint, the court dismissed the case with prejudice and ordered the case closed.

Date of Decision December 6, 2008

Bromily, Inc. v. State Nat’l Ins. Co., CIVIL ACTION No. 07-2039, 2008 U.S. Dist. LEXIS 98857 (M.D. Pa. Dec. 6, 2008)(Blewitt, J.)

FEBRUARY 2009 BAD FAITH CASES
NO BAD FAITH CLAIM WHERE THE INSURER PROPERLY DENIED COVERAGE UNDER APPLICABLE POLICY EXCLUSION (Middle District)

Published on February 14, 2009 in PA - Coverage Issues. Closed

In White v. West American Insurance Company, a bad faith claim arose after the insurer denied coverage with respect to the insured’s claims for damages to their trailer and personal property.  The insured purchased a homeowners policy for  their double wide trailer dwelling.  The policy included a Water Damages Exclusion and a Pollutant Exclusion.  During the policy period, the insured suffered water damage to their trailer and personal property. 

The insured filed a breach of contract and bad faith suit alleging that the insurer wrongfully denied coverage with respect to their claims for damages to their trailer and personal property.  The insurer filed a motion for summary judgment alleging that surface water caused the damage to the insured’s property and therefore was excluded under the policy.  The Court found that there were no ambiguities in the policy and that the nature and origin of the damages to the trailer were from surface water caused by the heavy rainfall which began the prior weekend.  The undisputed evidence in the record, including the photographs and the testimony show, beyond doubt, that the cause of the damage was from extensive rain flooding, which in turn caused a backup of sewage from the sewer system when the sewer pumping station’s pumps were turned off.  Even if flooding did not occur, the Concurrent Clause of the policy would exclude surface water from coverage. 

The Court found there was no evidence to support the insured’s contention that the water came from underground and was not surface water. Therefore the Court found that the Water Damages Exclusion applies and the insured was properly denied coverage with respect to their damages claim by the insurer, since there was no coverage for water damages caused by flooding and surface water. 

Since the Court determined that the insured’s claims for damages were properly excluded from coverage under their policy’s Water Damage Exclusion, there was no duty by the insurer to cover the damages to the insured’s house and personal property.  Since the insured’s claim was properly denied by the insurer, there can be no showing under a clear and convincing standard that there was bad faith.  Therefore the Court granted the insurer’s motion for summary judgment on the insured’s bad faith claim.

Date of Decision: December 5, 2008

White v. West Am. Ins. Co., Civil Action No. 4:06-CV-2453, 2008 U.S. Dist. LEXIS 99034 (M.D. Pa. Dec. 5, 2008)(Blewitt, J.)

 

J.M.A.

FEBRUARY 2009 BAD FAITH CASES
PHILADELPHIA BAD FAITH CASE DISMISSED ON FORUM NON CONVENIENS GROUNDS WITH LEAVE TO REFILE IN MARYLAND (Philadelphia Commerce)

Published on February 13, 2009 in PA - Procedural Issues. Closed

In Lewittman v. Mt. Vernon Fire Insurance Company, Philadelphia’s Commerce Court dismissed a putative Pennsylvania bad faith claim on forum non conveniens grounds.  The event an issue was a building fire in Baltimore.  The insureds were New Yorkers who owed the building in Maryland. The insurance policy was procured through the additional defendant insurance agency located in Maryland, and was issued by an Pennsylvania carrier through its agent in Maryland.

All private and public factors weighed heavily in favor of transferring the case.  The insureds were not domiciled in nor residents of Pennsylvania, and did not maintain any office or conduct any business in Pennsylvania.  The fire damaged building was in Maryland. The insureds established no connection to Pennsylvania beyond the location of the insurer.  The witnesses  and access to all sources of proof are in Maryland. No Pennsylvania court has jurisdiction over the Maryland witnesses.  Maryland has the most significant interest in this case. Maryland insurance law, not Pennsylvania bad faith law applies.  Pennsylvania’s bad faith statute was enacted to protect Pennsylvania insureds and it does not have extraterritorial application in a case with this factual situation.  Further, the  insureds have an alternative forum available in Maryland since the Maryland statute of limitations of three years has not yet expired.  Therefore, Philadelphia’s business court granted the insurer’s motion for dismissal of this lawsuit with leave to be refilled in Maryland.

Date of Decision: December 4, 2008

Lewittman v. Mt. Vernon Fire Ins. Co., February Term 2008, No. 185, 2008 Phila Ct. Com. Pl. LEXIS 265 (2008)(C.C.P. Philadelphia)(Bernstein, J.) 

FEBRUARY 2009 BAD FAITH CASES
SUMMARY JUDGMENT GRANTED WHERE INSURER’S SETTLEMENT POSITION REASONABLE EVEN THOUGH ARBITRATION AWARD EXCEEDED OFFER (Philadelphia Federal)

Published on February 11, 2009 in PA - Claims Handling Procedures. Closed

In Laferriere v. Zurich American Insurance Company, a bad faith claim arose after a motor vehicle accident.  The plaintiff was struck from behind while she was riding in her employer’s vehicle that had uninsured motorist coverage with the insurer.  The plaintiff’s claim was eventually submitted to arbitration. The plaintiff submitted memoranda outlining her alleged injuries and arguments, and demanded $450,000 in settlement. Subsequently, the plaintiff demanded $375,000.  The insurer offered $125,000.  The arbitration went forward and the arbitrators made an award which substantially exceeded the amounts which had previously been offered by insurer.

The plaintiff filed a bad faith complaint against the insurer.  The insurer filed a motion for summary judgment.  The court found that there was a legitimate dispute as to the amount of plaintiff’s damages. There was a valid, reasonable basis for the position taken by the defendant, as well as the position taken by the plaintiff. The court did not believe that a reasonable jury could properly conclude that the defendant has been shown to have acted in bad faith in any respect.  Therefore the court granted the insurer’s motion for summary judgment.

Date of Decision: November 25, 2008

Laferriere v. Zurich Am. Ins. Co., No. 06-cv-05492-JF, 2008 U.S. Dist. LEXIS 96155 (E.D. Pa. Nov. 25, 2008)(Fullam, J.).

 

J.M.A.

FEBRUARY 2009 BAD FAITH CASES
GENUINE ISSUE OF FACT ON TIMING OF LAYOFF PRECLUDED SUMMARY JUDGMENT ON LOST WAGES CLAIM; DELAWARE COMMON LAW DID NOT MAP SECTION 8371 (Philadelphia Federal)

Published on February 10, 2009 in PA - Claims Handling Procedures. Closed

In Hatchigan v. State Farm Insurance Company, a bad faith claim arose after the insurer reversed its decision to provide the insured with payment for lost earnings.  The insured suffered a lower back and neck injury when a vehicle lost control and struck his parked van.  The carrier’s policy insured “the loss of wages or salary the insured would have earned in his or her regular work but not other income.” The insured filed an Application for Benefits which made a loss of earnings claim. The insurer’s claims representative called the insured and left a message indicating that a check covering his lost earnings would be issued.  However , this was message was allegedly issued before the insured’s employer told the insurer that the insured was laid off.  The insured was told by the insurer that lost wages would not be paid if he was laid off.  However the insured continued to assert that he was not laid off but stopped working because of his injury.  Both parties continued to send letter communications back and forth, however the insurer refused to pay the benefits and closed the file. 

The insured filed a bad faith complaint.  The insurer filed a motion for summary judgment, arguing that it reversed its decision to provide payment for lost earnings only after learning from the insured’s employer that he was laid off; and because applicable Delaware law did not permit the claims made.  The insured was a Delaware resident at the time of the policy’s issuance. The insured responded that he did not seek recovery under Pennsylvania law, but only referred to Pennsylvania law as a basis for comparison since Delaware has no applicable statutory law. The Court found that Delaware law applied, and had no bad faith statute.  Rather in Delaware, a bad faith insurance claim sounds in contract and arises from the implied covenant of good faith and fair dealing.  The Court found that based on the facts there exists genuine issues of material fact warranting the denial of summary judgment. Factual disputes regarding the insured’s ability to work, whether he sought light duty work, as well as his obligation to mitigate lost income remain.  Therefore given legitimate disputes regarding these factual matters exist, the Court denied the insurer’s motion for summary judgment and denied the insurer’s motion for summary judgment seeking that the insured be denied recovery of attorney’s fees and costs. 

Date of Decision: November 25, 2008

Hatchigan v. State Farm Ins. Co., Civil Action No. 07-3217, 2008 U.S. Dist. LEXIS 96161 (E.D. Pa. Nov. 25, 2008)(Buckwalter, J.)

 

J.M.A.

FEBRUARY 2009 BAD FAITH CASES
INSURED’S MOTION TO REMAND DENIED WHERE THERE WAS A VALID CLAIM FOR PUNITIVE DAMAGES (Middle District)

Published on February 10, 2009 in PA - Punitive Damages. Closed

In Webb v. Discover Property & Casualty Insurance Company, the insured instituted suit against the insurer contesting, among other things, the validity of the forms used by the insurer for the rejection of underinsured motorist coverage.   The complaint, which was brought in the Court of Common Pleas, Luzerne County, Pennsylvania, included a bad faith claim, wherein the insured sought punitive damages.  

The insurer removed the case to the United States District Court for the Middle District of Pennsylvania. According to the insurer, because the insured sought punitive damages, the  claim satisfied the $75,000.00 “amount in controversy” threshold and therefore, removal was appropriate.  The insured disagreed and filed a motion to remand the case to state court.     

The court held that if an insured makes an appropriate claim for punitive damages, the amount in controversy requirement is generally met “because it cannot be stated to a legal certainty that the value of the plaintiff’s claim is below the statutory minimum.” Because the insured in this case made a valid claim for punitive damages under its bad faith cause of action, the Court opined that it could not find, to a legal certainty, that the value of the insured’s claims are below the statutory threshold and, therefore denied the insured’s motion to remand.  

Date of Decision: November 24, 2008

Webb v. Discover Prop. & Cas. Ins. Co., No. 3:08cv1607, 2008 U.S. Dist. LEXIS 95431 (M.D. Pa. Nov. 24, 2008)(Munley, J.). 

 

J.M.A.

FEBRUARY 2009 BAD FAITH CASES
INSUREDS’ MOTION TO REMAND TO STATE COURT GRANTED DUE TO LACK OF JURISDICTION (Western District)

Published on February 3, 2009 in PA - Procedural Issues. Closed

In Sadler v. State Farm Fire and Casualty Co., a bad faith claim arose out of the insureds’ claims to cover damages to their homes as a result of an explosion. The insureds are two married couples whose homes were damaged by an explosion at another nearby house. Both houses were insured by the insurer.  Both couples made claims with the insurer to cover the damages to their respective houses. 

The insureds’ jointly filed a complaint which included claims for breach of contract and bad faith for the insurer’s failure to reasonably pay all of the damages claimed by each couple.  Each of the couple’s set of claims in the complaint demanded damages in an indeterminate amount in excess of $20,000, plus punitive damages and attorney fees.  The insurer filed a notice of removal asserting diversity jurisdiction based on diversity of citizenship of the parties and an amount in controversy in excess of the $75,000 threshold.  The insureds’ filed a motion to remand to the Court of Common Pleas of Lawrence County.  The insureds’ motion is predicated solely on their contention that the amount in controversy does not meet the $75,000 threshold. 

The insureds’ complaint was for an indiscriminate amount and the court found that the insurer did not meet its burden of showing that at the time of the filing of the complaint, it was a legal certainty that the amount in controversy was at least $75,000.  The court considered the insureds’ affidavits to be judicial admissions by the insureds’ that each set of claims cannot equal the threshold amount of $75,000, even if punitive claims and attorney’s fees were aggregated for each set.  Therefore since the insurer failed to show to a legal certainty that the amount in controversy exceeds the statutory minimum the court granted the insureds’ motion to remand for lack of jurisdiction. 

Date of Decision: November 19, 2008

Sadler v. State Farm Fire & Cas. Co., No. 08cv0951,2008 U.S. Dist. LEXIS 94339 (W.D. Pa. Nov. 19, 2008) (Schwab, J.).

 

J.M.A.