In Mi Ja Jae v. Metro. Life Ins. Co., the beneficiary of a life insurance policy sued its carrier for bad faith and benefits under the policy. Before the trial court, the parties filed cross-motions for summary judgment. The carrier asserted that the beneficiary’s deceased husband misrepresented his annual income on the life insurance application. The court granted the carrier’s motion, but denied its claim under the Insurance Fraud Prevention Act. On appeal, the court affirmed the trial court’s decision, reasoning that the carrier would not have issued the policy based on the insured’s true income.
Date of Decision: February 14, 2013
Mi Ja Jae v. Metro. Life Ins. Co., No. A-2302-11T4, 2013 N.J. Super. Unpub. LEXIS 340, New Jersey Appellate Division (App.Div. Feb. 14, 2013) (Graves, J. and Espinosa, J.)
Monthly Archive for March, 2013
In Ferguson v. Kemper, the insured filed a six-count suit, including breach of contract and bad faith claims, after its homeowners insurance carrier denied coverage for flood damages sustained during a hurricane. In March 2011, the insureds filed a claim for storm-related flood damage with the carrier. The carrier paid the claim. In June 2011, the insured’s home sustained severe damages in a second storm. The carrier hired a contractor to begin damage cleanup and start gutting the insured’s basement.
The insured received several assurances from the carrier that the remediation would be covered under the homeowner’s policy. However, in September 2011, the insured received a letter from the carrier that the cleanup services would not be covered. Since then, the contractor has attempted to collect from the insured.
The insured filed suit in September 2012, alleging that the carrier was obligated to cover the loss and that in denying the claim, violated several Pennsylvania laws, including the bad faith statute. The carrier filed a motion to dismiss, to which the insured failed to file a response. As such, the court granted the carrier’s motion. The court also struck the insured’s claim for compensatory, consequential, treble, and exemplary damages stemming from the carrier’s alleged bad faith.
Date of Decision: February 15, 2013
Ferguson v. Kemper, No. 1:12-CV-01993, 2013 U.S. Dist. LEXIS 21055, Middle District of Pennsylvania (M.D. Pa. Feb. 15, 2013) (Jones III, J.)
In Mason v. Travelers Home & Marine Ins. Co., the court heard a carrier’s summary judgment motion filed in response to its insureds’ claims for breach of contract and bad faith. The suit arose from a fire on the insureds’ property which destroyed a building and its contents. The carrier made two payments for loss of personal property and fire damage. However, the insureds filed suit, alleging that the carrier acted in bad faith by making an improper depreciation deduction and failing to cover the replacement cost of the lost building. The carrier removed the suit to federal court and filed a motion for summary judgment.
First, the court granted the carrier’s motion with respect to the insureds’ contention that the depreciation deduction was improper. It reasoned that “actual cash value,” as defined in the policy, is the cost of repair or replacement, subject to a depreciation deduction.
Second, the court agreed with the carrier than the policy did not cover the building that was destroyed. The building was a “structure other than the dwelling” and was used to store property of the insureds’ business. As such, the building was excluded from coverage because it was not owned by the insureds, but a business that is an independent entity.
Third, the court granted summary judgment to the carrier on the insureds’ bad faith claims, which failed to allege conduct that would amount to actionable bad faith.
Date of Decision: February 28, 2013
Mason v. Travelers Home & Marine Ins. Co., No. 3:11cv2155, 2013 U.S. Dist. LEXIS 27713, U.S. District Court for the Middle District of Pennsylvania (M.D. Pa. Feb. 28, 2013) (Munley, J.)
In Robinson v. Nationwide Mut. Ins. Co., insured homeowners filed suit against multiple parties after their home sustained damages following two severe storms in August and September 2011. In August 2011, the first storm hit, requiring repairs to the insureds’ water heater and oil tank. A contractor performed work on the units, but failed to properly cap the tank and then refused the insureds’ requests to fix it. In September 2011, a second storm hit, flooding the insureds’ property and spilling 130 gallons of oil from the uncapped tank.
Their home and floor insurers both refused to cover the damages. In August 2012, the insureds filed suit against both carriers, alleging bad faith and breach of contract against the home insurer, breach of contract against the flood insurer, and negligence against the HVAC contractor.
The homeowner’s insurance carrier filed a motion to dismiss the insureds’ bad faith claim. The court permitted the claim to proceed, citing several actions allegedly made in bad faith, including the carrier’s (1) misrepresentation of the benefits or terms of its insurance policy; (2) misrepresentation of the pertinent facts or contract provisions relating to the coverage at issue; (3) failure to conduct a reasonable investigation into the loss; (4) failure to interpret ambiguous policy language in the insureds’ favor; (5) inconsistent and conflicting estimates of the insureds’ loss; (6) refusal to pay claims without conducting a reasonable investigation; (7) failure to effectuate prompt, fair, and equitable settlement of claims in which the company’s liability under the policy had become reasonably clear; (7) actions to compel the insureds’ to institute litigation to recover amounts due under the policy by offering substantially less than the amounts due and ultimately to be recovered; and (8) failure to visit the property to assess damage to the home.
The contractor also moved to dismiss the insureds’ claim for punitive damages and the court agreed, finding that their failure to cap the oil tank was negligent at worst, not recklessly indifferent. Lastly, the flood insurer filed a motion to bifurcate claims against it. The court disagreed and denied the motion, holding that the court would hear claims against the flood insurer while the jury would hear claims against the home insurer and contractor.
As such, the court denied all motions, except for the contractor’s motion to dismiss claims for punitive damages, which it granted.
Date of Decision: February 26, 2013
Robinson v. Nationwide Mut. Ins. Co., No. 12-5065, 2013 U.S. Dist. LEXIS 25806, Eastern District of Pennsylvania (E.D. Pa. Feb. 26, 2013) (Buckwalter, J.)
In Pa. Manufacturers’ Ass’n Ins. Co. v. Pa. State Univ., the insured appealed an order of the trial court that coordinated two simultaneous coverage actions taking place in different Pennsylvania counties. (See this blog). The first suit was a declaratory judgment action in Philadelphia and the second was a breach of contract suit in Centre County. The trial judge coordinated the actions, which were both collateral to an ongoing civil suit also located in Philadelphia.
On appeal, the court recognized that there was no dispute as to the presence of a common question of law or fact, meaning that the only issue in need of a resolution concerned the proper venue. The court affirmed the trial court’s coordination, reasoning that the convenience of the parties should not be the controlling factor, despite the insured’s contention to the contrary. Convenience is only one factor among many that influence the venue of a coordinated suit.
One judge issued a concurring opinion, agreeing in judgment but noting that the coverage action will not settle unless the underlying civil action settles as well. This will be more likely if all of the parties in both actions can “sit around the same table and negotiate” in the same venue.
Date of Decision: February 21, 2013
Pa. Manufacturers’ Ass’n Ins. Co. v. Pa. State Univ., 2013 PA Super 29 (Pa. Super. Ct. 2013) (Lazarus, J., Ott, J., Strassburger, J.)
In Barnes v. Allstate Prop. & Cas. Ins. Co., the court heard an insured’s motion to dismiss its home insurer’s counterclaim under Pennsylvania’s Insurance Fraud statute, which was filed in response to the insured’s breach of contract and bad faith claims against the carrier. The suit arose after the carrier denied coverage over fire damage sustained by the insured’s residence. After it denied coverage, the insured filed the instant suit. Once the carrier’s counterclaim was filed, the insured moved to dismiss.
The court granted the insured’s motion to dismiss the counterclaim, arguing that the carrier could not make out a claim for insurance fraud. While the court agreed, it noted that carrier does not need to plead a “pattern” of fraud to successfully allege such a counterclaim. The court also permitted the carrier to file an amended counterclaim, suggesting that compensatory damages against the insured would be a proper remedy.
Date of Decision: February 15, 2013
Barnes v. Allstate Prop. & Cas. Ins. Co., 2013 U.S. Dist. LEXIS 20661, U.S. District Court for the Eastern District of Pennsylvania (E.D. Pa. Feb. 15, 2013) (McLaughlin, J.)
In Keppol v. State Farm Ins., a carrier moved to dismiss its insured’s suit for declaratory judgment, bad faith, breach of duty of good faith and fair dealing and breach of fiduciary duty. The insured originally filed this action after the carrier denied his claim for wage loss benefits. First, the court permitted the insured’s bad faith claim to proceed because the carrier’s alleged refusal to pay wage loss benefits supports a claim for bad faith. The court also permitted the breach of duty of good faith and fair dealing claim to proceed, reasoning that such a claim may arise from the insurance contract between the parties. Last, the court refused to dismiss the insured’s claim for attorney’s fees, holding that such an award may be proper in the insurance context for declaratory judgment actions.
However, the court dismissed the insured’s claim for breach of fiduciary duty because a contract between insured and insurer does not automatically create a fiduciary relationship and such causes of action are duplicative of bad faith claims.
Date of Decision: January 25, 2013
Keppol v. State Farm Ins., No. 12-5350, 2013 U.S. Dist. LEXIS 10106 (E.D. Pa. Jan. 25, 2013) (Schiller, J.)
In Correnti v. Merchs. Preferred Ins. Co., the court granted a carrier’s motion for summary judgment filed in response to the insureds’ suit for bad faith and breach of contract. The insureds originally filed suit after the parties disagreed on the amount of the insured’s loss. However, the insureds refused to comply with an appraisal process as required by their insurance policy. As such, the court granted the carrier’s summary judgment motion.
Date of Decision: January 31, 2013
Correnti v. Merchs. Preferred Ins. Co., No. 12-6303, 2013 U.S. Dist. LEXIS 13053, U.S. District Court for the District Court of Pennsylvania (E.D. Pa. Jan. 31, 2013) (Diamond, J.)
In Dolph v. Ill. Nat’l Ins. Co., two insurance companies were sued for bad faith and breach of contract by assignees who were initially plaintiffs in an underlying tort suit stemming from injuries they sustained in a car accident. After liability was established in the underlying case against the estate of the defendant-insured in that action, the estate assigned to plaintiffs all claims related to one of the insurer’s alleged mishandling of the underlying settlement process.
The assignees filed suit against two insurers – the named carrier and another insurer that now claims to be a holding company. In this action, the assignees argue that the insured had a contract of insurance with the second insurer, entitling the assignees to proceed with their bad faith and breach of contract suit. However, the insurer filed a motion to dismiss, arguing that it is not an “insurer” under Pennsylvania’s bad faith statute, but a holding company that does not issue policies or collect premiums.
The court recognized that dismissal may be appropriate if that entity is not found to be an insurer, but denied the party’s motion because the assignees sufficiently alleged that an agent of both insurer-defendants handled the investigation of the assignor’s claims following the underlying personal injury trial. The court did, however, recognize that a record needs to be developed to define corporate status of the moving defendant.
Date of Decision: February 11, 2013
Dolph v. Ill. Nat’l Ins. Co., NO. 3:12-2167, 2013 U.S. Dist. LEXIS 20158, U.S. District Court for the Middle District of Pennsylvania (M.D. Pa. Feb. 11, 2013) (Mannion, J.)
In Merrill v. State Farm Fire and Casualty Co., insured homeowners brought suit against their homeowner’s insurance carrier, alleging breach of contract, breach good faith and fair dealing, bad faith, and Pennsylvania Unfair Trade Practices and Consumer Protection Law (“UTPCPL”). The suit was commenced in the Westmoreland County Court of Common Pleas after the carrier refused to provide coverage for damage incurred by the insureds’ home during a tornado and hailstorm. The carrier removed the case to federal court and moved to dismiss all claims, except the breach of contract count.
First, the court ruled that the “gist of the action” doctrine barred the insureds’ breach of good faith and fair dealing claim because their breach of contract claim cannot be recast as a tort claim. [Note: It is not clear from this Opinion if the plaintiffs attempted to assert the claims for a common law contractual breach of the duty of good faith under Cowden or Birth Center.] Second, the court dismissed the insureds’ statutory bad faith claim, reasoning that they failed to allege sufficient facts in support of their claim that the carrier acted with an intent to underestimate the amount of damages that their home sustained. Citing Third Circuit case law (Brewer v. U.S. Fire Ins. Co.), the court observed that mere insinuations of bad faith cannot meet the Twombly/Iqbal pleading standards. Lastly the court ruled that the insureds did not state a plausible UTPCPL claim.
As such, the only remaining claim was the insureds’ breach of contract count against the carrier. Since the court was now without jurisdiction to hear the case, it remanded to state court for further proceedings.
Date of Decision: February 13, 2013
Merrill v. State Farm Fire and Casualty Co., No. 12-1328, 2013 U.S. Dist. LEXIS 19660 (W.D. Pa. Feb. 13, 2013) (Lancaster, J.)