Daily Archive for October 19th, 2013

OCTOBER 2013 BAD FAITH CASES: COURT QUASHED SUBPOENA DIRECTED TO ATTORNEY OF THIRD PARTY AS IT SOUGHT INFORMATION IRRELEVANT TO THE CARRIER’S CLAIMS HANDLING ON AN IRRELEVANT CONTRACT, AND WOULD VIOLATE THE ATTORNEY CLIENT PRIVILEGE AND WORK PRODUCT DOCTRINE (New Jersey Federal)

Published on October 19, 2013 in NJ - Procedural Issues. Closed

In Kull v. Arrowood Indemnity Company, the court addressed a motion to quash a subpoena issued in connection with an underlying case in federal district court in Ohio. At the time of the subpoena, the only litigation issue in Ohio was a bad faith insurance claim by an insured corporation against one of its insurers. That insured originally had disputes with two insurers, with which it signed releases in connection with a settlement. The subpoena was directed at the attorney for the second insurer, not a party in the Ohio litigation, who was involved with the litigation and the release of his client, which was putatively similar or identical to the release provided to the insurer in the bad faith case.

The court quashed the subpoena.

First, the information requested was not relevant. The non-part insurer’s release did not have any relevance to the way insurer defendant handled the claim. The other insurer’s release was not even at issue in that case. Even if certain provisions of the agreements are “substantively identical”, since they were two separate contracts, any information that the other insurer’s attorney could provide about the party insurer’s release is not likely to lead to relevant evidence in the Ohio matter. Second, the information requested is protected by the attorney-client privilege and the work product doctrine. The court agreed that the requested deposition would require the attorney to divulge his own mental impressions and opinions regarding the development and/or preparation of his client’s release and thus, violate the work product doctrine.

Date of Decision October 11, 2013

Kull v. Arrowood Indemnity Co., Civil Action No. 13-4343 (FLW), 2013 U.S. Dist. LEXIS 147271 (D.N.J. October 11, 2013) (Bongiovanni, U.S.M.J.)

 

OCTOBER 2013 BAD FAITH CASES: COURT REFUSES TO DISMISS UIM BAD FAITH CLAIM WHERE EVEN FACTS ALLEGED FROM WHICH BAD FAITH IN CLAIMS HANDLING AND DELAY IN SETTLEMENT OR INVESTIGATION MAY BE INFERRED FROM ALLEGATIONS (Middle District)

Published on October 19, 2013 in PA - Claims Handling Procedures, PA - Discovery and Evidence and PA - Procedural Issues. Closed

In Shaffer v. State Farm Mutual Automobile Insurance Company, the UIM insureds was injured, settled with the other driver and made a UIM claim against its carrier. The insureds alleged they were cooperative, provided all pertinent medical information promptly, and submitted to an examination under oath. The carrier’s investigation was ongoing and there had been no settlement or denial of the claim at the time of filing, though the parties had negotiated and could not come to an agreement.

The court stated that bad faith could arise from the total denial of a benefit, but could also arise from claims handling, in failing to conduct a reasonable investigation or in undue delays, even where a claim is eventually paid. The plaintiff’s burden of proof is high, and the insurance company need not show that the process used to reach its conclusion was flawless or that its investigatory methods eliminated possibilities at odds with its conclusions. Rather, an insurance company simply must show that it conducted a review or investigation sufficiently thorough to yield a reasonable foundation for its action. Further, the length of a time by itself cannot establish bad faith; rather, a court should look to the degree to which a defendant insurer knew that it had no reason to deny the claim, and if the delay is attributable to the need to investigate further or even simple negligence, no bad faith has occurred.

Based on the allegations in the complaint taken in the light most favorable to plaintiffs, the court denied the carrier’s motion to dismiss the bad faith case as premature. The plaintiffs asserted enough facts to show a delay and to leave open the possibility that the delay was improper. The court was mindful of the fact that the carrier may be conducting a comprehensive investigation into the claim thereby providing what may be a reasonable basis for any delay during that period; however, for purposes of a motion to dismiss, the alleged facts may also indicate questionable investigation and communication practices, especially considering that the underlying automobile accident involved a clear liability, head-on collision. The court concluded that this case called for discovery regarding the claim handling, and therefore, dismissal was not proper at this stage of the proceedings.

Date of Decision: October 15, 2013

Shaffer v. State Farm Mut. Auto. Ins. Co., Civil Action No. 1:13-cv-01837, 2013 U.S. Dist. LEXIS 147875 (M.D. Pa. October 15, 2013) (Rambo, J.)