In this case, the Philadelphia Court of Common Pleas Judge stated that the two year bad faith statute of limitations began to run with the date of loss. Settlement negotiations did not toll the running of the statute of limitations. Under those principles, the claims in this case were time-barred.
Date of Decision: July 3, 2017
Dutton v. American Bankers Insurance Company, September Term 2016, No. 1412, 2017 Phila. Ct. Com. Pl. LEXIS 181 (C.C.P. Phila. July 3, 2017) (Anders, J.)
An interesting New Jersey 2016 trial court opinion on settling for less than all insureds.
As the court framed the issue: Did the insurer have “the discretion under the policy to settle the claims against [one insured] and thereby exhaust the policy without also obtaining a release from the Plaintiff of the claims against the [other insureds?]” The party resisting the partial settlement was a different insurer for these other insureds, which brought suit to stop the partial settlement.
The settling insurer wanting brought its own arguments to the table that it did have “discretion to exhaust its policy limit in good faith to settle the underlying claims against one of its insureds even if that settlement does not extinguish the claims against its other insureds….” The opposing carrier countered “that any proposed settlement on behalf of only one of [the] insureds would be unreasonable under the circumstances and would constitute bad faith.” The court found in favor of discretionary partial settlement, holding that the insurer “has discretion to exhaust its policy limit in good faith to settle the underlying claims against one of its insureds even if that settlement does not extinguish the claims against its other insureds….”
The court recognized that “an insurance company owes its insured a duty of good faith that applies when, as here, the insurer reserves control of settlement negotiations….” It examined both New Jersey and other states’ case law on bad faith settlements. This included a Pennsylvania Commonwealth Court decision standing for the proposition that an “insurer should not be precluded from accepting reasonable settlement offer for fewer than all insureds when no evidence establishing that the proposed settlements are unreasonable” and finding “that [an] insurer may be subject to bad faith action if evidence of unreasonable settlement.” Citing relevant New Jersey case law, the court emphasized a carrier’s “broad discretion to evaluate and settle claims in good faith as they see fit.”
The court considered it significant that a partial settlement would not leave the other insureds bare of any defense or coverage; rather, two other carriers provided potential defense and indemnification for them.
The court found “no impediment to the [insurer’s] exhaustion of its policy to settle the claims against [one insured] without also obtaining a release of the claims against the [other insureds]. The plain language of the policy affords the carrier discretion to investigate occurrences and settle claims as they see fit, so long as the decision is made in good faith.” Moreover, as stated above, “the two additional insureds in this case each have their own primary liability policies.” Further, “one of the additional insureds … [had] rebuffed Plaintiff’s request to make a meaningful contribution to a global settlement. …. [H]aving failed despite extensive efforts to achieve a global settlement, the carrier has decided to effect a partial settlement to cap the exposure of [the settling insured]. Moreover, in this case, given the amount of coverage both primary and excess available to the [other insureds], the prospect that the settlement would be found in bad faith are in the court’s judgment remote.”
Thus, summary judgment was granted to the settling insurer.
Date of Decision: November 18, 2016
National Surety Corp. v. First Specialty Insurance Corp., No. L-3983-16, 2016 N.J. Super. Unpub. LEXIS 2570 (N.J. L. Div. Essex County Nov. 18, 2016) (Mitterhoff, J.)
In this UIM based action, the Plaintiff sued his alleged insurer after being injured in a Florida motorcycle accident. He incurred over $3,000,000 in medical expenses, but only recovered $12,000 from the tortfeasor’s carrier.
His parents reside in Pennsylvania, and are the named insureds on the policy at issue. Furthermore, the policy lists three cars as insured vehicles, but not their son’s motorcycle. The insurer denied the son’s UIM claim, and the son brought suit for breach of contract and bad faith.
On the breach of contract claim, the Court refused to grant the insurer’s motion to dismiss because certain factual questions remained as to whether coverage was due to the son. These questions included whether he resided with his parents, and whether he owned the motorcycle.
However, the Court granted the insurer’s motion to dismiss as to the bad faith claim. The Court found that the Plaintiff failed to state any plausible allegations of bad faith supported by specific facts. The Court reiterated the bad faith standard, stating that a bad faith plaintiff is required “to prove with clear and convincing evidence that ‘(1) the insurer lacked a reasonable basis for denying benefits; and (2) that the insurer knew or recklessly disregarded its lack of reasonable basis.’” All this Plaintiff alleged was that the insurer acted unfairly, but he did not specify the unfair conduct. Because his bad faith claim consisted only of conclusory statements devoid of factual substance, the Court granted the insurer’s motion to dismiss as to the bad faith claim. Moreover, unlike many claims failing to meet the Twombly/Iqbal pleading standards, the Court did not give this Plaintiff an opportunity to re-plead by way of an amended complaint.
Date of Decision: July 6, 2017
Toner v. GEICO Ins. Co., No. 17-0458, 2017 U.S. Dist. LEXIS 104075 (E.D. Pa. July 6, 2017) (Slomsky, J.)
After purchasing a new car, the insureds were involved in an accident with an uninsured motor vehicle. The insureds tendered a claim for UIM benefits to their automobile insurance provider who denied the claim. The basis for the denial was that the newly purchased car was not insured at the time of the accident. The insureds brought suit, alleging claims for breach of contract, statutory bad faith, and negligence for failure to procure insurance.
The Court issued two opinions concerning the insureds bad faith claims. In the first opinion, the District Court granted the insurers’ Motion to Dismiss, without prejudice, holding that the Complaint contained only conclusory legal recitations, and lacked factual recitations of any bad faith conduct. The Court found an absence of any “facts showing how [the insurer] lacked a reasonable basis for its decision to not pay UIM benefits,” or “facts specifically describing what was unfair about [the insurer’s] denial or refusal to pay UIM benefits.” Although the Court granted the insurer’s Motion, it gave the insureds leave to file an amended complaint.
The insureds filed an amended complaint, and the insurer again moved to dismiss. In its second opinion, the District Court came to a vastly difference conclusion. In the amended complaint, the insureds attached their automobile policy which expressly promised “to insure the plaintiffs as long as they request a car be added to the policy within 30 days of acquiring the car.” The amended complaint alleged that the insureds did just that. According to the court, the inclusion of this policy was, in and of itself, sufficient proof of bad faith. The Court explained that “an insurance company ignoring its costumer’s claim in the face of its own policy language clearly guaranteeing coverage for the very claim at issue certainly forms the basis for a bad faith claim.”
Dates of Decisions: April 10, 2017 & July 11, 2017
Riedi v. Geico Casualty Co., No. 16-6139, 2017 U.S. Dist. LEXIS 54952 (E.D. Pa. April 10, 2017) (Stengel, J.)
Riedi v. Geico Casualty Co., No. 16-6139, 2017 U.S. Dist. LEXIS 106678 (E.D. Pa. July 11, 2017) (Stengel, J.)
In this case, the plaintiff leased office space to the insured for day-to-day use. In exchange for a rent reduction, the insured agreed to store corporate documents and other assets belonging to the plaintiff in a secured filing cabinet on the property. During a later cleaning and reorganizing project undertaken by the insured, the contents in the filing cabinet were mistakenly disposed of. Plaintiff’s accountant estimated the intrinsic value of the filing cabinet contents at $262,045.
Defendant insurer issued an insurance policy to the insured that covered the office space property. The plaintiff took various informal attempts to settle the loss directly with the insurer. The insurer offered to process plaintiff’s claim as a first-party claim, and required plaintiff to submit certain documentation substantiating the loss. Furthermore, the insurer advised plaintiff that the policy limit for a first-party claim was only $100,000.00, well below plaintiff’s $262,045 claim.
Plaintiff advised the insurer that it would be pursuing a third-party claim, upon learning of the $100,000 first-party claim limit. The insurer, however, had already investigated and analyzed coverage for the loss as a third-party claim, and concluded that the insurance policy excluded coverage for property in the care, custody, and control of the insured. Based on this analysis, the insurer had previously issued the insured a denial letter to the insured on the third-party claim.
The plaintiff brought suit against the insured in the Court of Common Pleas. The insurer denied any duty to defend and indemnify, per the above reasoning. The insured later assigned plaintiff its contract and bad faith rights against the insurer. Plaintiff, as assignee, alleged breach of contract and bad faith.
Specifically, plaintiff alleged the insurer refused to cover the third-party claim, and continually treated plaintiff as a first-party claimant. The court granted the defendant insurer’s motion for summary judgment on the contract claim. The court found that an explicit policy exclusion precluded coverage for the third-party claim because the contents of the filing cabinet were in the care, custody, and control of the insured.
As to the bad faith claim, the court stated that statutory bad faith “is not restricted to an insurer’s bad faith in denying a claim, but rather may extend to a variety of actions such as the insurer’s investigative practices or failure to communicate with the insured.” Still, as the court had ruled the insurer “correctly determined that plaintiff’s claim fell within a policy exclusion … [that] conclusion compels the finding that defendant’s denial of coverage does not constitute bad faith.”
Further, to “the extent that plaintiff alleges that defendant willfully misinterpreted plaintiff’s claim to be requesting first-party property coverage rather than third-party liability coverage, the undisputed evidence of record does not support a reasonable inference that defendant acted in bad faith.” The court concluded: “Plaintiff produced no evidence that defendant lacked reasonable basis for its initial understanding or persisted in this position despite clarification to the contrary. To the contrary, the evidence of record clearly establishes that defendant’s initial confusion was nothing more than mere error. Indeed, defendant’s mistaken characterization of the claim as seeking first-party coverage actually subjected it to more liability exposure—up to $100,000—than it would have under the third-party liability provisions. Given the complete absence of bad faith evidence, I find that this claim fails on summary judgment review.”
Date of Decision: June 27, 2017
Wugnet Publications, Inc. v. Peerless Indemnity Insurance Company, No. 16-4044, 2017 U.S. Dist. LEXIS 98948 (E.D. Pa. June 27, 2017) (O’Neill, Jr., J.)
In this case, the court previously had denied a motion to dismiss the statutory bad faith claim. The matter was now before the court on summary judgment.
The court concluded that insurer did not withhold payments due, but rather was correct in not making the claimed payments at issue. Thus, there was no breach of the insurance contract. The insured conceded these actions in not making payment were reasonable.
Moreover, the insured had already conceded that if the insurer “was entitled to summary judgment on the breach of contract claim because it paid … the entire amount that was due under the Policies, then this claim for insurance bad faith necessarily fails.” Thus, the court granted summary judgment on both the contract and bad faith claims.
Date of Decision: July 6, 2017
First National Bank of Pennsylvania v. Transamerica Life Insurance Company, No. 14-1007, 2017 U.S. Dist. LEXIS 104082 (W.D. Pa. July 6, 2017) (Reed Eddy, M.J.)
The insured and insurer were in a dispute over what caused damage to the insured’s home. The insurer sent out an independent engineer for two inspections, with a third being cancelled due to disagreement over videotaping the inspection. This inspector’s analysis, which involved an invasive inspection by cutting holes, identified long standing structural problems as the cause of loss, rather than a specific weather event. There was no coverage for the former, but coverage for the later.
The insured brought breach of contract and bad faith claims. The court granted partial summary judgment on the bad faith claim.
The insurer alleged various biases on the inspector’s part and that the conclusion was in error, apparently because of these biases. The standard for proving bad faith requires clear and convincing evidence of conduct that goes beyond negligence or bad judgment; but the first hurdle is that the insurer’s denial must have been unreasonable.
In this case, the summary judgment record reflected the insurer’s prompt action once the claims were made, retention of an independent contractor, that contractor’s conducting multiple investigations into the cause of loss, and the insurer’s reliance on the independent inspector’s report in concluding there was no coverage. The court found that “[t]hese actions constitute a reasonable basis for denying coverage, notwithstanding any findings on the accuracy of the reports and interpretations of the insurance contract.”
Thus, summary judgment was granted on the bad faith claim.
Date of Decision: July 5, 2017
Souder v. Travelers, No. 15-CV-02223, 2017 U.S. Dist. LEXIS 103332 (M.D. Pa. July 5, 2017) (Mehalchick, M.J.)
The parties had agreed to allow the Magistrate Judge to rule on the motion.
This case involved a detailed three-year history concerning a dispute over what coverage the insured paid for, wanted or had. There were no claims against the insured or losses involved. The insured brought numerous claims, including a breach of fiduciary duty claim.
In dismissing that claim, the court observed that there are circumstances in which an insurer owes a fiduciary duty, but these circumstances are limited. Thus, “an insurer acting as an agent to the insured when settling claims owes a fiduciary duty,” and “an insurance company owes a duty of good faith to its insured in processing a first-party claim.”
However, “absent ‘special circumstances’ a claim for fiduciary duty cannot survive.” The court cited case law for the proposition that: “[A]bsent a special relationship, parties operating in the normal contractual posture, not as principal and agent, are typically not in a fiduciary relationship.”
In this case, the insured did not “allege anything to suggest the relationship between Plaintiff and Defendants exceeds an ordinary contractual relationship. Plaintiff’s basis for finding a fiduciary relationship is essentially that he was insured by the Defendants.” There was no first party of third party claim. “Therefore, Plaintiff and Defendants never had the occasion to enter into a fiduciary relationship.”
This claim was dismissed without prejudice.
Date of Decision: June 22, 2017
Degennaro v. American Bankers Insurance Company of Florida, No. 3:16-cv-5274-BRM-DEA, 2017 U.S. Dist. LEXIS 96372 (D.N.J. June 22, 2017) (Martinotti, J.)
In 2007, the insured was involved in a motor vehicle accident, injuring another driver. The injured party filed a negligence action against the insured. The insurer sent a 2007 letter declining to defend or indemnify the insured. In 2008, the insurer filed a declaratory judgment action, claiming that it did not have a duty to defend or indemnify the insured. The court entered a consent order that the insurer owed no duty to defend or indemnify.
Around the same time-period, the injured party separately filed her own declaratory judgment against the insurer, arguing that the insurer was obligated to defend and indemnify the insured. This second declaratory judgment action did not assert claims for breach of contract or bad faith, and there was no assignment of such claims by the insured to the injured plaintiff. In February 2009, the injured party was given leave to withdraw this second declaratory judgment action, without prejudice.
The insured passed away in 2015. In 2016, after trial, the court entered judgment in favor of the injured party in the original 2007 negligence action, for a sum in excess of $1 Million. The estate assigned the injured party any and all of its rights, claims, demands, and causes of action against the insurer, including claims for breach of contract and bad faith.
The injured party subsequently filed an action against the insurer. The claims included breach of contract and statutory bad faith claim, as well as a request for declaratory relief. The court granted summary judgment on the assigned breach of contract and bad faith claims, though not as to the injured party’s own declaratory judgment count.
An assignee stands in the assignor shoes. Any causes of action the insured had for breach of contract and bad faith accrued when the insurer conveyed a letter denying any duty to defend and indemnify the 2007 negligence action (or, at the latest, in 2008, when the court entered the consent order). The court stated that any bad faith claim had to be raised no later than 2009 (under the two year statute of limitations governing statutory bad faith claims) or by 2011 for the breach of contract claim.
The court concluded: “In order to advance timely claims for breach of contract/bad faith, under the facts here, [the insured] would had to have filed suit and challenged that coverage denial in the 2008 ‘second’ declaratory judgment suit by seeking an assignment to include the breach of contract/bad faith claims at that time. Instead, [the insured] brought only a declaratory judgment action.”
As the bad faith claim was not filed within two years after the initial denial of coverage, the court found that the claim was time-barred.
Date of Decision: May 22, 2017
Falo v. Travelers Personal Insurance Co., No. 17cv0143, 2017 U.S. Dist. LEXIS 77425 (W.D. Pa. May 22, 2017) (Schwab, J.)
