We at the Pennsylvania and New Jersey Insurance Bad Faith Case Law Blog wish you all the best in the coming year.
We had over 140 postings in 2017, and would anticipate that 2018 will continue to bring a bevy of bad faith cases, which we will faithfully report to you.
May your year ahead be filled with good faith and fair dealing.
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The insured was involved in a motor vehicle accident. The insured’s policy provided for first party medical benefits up to $50,000, income loss protection benefits up to $5,000, and UIM coverage up to $100,000. The insurer happened to insure both the insured plaintiff and the tortfeasor, on two different policies. The insurer opened a first-party claim file and a third-party claim file.
The insured gave notice of her intent to make a lost-income claim, and forwarded partial information supporting this claim to the insurer. Several months later, the insurer submitted the medical file to a peer review organization (“PRO”) pursuant to the Pennsylvania Motor Vehicle Financial Responsibility law. Five months later, the insured’s counsel requested that the insurer open a UIM claim under the existing first-party claim. The insurer did so, but also denied coverage for the third-party claim on the basis the insured selected a limited-tort option, which, with some exceptions, restricts the right of a plaintiff to recover noneconomic damages unless the injury is sufficiently serious.
$5,400 in first-party medical benefits were paid to the insured. The insurer continued to request full documentation regarding the lost wage claim. The insurer credited $15,000 toward its policy under the UIM claim.
The insured sued for breach of contract and bad faith in state court, and the action was removed to federal court. The insurer moved for summary judgment on the bad faith claim, arguing that a valid dispute over the value of the insured’s claim does not rise to bad faith. While the insured did not contest the legitimate dispute as to the value of her claim, she argued that the insurer’s means and methods in handling the claim amounted to bad faith.
Specifically, the insured argued (1) that the insurer was not entitled to a $15,000 credit against its own policy; (2) the insurer failed to meet its burden to show that the insured was bound by limited tort; (3) the insurer, in bad faith, attempted to stop the insured’s medical treatment or force the insured to rely on a lack of ongoing treatment; and (4) the insurer’s failure to review its own file is not a sufficient basis to claim it did not have complete documentation for the wage loss claim.
The Court rejected all of the insured’s arguments. First, the Court stated “Pennsylvania courts have . . . held that UIM awards are properly reduced by the full amount of the tortfeasor’s policy limits . . . .” Thus, the $15,000 credit was proper. Second, the Court found that full tort insurance was waived under the policy terms, because the insured’s electronic signature on the policy sufficed to show that the waiver was knowing and intelligent. Third, the insurer sending its claim file to a PRO is consistent with industry practice and in no way “amounts to bad faith.” The Court rejected the final argument as well. While the insurer did have wage loss information regarding the insured’s part-time job, it did not have this information regarding the insured’s full-time position.
The Court granted the insurer’s motion for summary judgment, and dismissed the bad faith claim with prejudice.
Date of Decision: December 11, 2017
Jallad v. Progressive Advanced Ins. Co., Civil Action No. 16-4795, (E.D. Pa. Dec. 11, 2017) (Kelly, Sr. J.)
We at the Pennsylvania and New Jersey Insurance Bad Faith Case Blog wish you happy holidays and all the best in the New Year.
This is a report and recommendation authored by a U.S. Magistrate Judge, subject to final review and decision by the District Court Judge.
The insured sued his insurer for breach of contract and bad faith surrounding a UIM claim in the Fayette County Court of Common Pleas. The insurer removed the action to federal court based upon diversity jurisdiction. Thereafter, the insured filed a motion to remand, arguing that the case should not proceed in federal court because it involves questions of Pennsylvania law.
The Court stated “the party asserting jurisdiction bears the burden of showing that at all stages of the litigation the case is properly before the federal court.” As such, the insurer “bears the burden of demonstrating that . . . removal . . . [is] proper in all respects.”
The insured cited case law referencing the Declaratory Judgment Act, but the insured’s complaint did not seek a declaratory judgment. Consequently, the Court found that the insured’s brief was largely irrelevant. The Court further found that the amount in controversy requirement was satisfied because the insured sought damages of $60,000, plus additional damages of attorneys’ fees, costs, and more, likely reaching the $75,000 threshold. Because “[f]ederal courts routinely resolve issues of state law relating to insurance, including UIM benefits and bad faith[,]” the Court denied the insured’s motion to remand.
Date of Decision: December 12, 2017
Carney v. GEICO, Civil Action No. 17-1486, (W.D. Pa. Dec. 12, 2017) (Mitchell, M.J.)
This is a report and recommendation written by the U.S. Magistrate Judge. Final determination on the issues is subject to future rulings by the District Court Judge.
The insured suffered numerous injuries after being hit head-on by a drunk and underinsured driver. The insured allegedly suffered facial scarring, facial lacerations, a cervical strain, head injuries, headaches, a broken finger, and ligament tears, among other injuries. The insured settled the underlying action with the tortfeasor’s insurer for the maximum policy limits of $15,000. Arguing that his damages exceeded that amount, the insured filed a UIM claim under his own policy, which contained UIM benefits up to $250,000. The complaint alleges that despite providing the insurer with reasonable proofs of damages, the insurer has failed to offer any amount and has failed to offer an explanation as to why it has not made an offer.
The action was then removed to federal court. The insurer filed a motion to dismiss the bad faith claim, arguing that there exists a genuine dispute as to the value of the insured’s UIM claim. The insured argued the motion to dismiss should be denied, because the insurer’s refusal to make any offer or provide an explanation constitutes bad faith.
In construing a motion to dismiss under Rule 12(b)(6), the Magistrate Judge stated that “when there are well-pleaded factual allegations, a court should assume their veracity and then determine whether they plausibly give rise to an entitlement for relief.” The magistrate recommended that the motion to dismiss be denied, because the insured’s allegations that “[the insurer] has failed to make any offers of payment on the UIM claim or any evaluations of it” are specific and sufficient to constitute bad faith at this stage of the litigation. Lastly, the magistrate judge wrote that whether the bad faith claim survives a motion for summary judgment is a completely separate matter, which would need to be decided with a more developed discovery record.
Date of Decision: December 6, 2017
Hart v. Progressive Preferred Ins. Co., Civil Action No. 17-1158, (W.D. Pa. Dec. 6, 2017) (Mitchell, M.J.)
The insured was involved in a deadly motor vehicle accident. The insurer could have settled the case within the $11,000,000 policy limit, but declined to do so. The case was mediated before two different mediators and the judge held a settlement conference. The case went to trial and the jury awarded $32,000,000. The insured sued for breach of contract and bad faith.
During the bad faith litigation, the insured sought discovery concerning the mediations and reinsurance. The insurer asserted the mediation privilege and that the reinsurance documents were not relevant. The insured argued that the purpose of Pennsylvania’s mediation privilege is to enable the parties to be frank and honest with the mediator and/or opposing parties without fear of reprisal in a subsequent bad faith lawsuit for doing so.” The insurer had the burden in asserting this privilege.
MEDIATION PRIVILEGE
As a practice point, the court observed the insurer “did not specify on its privilege log whether its decision to redact or withhold a document was because a portion of a document was ‘a mediation communication’ or a ‘mediation document’ as those terms are defined. Instead, [the insurer] merely opted to cite the statute and then let this Court attempt to discern what [it] meant by the following entry on its privilege log: ‘Mediation and/or settlement conference privilege pursuant to 42 Pa.C.S. §5949, F.R.E. 408, and/or applicable law.’” The court then stated that the insurer had reciting the statutory definitions of mediation communication and mediation document and then argued that “‘[a]ll of the documents withheld and/or redacted … and submitted to the Court in camera qualify as mediation documents or mediation communications.’” The court went on to describe this as a lack of pointed argument.
Pertaining to documents redacted or withheld, the court found that “none of the redacted or withheld documents qualify as ‘a mediation document’ under the plain meaning of Pennsylvania’s mediation privilege statute except for” a single document. As to that document, it should only have been “redacted where the mediator … wrote an email ….” Under 42 Pa.C.S. 5949, “mediation document” is defined as: “Written material, including copies, prepared for the purpose of, in the course of or pursuant to mediation. The term includes, but is not limited to, memoranda, notes, files, records and work product of a mediator, mediation program or party.”
The court then went on to address mediation communications within the documents, which the statute defines as: “A communication, verbal or nonverbal, oral or written, made by, between or among a party, mediator, mediation program or any other person present to further the mediation process when the communication occurs during a mediation session or outside a session when made to or by the mediator or mediation program.” The court refused to apply the mediation privilege to statements made outside the mediation that did not in some way include the mediator.
The court did protect communication from the insured’s expert consultant relaying something the mediator said. However, it did not protect “redacted statements a mediator or a party may have said during the course of a mediation” in other circumstances. Specifically, it did not protect these communications where the documents including those statements “are nothing more than reports and/or claims notes. These redacted documents contain statements which were made by a person who may have been present at the mediation session to someone (not the mediator) outside the mediation session. Thus, they do not meet the plain meaning of the definition of ‘mediation communication’ and therefore, are not protected by Pennsylvania’s mediation privilege.” (Emphasis in original)
REINSURANCE DISCOVERY
On the reinsurance documents, the court observed that there “is no absolute exclusion of reinsurance information, as discovery of such information has been readily permitted,” citing at least one case on the issue of reserves being discoverable in bad faith litigation to support this position. The court also quoted case law that “the purpose of permitting discovery of the existence of and content of any insurance agreement is to equalize the knowledge of both parties and give the plaintiff ‘assurance that there can be recovery in the event of a favorable verdict to justify the time, effort and expense of preparing for trial.’ … Although the discovered information may not be admissible at trial, it would allow parties to fairly evaluate settlement offers and foster a just, speedy and inexpensive determination.”
Relying on these cases, the court concluded that: “Given the nature of this case, and the allegations brought by Golon, this Court finds that all of [insurer’s] documents which were either withheld or redacted because the document either referenced or discussed reinsurance should be produced in their entirety. However, this does not guarantee that these documents will be admissible at the time of trial. The Court is ordering them produced so that [the insured] can evaluate what [the insurer] did or did not do, and when [the insurer] took action with its own reinsurer, in relation to the underlying claim.”
The Court subsequently denied two emergency motions for reconsideration.
Date of Decision: December 7, 2017/December 14, 2017
Golon, Inc. v. Selective Ins. Co., No. 17cv0819, 2017 U.S. Dist. LEXIS 201792 (W.D. Pa. Dec. 7, 2017) (Schwab, J.)
Golon, Inc. v. Selective Ins. Co., No. 17cv0819, 2017 U.S. Dist. LEXIS 213966 (W.D. Pa. Dec. 14, 2017) (Schwab, J.)
This is a UIM bad faith action that went to verdict in Philadelphia’s Court of Common Pleas, with the Court ruling for the insurer.
The injured insured settled a lawsuit with the tortfeasor’s insurer for $50,000 in March of 2012, and then filed a UIM claim with his own insurer. The insurer continually investigated the claim, and ultimately valued the insured’s injuries between $50,000 and $75,000. The insurer discounted the previously paid $50,000 amount from the March 2012 settlement in its own settlement offers.
The insurer initially offered $7,500, but increased its offer six times in a span of 10 months through a course of ongoing negotiations, upon receiving new information during that time. The insured refused to settle for any amount less than the $100,000 UIM policy limits. When the insured ultimately produced documentation that his injuries were regressing, and that he may never live pain free again, the insurer offered $100,000, which the insured accepted.
The insured then sued for bad faith, arguing that (1) the insurer had no reasonable basis for its negotiating position at any time during the ten-month period; and (2) the insurer acted in bad faith for its consistent undervaluation of the claim. After a six-day bench trial, the Court found in favor of the insurer.
The Court found that a ten-month claim window is inherently unreasonable, and the evidence suggested that the claim continually had ongoing developments complicating the evaluation process. The Court further found that “[e]ach step of the way, [the insurer] acknowledged and credited new information and responded accordingly,” and low but reasonable settlement offers do not amount to bad faith.
The Court further found that defense counsel instructing its IME expert to delay writing his report was not done to unreasonably prolong negotiations, but to control litigation costs when counsel believed the case was on the eve of settlement. Lastly, the Court found that, when discounting the March 2012 settlement, all of the insurer’s offers fell within “the total valuation for UIM liability.”
Date of Decision: November 2, 2017
Camiolo v. Erie Insurance Exchange, July Term 2015 Case No. 1750, (C.C.P. Phila. Nov. 2, 2017) (Colins, J.)
Our thanks to Dan Cummins of the wonderful Tort Talk Blog for bringing this case to our attention.
This case arises out of a fatal automobile accident, involving the son-in-law of the named insureds. The named insureds are the parents of the deceased’s wife, who is listed as a “household driver”. Following the accident, the insurer refused to pay her stacked UIM benefits, arguing that she does not reside with the named insureds and is thus not a “relative” under the policy. The insureds then sued for breach of contract and bad faith, among other claims. The insurer moved to dismiss under Federal Rule of Civil Procedure 12(b)(6).
In making the coverage determination, the Court found that “relative” in the policy includes “child”, and while “child” was not defined in the policy, it could reasonably be interpreted to include the deceased’s wife. Thus, the Court denied the insurer’s motion to dismiss the breach of contract claim.
However, the Court granted the insurer’s motion to dismiss the bad faith claim, without prejudice, finding the insureds failed to provide any “allegation that [the insurer] knew or recklessly disregarded [a] lack of a reasonable basis when it denied [stacked] coverage.” For the same reasons, the Court also dismissed the insureds’ fraud claim. The Court further dismissed the insureds’ unjust enrichment claim with prejudice, ruling that such a claim is inappropriate where the relationship of the parties is governed by an express contract. The Court offered the insureds leave to file an amended complaint.
Date of Decision: December 1, 2017
Estate of Sippey v. Metro. Group Prop. & Cas. Ins. Co., CIVIL ACTION NO. 17-227, 2017 U.S. Dist. LEXIS 197533 (W.D. Pa. Dec. 1, 2017) (Bissoon, J.)
The tortfeasor struck the insured as he was riding his bicycle. USAA insured the tortfeasor under a policy containing a liability limit of $15,000. The insured held policies with Progressive (providing for $50,000 in UIM benefits) and State Farm (providing for $100,000 in UIM coverage). USAA tendered its policy limits to the insured in an attempt to settle the claim, which the insured accepted. The insured requested consent with Progressive to settle the claim, and while the insured’s attorney contacted State Farm to notify it of the claim, there was no mention made of the settlement offer. A second correspondence to State Farm also failed to notify it of the settlement.
The State Farm policy contained language denying coverage if the insured settles any lawsuit “without our written consent.” State Farm denied coverage because it believed that the USAA policy provided benefits “equal to or exceeding” the benefits provided under the State Farm policy. This mistake “occurred after [the insured] had extinguished State Farm’s right of subrogation, and nothing [the insured] did was the result of State Farm’s initial mistake.” State Farm acknowledged its claim handling mistake, but then denied UIM coverage because the insured “never [gave] notice and sought consent to accept USAA’s tender of liability limits available under the [tortfeasor’s] policy.”
The insured sued for bad faith, and State Farm moved for summary judgment. The court previously decided that New York law controls. The court ruled that the insureds failed to show that (1) the USAA settlement did not prejudice State Farm’s subrogation rights; and (2) State Farm did not waive the insured’s obligation to provide it with advance notice of settlement of the claim.
As to the bad faith claim, the Court held that “State Farm had a valid basis for denying benefits under New York law.” The Court reasoned that State Farm’s initial claims handling error does not rise to the level of bad faith, because the error was not only corrected, but it was “not causally related to the legitimate basis on which it denied the [UIM] claim.” The Court further held that even if Pennsylvania law controlled, nothing in this case would be sufficient to support a bad faith claim. The Court granted State Farm’s motion for summary judgment.
Date of Decision: November 30, 2017
Bennett v. State Farm Fire & Cas. Co., CIVIL ACTION NO. 15-5170, 2017 U.S. Dist. LEXIS 197515 (E.D. Pa. Nov. 30, 2017) (McHugh, J.)
The plaintiff served in various official roles for the insured corporation. The insurer issued a DO&E policy to the corporate insured.
The plaintiff and another entity filed a conservatorship petition over property owned by the Underlying Plaintiffs. The Underlying Plaintiffs sued the plaintiff, that other entity, and the insured corporation for allegedly making false statements in the conservatorship petition as part of a “plan to run the [property owners] out of the neighborhood.” The court in the underlying action, however, dismissed all claims with prejudice against the insured corporation. The jury returned a verdict for the Underlying Plaintiffs, and against the plaintiff, among others.
The DO&E policy contained a coverage exclusion that stated, “The Insurer shall not pay Loss . . . (I) of an Insured Person based upon, arising from, or in any way related to such Insured Person’s service, at any time, as a director, officer, trustee, regent, governor, or equivalent executive or as an employee of any entity other than an Insured Entity . . . .” The insurer withdrew its defense of the plaintiff under this exclusion after the the insured corporation was dismissed with prejudice. The plaintiff then brought this action against the insurer for bad faith and breach of contract.
The court converted the insurer’s motion to dismiss into a summary judgment motion. The court stated, “it is the duty of the insurer to defend until such time as the claim is confined to a recovery that the policy does not cover.” When an underlying plaintiff drops an insured claim, this constitutes “absolutely clear” evidence that the action seeks relief that is not covered under the policy.
The court held that the insurer had no duty to defend the plaintiff once the underlying court dismissed the insured from that action. The court rejected the idea that insured corporation tacitly approved the plaintiff’s actions in filing the conservatorship petition because the insured was in no way involved in that petition. Furthermore, the plaintiff did not serve the insured corporation’s interest in any official capacity at the time the conservatorship petition was filed and “it is undisputed that [the plaintiff] . . . filed the conservatorship petition . . . in his capacity as President and owner of [another entity].”
The policy exclusion thus barred any coverage. Because the insurer did not owe a duty to defend or indemnify the plaintiff, his bad faith claim against the insurer necessarily failed.
Date of Decision: November 20, 2017
Palmer v. Twin City Fire Ins. Co., CIVIL ACTION NO. 17-826, 2017 U.S. Dist. LEXIS 190993 (E.D. Pa. Nov. 20, 2017) (Beetlestone, J.)
