Yearly Archive for 2018

MARCH 2018 BAD FAITH CASES: NO BAD FAITH ON UIM CLAIM DENIAL WHERE RECORD SHOWED THE INSURED WAS AT FAULT IN CAUSING THE ACCIDENT (Middle District)

Published on March 22, 2018 in PA - Claims Handling Procedures. Closed

In this UIM action, the insured brought suit for bad faith and breach of contract after the insurer denied the claim on the basis that the insured caused the accident at issue. The insurer moved for partial summary judgment on the bad faith claim.

The record showed the insured failed to stop at a blinking red light before striking another driver who had a blinking yellow light. The Court found that the insurer reviewed: the facts of the accident as provided by several witnesses, the police report, the insured’s traffic citation for failing to stop, photos showing damage to the vehicles, and the fact that the insured paid for the damages she caused to the other driver.

Citing Third Circuit precedent, the Court stated that “summary judgment is essentially ‘put up or shut up’ time for the non-moving party.’” While the insured testified that she did stop at the blinking light, such testimony was insufficient given the overwhelming evidence that she was at fault. Thus, the Court held that the insurer’s claim denial was supported by sufficient evidence to find that it had no duty to pay a UIM claim. There could be no bad faith on this record, and summary judgment went to the insurer.

Date of Decision: March 7, 2018

Long v. State Farm Mutual Automobile Insurance. Co., U. S. District Court for the Middle District of Pennsylvania, CIVIL ACTION NO. 4:15-cv-02404, 2018 U.S. Dist. LEXIS 36779 (M.D. Pa. Mar. 7, 2018) (Brann, J.)

 

MARCH 2018 BAD FAITH CASES: NEGLIGENCE IS NOT BAD FAITH; SUMMARY JUDGMENT CANNOT BE DEFEATED WHERE RECORD CONTRADICTS BALD ALLEGATIONS OF BAD FAITH (Philadelphia Federal)

Published on March 20, 2018 in PA - Claims Handling Procedures. Closed

In this UIM case, the actual record warranted summary judgment for the insurer, despite allegations of bad faith to the contrary.

The insured submitted a UIM claim for injuries sustained to his elbow. The insured recovered $100,000 from the tortfeasor’s insurer, and then requested maximum UIM benefits of $200,000. Three weeks before the accident, the insured had injured the elbow when he fell at his home.

The insured’s counsel initially attempted to contact a claims specialist who no longer worked for insurer. Nearly four months later, the insurer responded that that this adjuster no longer worked there, but the UIM claim was being transferred to another claims specialist immediately. The insurer did immediately begin processing the claim, and continually requested additional medical records from the insured, to no avail.

The insured filed suit for bad faith and breach of contract, and the insurer moved for summary judgment on the bad faith claim, which was granted for the following reasons:

Negligence is not bad faith.

  1. The insured argued bad faith in delaying the UIM investigation for four months. The Court ruled that in light of the fact that the initial demand letter was sent to the wrong person, the delay in opening the claim amounted to mere negligence, not bad faith.

The record contradicts the insured’s alleged bases for bad faith.

  1. The insured argued a failure to tender reasonable UIM benefits. The Court rejected this argument, stating that a partial valuation of the claim had neither been made nor requested by the insured.
  2. The insured argued the insurer used dilatory tactics and failed to investigate the claim. The Court found this “patently false,” because the record showed the insurer continually communicated with the insured and retained three separate physicians who all concluded the insured suffered no additional elbow injury due to the auto accident.
  3. The insured argued the claim was frivolously denied. The Court rejected this argument, citing the thorough investigation conducted by the insurer.

Date of Decision: March 6, 2018

Smith v. LM General Insurance Co., CIVIL ACTION NO. 17-02310, 2018 U.S. Dist. LEXIS 35773 (E.D. Pa. Mar. 6, 2018) (Pappert, J.)

MARCH 2018 BAD FAITH CASES: THIRD CIRCUIT DID NOT HAVE TO REACH ISSUE OF WHAT LITIGATION CONDUCT COULD CONSTITUTE BAD FAITH, BECAUSE CONDUCT AT ISSUE WAS NOT BAD FAITH CONDUCT IN THE FIRST INSTANCE (Third Circuit, Pennsylvania law)

Published on March 19, 2018 in PA - Experts and PA - Litigation Conduct Claims. Closed

The insured alleged bad faith based on the insurer’s introduction and reliance on allegedly biased expert testimony in this underinsured motorist case. The District Court had dismissed the claim, after an extensive analysis on when litigation conduct might constitute bad faith. The Third Circuit affirmed, but without addressing that issue.

The parties entered a high/low settlement agreement during the course of a jury trial, i.e., if the insured won he could get up to $300,000, but no less than $100,000 if he lost. The jury awarded $1.6 Million, but that sum was molded to $300,000. The agreement released all bad faith claims existing up to the date of the agreement, but did not release post-agreement bad faith claims.

The insurer relied upon two experts’ reports and testimony before the jury. The insured later brought a bad faith action based upon the insurer’s use of its expert reports and testimony during the trial process and after the date of the high/low agreement. He alleged that the insurer acted in bad faith by introducing and relying upon the biased testimony of its experts; by “failing to make an honest, intelligent settlement offer”; and by “seeking to have the bad faith claim dismissed with prejudice.”

The Third Circuit observed that bad faith is based upon the frivolous or unfounded refusal to pay proceeds under a policy, under a two criteria test: (1) that it was unreasonable to deny benefits; and (2) that the insurer knew or recklessly disregarded the absence of a reasonable basis to deny benefits. The big issue addressed at the District Court level was how to evaluate litigation conduct under the Bad Faith Statute. The Third Circuit found it did not have to reach that issue because the complaint’s allegations (including expert reports and depositions as exhibits) did “not identify any misconduct, much less bad faith” conduct.

It was alleged contradictions in the experts’ testimony that formed the basis of the bad faith claim. The Court found no inconsistencies in the first expert’s report and testimony, and found that the report was more limited in scope than the insured asserted. Similarly, the Court found no contradictions in the second expert’s report. Thus, “[b]ecause the statements made by [the medical experts] are not contradictory, [the insurer’s] introduction of and reliance on their testimony cannot rise to the level of bad faith, even under [insured’s] suggested legal standard.”

And again, after noting the absence of Pennsylvania Supreme Court precedent on when litigation conduct could be subject to the Bad Faith Statute — though it had been addressed to some degree in the Superior Court and the Third Circuit — the Court stated that it “need not reach this question because the facts alleged clearly do not amount to knowing presentation of biased expert testimony.”

Date of Decision: February 27, 2018

Homer v. Nationwide Mutual Insurance Co., U. S. Court of Appeals Third Circuit No. 16-3686, 2018 U.S. App. LEXIS 4859 (3d Cir. Feb. 27, 2018) (Fishman, Hardiman, Roth, JJ.)

MARCH 2018 BAD FAITH CASES: COURT REMANDS CASE WHERE BAD FAITH CLAIM DROPPED AFTER REMOVAL, AND SUM AT ISSUE FALLS BELOW $75,000 (Western District)

Published on March 15, 2018 in PA - Procedural Issues. Closed

The carrier removed the case based on diversity jurisdiction. At the time of removal, there was diversity and “there was a good faith belief that the amount in controversy exceeded $75,000 because [the insured] could recover punitive damages under the Pennsylvania Bad Faith statute.” However, the insured later “agreed to voluntarily dismiss the insurance bad faith claim leaving only an $18,000 breach of contract claim.

The court looked to 28 U.S.C. § 1447(c): “If at any time before final judgment it appears that the district court lacks subject matter jurisdiction, the case shall be remanded.” Applying section 1447(c), the court found the case no longer involved a dispute in excess of $75,000, and the insurer agreed that remand was proper.

Date of Decision: February 26, 2018

Sciulli v. GEICO General Insurance Co., CIVIL ACTION NO. 16-1907, 2018 U.S. Dist. LEXIS 30158 (W.D. Pa. Feb. 26, 2018) (Flowers Conti, C.J.)

FEBRUARY 2018 BAD FAITH CASES: ISSUES OF FACT REMAINED ON ALLEGED FAILURE TO INVESTIGATE EXCEPTION TO POLICY EXCLUSION (Middle District)

Published on February 28, 2018 in PA - Claims Handling Procedures. Closed

Wife and husband are insureds under a homeowner’s insurance policy issued to them by the insurer. A fire destroyed the home, and wife later pleaded guilty to intentionally starting the fire. The insurer denied coverage under the policy’s intentional loss exclusion. However, husband, as co-insured, argued an exception to the intentional loss provision should apply. The exception states “the intentional loss exclusion ‘will not apply to deny payment to the “insured” who did not cooperate in or contribute to the creation of the loss if the loss [is otherwise covered] and [a]rises out of abuse to the innocent “insured” by another “insured”.’” When the insurer refused to accept coverage under this abuse exception, the husband filed suit for bad faith and breach of contract. The insurer moved for summary judgment.

On the bad faith claim, the insured argued the insurer “fail[ed] to investigate, consider and/or alert [him] to the abuse exception to the exclusion for an intentional act by a spouse and instead attempt[ed] to lead [him] to believe that the denial had no exception, all of which was deceptive.” The Court held that a jury could find that the insurer failed to investigate the exception to the intentional loss exclusion. Thus, the Court found material issues of fact remained, and denied summary judgment. The Court also denied summary judgment on the contract claim, holding that a question of material fact exists as to whether wife “set fire to the house in an attempt to intimidate or control . . .” husband, which would trigger the exception.

Date of Decision: February 22, 2018

Sterner v. Liberty Ins. Corp., No. 16-2453, 2018 U.S. Dist. LEXIS 28138 (M.D. Pa. Feb. 22, 2018) (Munley, J.)

POST-KOKEN SEVERANCE AND STAY DENIED, BUT BAD FAITH CLAIM BIFURCATED FOR TRIAL (Lackawanna County)

Published on February 22, 2018 in PA - Punitive Damages. Closed

In keeping with its leading place in reporting post-Koken UIM bad faith law, the excellent Tort Talk Blog has summarized Judge Nealon’s opinion out of Lackawanna Common Pleas denying a motion to sever and stay bad faith claims, but ruling that the bad faith claim would be bifurcated for trial. The opinion gives a thoroughgoing analysis of these issues.

As always, thanks to Dan Cummins for his good work in keeping all of us up to date on these issues.

FEBRUARY 2018 BAD FAITH CASES: REINSURER IS NOT AN INSURER UNDER SECTION 8371 (Western District)

Published on February 20, 2018 in PA - General Bad Faith and Litigation Issues. Closed

The insured filed suit for bad faith and breach of contract against its insurer, and later filed an amended complaint alleging bad faith and breach of contract against the reinsurer, among other claims. The reinsurer moved to dismiss both claims.

The reinsurer argued that it is not an “insurer” for purposes of Pennsylvania’s bad faith statute. The Court stated, “Pennsylvania law requires the Court to consider two factors when determining whether a party is an ‘insurer’ for the purposes of the bad faith statute: “(1) the extent to which the company was identified as the insurer on the policy documents; and (2) the extent to which the company acted as insurer.’” Regarding the first factor, the Court found that the reinsurer is not listed anywhere on the policy documents, and therefore the reinsurer is not a party to the policy between the insured and the insurer.

In evaluating the second factor, the Court stated that, “a party acts as an insurer when it ‘issues policies, collects premiums and in exchange assumes certain risks and contractual obligations.’” The Court held that the reinsurer was not the insured’s “insurer” for purposes of the bad faith statute because it did not issue the policy to the insured, it did not collect premiums from the insured, it did not make payments to the insured, and it assumed no risks or contractual obligations to the insured. As such, the Court granted the reinsurer’s motion to dismiss the bad faith claim because it was not an “insurer” for purposes of the bad faith statute. The Court further dismissed the breach of contract claim against the reinsurer because no contractual privity existed between the reinsurer and the insured.

Date of Decision: February 8, 2018

Three Rivers Hydroponics, LLC v. Florists’ Mut. Ins. Co., No. 15-809, 2018 U.S. Dist. LEXIS 20699 (W.D. Pa. Feb. 8, 2018) (Hornak, J.)

 

FEBRUARY 2018 BAD FAITH CASES: COURT REVERSES ITS DECISION TO BIFURCATE BAD FAITH DISCOVERY BECAUSE OF LENGTH OF DISCOVERY PROCESS; ALLOWS BAD FAITH QUESTIONS AT 30(b)(6) DEPOSITION; AND QUASHES SUBPOENA ON INSURED’S LAWYER IN UNDERLYING ACTION (New Jersey Federal)

Published on February 14, 2018 in NJ - Discovery and Evidence. Closed

This is a discovery dispute regarding coverage litigation between the parties. The insurer was seeking a declaration there was no obligation to defend or indemnify in connection with two antitrust lawsuits the insured settled for $100,000,000. The insured brought claims for bad faith, alleging the insurer failed to conduct a reasonable investigation of the underlying actions and the claim for coverage. The insurer argued the insured breached various policy conditions, specifically when it failed to notify the insurer of the underlying action until ten years after the settlement, with the insured arguing no appreciable prejudice from the late notice.

The Court previously bifurcated the bad faith discovery in the interests of judicial economy.

The insurer sought a protective order prohibiting the insured from inquiring into certain topics related to the bad faith claim during a Rule 30(b)(6) deposition of the insurer’s corporate representative. On the other hand, the insured moved to quash the insurer’s subpoena upon its attorney in the underlying action.

First, the Court vacated its earlier order bifurcating the bad faith discovery, reasoning that years later discovery does not appear to be nearing the finish line. The Court explained that further bifurcation would just lead to two protracted discovery battles. As such, the Court denied the insurer’s motion for a protective order.

Regarding the insured’s motion to quash, the Court found that the insurer “failed to establish that [the insured] placed . . . privileged information sought at issue in this matter or that such information is material to the issues before th[e] Court . . . .” and consequently granted the insured’s motion to quash the subpoena.

Date of Decision: January 30, 2018

National Union Fire Insurance Co. of Pittsburgh, P.A. v. Becton, No. 14-4318, 2018 U.S. Dist. LEXIS 14558 (D.N.J. Jan. 30, 2018) (Clark, III, MJ.)

 

FEBRUARY 2018 BAD FAITH CASES: NO BAD FAITH WHERE NO ACTIVE INSURANCE CONTRACT EXISTED BETWEEN THE PARTIES (Middle District)

Published on February 13, 2018 in PA - General Bad Faith and Litigation Issues. Closed

The decedent-insured took out a life insurance policy and paid premiums on it for roughly six years, before cancelling the policy just ten months before her death. The decedent-insured’s husband, as executor of the estate, then submitted a claim under the policy. The insurer denied the claim, citing the decedent-insured’s cancellation as its justification. The husband sued for breach of contract and bad faith, and the insurer moved for summary judgment.

The husband argued benefits were owed because the decedent-insured meant to cancel her auto insurance policy with the insurer and not the life insurance policy. After listening to an audio recording of a telephone call, the Court was unconvinced, and ruled “no contract existed between the parties at the time of the decedent’s death.” Because no contract exited between the parties, the insurer had a reasonable basis for denying the claim, and the Court granted summary judgment in favor of the insurer on both the bad faith and breach of contract claims.

Date of Decision: January 29, 2018

Williams v. Hartford Life & Accident Ins. Co., No. 17-234, 2018 U.S. Dist. LEXIS 13693 (M.D. Pa. Jan. 29, 2018) (Munley, J.)

FEBRUARY 2018 BAD FAITH CASES: EXAMPLE OF ADEQUATELY PLEADING UIM BAD FAITH CASE (Philadelphia Federal)

Published on February 12, 2018 in PA - Claims Handling Procedures. Closed

This is another UIM bad faith case. The court found the following allegations were sufficient to defeat a motion to dismiss the bad faith claim.

First, the court found the following allegations were adequate to meet the standard that the insurer lacked a reasonable basis to deny benefits:

  1. Defendant did not request a written statement from plaintiff;
  2. Defendant never requested a statement under oath;
  3. Defendant never requested a medical examination;
  4. Defendant did not request authorizations from plaintiff to secure any medical records;
  5. Defendant did not have a medical expert review plaintiff’s MRI;
  6. Defendant did not have Plaintiff’s medical records reviewed or evaluated;
  7. Defendant did not put its aforementioned offer in writing
  8. Defendant made no reference to any record or diagnostic firm review in making its offer;
  9. Defendant offered no explanation of its offer
  10. Defendant did not request current records of plaintiff’s treatment even though he was actively treating at the time of the oral offer; and
  11. Defendant assigned an inexperienced and/or inadequately experienced adjuster to plaintiff’s claim.

Second, the insured adequately pleaded knowing or reckless disregard of the alleged lack of a reasonable basis to deny coverage. Plaintiff alleged that the insurer’s “denial of full coverage for Plaintiff’s claim is unsupported by factual evidence; Defendant did not have Plaintiff’s medical records reviewed or evaluated; it made no request for current records of Plaintiff’s treatment; it did not reference any record or diagnostic firm review in making its offer; and it did not offer any explanation of its offer.”

Date of Decision: January 30, 2018

Irving v. State Farm Mut. Auto. Ins. Co., CIVIL ACTION NO. 17-1124, 2018 U.S. Dist. LEXIS 14163 (E.D. Pa. Jan. 30, 2018) (Slomsky, J.)