Daily Archive for January 17th, 2019

SUBJECTIVE BELIEF THAT ALLEGED BREACH OF POLICY WAS DONE IN BAD FAITH IS INADEQUATE WITHOUT OBJECTIVE FACTUAL ALLEGATIONS TO SUPPORT UNREASONABLE CONDUCT (Middle District)

Published on January 17, 2019 in PA - Claims Handling (general), PA - Estimates, Valuation or Appraisal and PA - Federal Pleading Inadequate. Closed

The District Court adopted the Magistrate Judge’s Report and Recommendation that the bad faith case be dismissed without prejudice, with an opportunity to re-plead. As with many other bad faith complaints, “the plaintiff has not yet stated a bad faith claim that meets the exacting standards prescribed by the state statute and federal pleading rules.”

In his analysis, Magistrate Judge Carlson set out these exacting standards plaintiff had to meet in making out a bad faith case. The spare, and inadequate, averments allegedly supporting the bad faith claim were:

  1. At all times pertinent hereto, Plaintiff was the owner of the premises known as 71 Center Avenue, Schuylkill Haven / Landingville, Pennsylvania 17972.

  2. At all times pertinent hereto, Plaintiff and Defendant were parties to a contract of insurance covering the aforesaid subject property.

  3. On or about May 21, 2017, the subject property was damaged by fire and Plaintiff submitted a claim to Defendant for same.

  4. At all times pertinent hereto, Plaintiff maintained the subject insurance policy in good standing and made any and all payments due thereupon.

  5. Plaintiff performed his obligations pursuant to the subject policy/contract.

  6. At the time of making said claim to the present, Defendant has failed to honor its obligations under the subject policy/contract, to wit, Defendant continues to undervalue the property damage and fails to properly process the claim and make full payment.

The insured argued that the averments in paragraph 9 concerning undervaluation and failure to properly assess made out a bad faith action. The court disagreed, and concluded that, “fairly construed, this averment simply states the plaintiff’s subjective belief that the defendants have undervalued this particular insurance claim. Such claims, stated in a conclusory manner, do not meet federal pleading standards….”

Subjective beliefs on value “may reasonably, and permissibly, differ.” In the absence of additional supporting fact that the insurer’s valuation was unreasonable, subjective conclusions fail to make out a claim. Put another way, inferences of bad faith must be drawn from factual allegations directed to the insurer’s unreasonableness, not a subjective conclusory leap from facts that merely show a potential breach of contract.

Dates of Decision: December 17, 2018 (Report and Recommendation), January 10, 2019 (Order adopting Report and Recommendation)

Grustas v. Kemper Corporate Servs., U.S. District Court Middle District Pennsylvania Civil No. 3:18-CV-1053, 2018 U.S. Dist. LEXIS 212935 (M.D. Pa. Dec. 17, 2018) (Carlson, M.J.) (Report and Recommendation), Judge Mariani’s Order adopting Report and Recommendation (January 10, 2019)

It should be noted that Magistrate Judge Carlson has handled numerous bad faith cases, as reported on this Blog.