AUGUST 2018 BAD FAITH CASES: BAD FAITH ACTION CANNOT BE BROUGHT AGAINST CLAIM REPRESENTATIVE WHO IS NOT AN INSURER (Philadelphia Federal)

A UIM insured brought a breach of contract, loss of consortium, and bad faith action against both the claim representative and the insurer. The insurer argued that the claim representative was “fraudulently joined” to defeat diversity. The insurer asserted that bad faith actions against claim representatives are impermissible.

The court noted that the “removing party has a heavy burden of persuading a court that joinder is fraudulent.” However, “[t]he claims against [the claim representative] are wholly insubstantial and frivolous.” The court concluded as a matter of law “there is no basis to support a contract” against the claim representative because “only the principal, [insurer], may be held liable.” The claim representative was only an agent, who did not have a separate contract with the insured.

Further, the court concluded the insured could not state a bad faith claim against a claim representative. “The bad faith statute applies only to insurance companies.” The claim representative was not an insurer because she identified as an insurer in the policy, and the insured did not plead that claim representative acted as an insurer.

Thus, the court concluded the insured improperly joined the claim representative.

Date of Decision: August 8, 2018

Reto v. Liberty Mutual Insurance, U. S. District Court Eastern District of Pennsylvania, CIVIL ACTION NO. 18-2483, 2018 U.S. Dist. LEXIS 133336 (E.D. Pa. Aug., 8, 2018) (Savage, J.)