Archive for the 'PA - Claims Handling Procedures' Category

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
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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.)

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
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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.)

JANUARY 2018 BAD FAITH CASES: INSURED’S ALLEGATIONS OF INADEQUATE INVESTIGATION AND CONTRADICTIONS IN INSURER’S FILE STATE BAD FAITH CLAIM; INSURED MUST JOIN OTHER NAMED INSURED BUT NOT MORTGAGE HOLDER (Middle District)

Published on January 31, 2018 in PA - Claims Handling Procedures. Closed
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The insured purchased an insurance policy covering his residence and its contents. The property allegedly incurred significant water damage from ruptured pipes, and the insured gave the insurer written notice. The insurer allegedly conducted minimal investigation before denying the claim. The insurer argued that the loss was caused by the insured’s failure to maintain heat and/or drain the plumbing system. The insured argued the insurer had records in its possession that the heat was on at the property during the time of loss, and sued for breach of contract and bad faith.

On a motion to dismiss, the Court found a plausible bad faith claim based upon allegations that the insurer denied coverage without adequate investigation, and that the denial contradicted the insurer’s own records. The insured pleaded “[the insurer] did not have a reasonable basis for denying coverage based on the purported lack of heat at the subject property and it knew or recklessly disregarded this lack of a reasonable basis at the time coverage was denied.” Thus, that motion was denied.

The Court further held that the insured’s wife was a necessary party to the litigation because she was a named-insured. “It is well-established that a party to a contract which is the subject of the litigation is considered a necessary party.” The Court allowed an amended complaint adding the wife. Conversely, the Court held that case law does not support the proposition that a “purported holder of the mortgage is . . . a necessary party . . . .”

Date of Decision: January 18, 2018

Fuller v. Allstate Prop. & Cas. Ins. Co., No. 17-0955, 2018 U.S. Dist. LEXIS 7930 (E.D. Pa. Jan. 18, 2018) (Caputo, J.)

 

JANUARY 2018 BAD FAITH CASES: BAD FAITH POTENTIAL EXISTS WHERE INSURER ALLEGEDLY DID NOT INVESTIGATE AND THERE WERE INCONSISTENCIES IN THE CLAIMS FILE (Philadelphia Federal)

Published on January 18, 2018 in PA - Claims Handling Procedures. Closed
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The insured’s policy provided income loss benefits and medical benefits up to $277,500. The insured was injured in a motor vehicle accident one month after purchasing the policy, and underwent physical therapy. The physical therapy notes indicated that, while he was still able to work 8 hours per day, the insured normally worked 12-hour days. The insured submitted his federal tax returns to the insurer, which showed a significant income decrease. Additionally, the insured was diagnosed with cancer in the same year; however, at the time of the accident, the cancer was in remission and the insured was no longer undergoing treatment.

Two years later, the insured submitted a formal demand of $465,000 in income loss benefits. The insurer denied the claim, arguing that the insured failed to provide disability documentation or other documentation stating that he was unable to work. The insured then filed suit for breach of contract and bad faith, and the insurer moved for summary judgment.

In ruling on the bad faith issue, the Court denied summary judgment, stating that while the insurer may have had a reasonable basis for denying the income loss claim, bad faith liability could lie because the insurer failed to properly investigate the insured’s claim. The Court took note of discrepancies in the insured’s claim file, and held that these discrepancies and contradictions “should have prompted [the insurer] to investigate . . ., but it did not.” Additionally, the Court denied the insurer summary judgment on the breach of contract claim, holding that the insured “demonstrated that there is a genuine issue of material fact concerning whether he was entitled to income loss benefits . . ..”

Date of Decision: January 10, 2018

Grossman v. Metro. Life Ins. Co., No. 17-2940, 2018 U.S. Dist. LEXIS 4672 (E.D. Pa. Jan. 10, 2018) (Beetlestone, J.)

JANUARY 2018 BAD FAITH CASES: INSUREDS ALLEGING BAD FAITH MUST “DESCRIBE WHO, WHAT, WHERE, WHEN, AND HOW THE ALLEGED BAD FAITH CONDUCT OCCURRED”; LETTER TO INSURANCE DEPARTMENT DID NOT SHOW BAD FAITH (Philadelphia Federal)

Published on January 16, 2018 in PA - Claims Handling Procedures and PA - Coverage Issues. Closed
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The insured resided with her long-time partner at her home in Philadelphia when it was damaged by a fire. No one but the insured was listed on the policy.

Following the fire, the insured and her partner sought benefits under the policy for personal property destroyed and for home repairs. The insurer paid the insured $115,125.40 for home repairs, $160,982.21 for damage to personal property, and $37,784.81 for additional living expenses. The insurer did not pay the insured’s partner any benefits, arguing that he was not an insured person under the terms of the policy.

In addition, the insured received home repair estimates that ranged from $310,000 to $341,000, and the insurer did not pay any additional benefits beyond its $115,125.40 payment. The insured and her partner sued for bad faith, among other claims. The insurer moved for judgment on the pleadings.

The insured and her partner supported their bad faith claim with three arguments: (1) the insurer acted in bad faith when it sent a letter containing erroneous information about the claim to the Pennsylvania Insurance Department; (2) the insurer failed to obtain an appraisal; and (3) the insurer failed to properly investigate, evaluate, and communicate with the insured about the claim. The Court rejected all three of these arguments.

The court generally observed that “Pennsylvania federal and state courts have defined ‘bad faith’ as ‘a frivolous or unfounded refusal to pay proceeds of a policy.’” Specifically, as to the three arguments:

  1. The Court held that, in sending the letter containing erroneous information to the PID, there’s no evidence that this was done with a “motive of self-interest or ill will[,]” and was likely mere negligence.

[Note: The Court quoted case law stating, “A claimant must show that the insurer acted in bad faith based on some motive of self-interest or ill will.” However, this would appear to contradict the Supreme Court’s holding in Rancosky, that the motive of self-interest or ill will is not a required element of establishing a bad faith claim.]

  1. The policy stated that if there is an appraisal dispute, any party may demand an appraisal. The insured failed to make this demand.
  2. The Court held that the insured’s third argument was too vague to constitute bad faith, as insureds “must ‘describe who, what, where, when, and how the alleged bad faith conduct occurred.”

The Court dismissed all of the claims, but declined to award the insurer judgment on the pleadings, because it granted the insured leave to amend her complaint.

Date of Decision: December 21, 2017

Elican v. Allstate Ins. Co., No. 17-03105, 2017 U.S. Dist. LEXIS 209901 (E.D. Pa. Dec. 21, 2017) (Pappert, J.)

DECEMBER 2017 BAD FAITH CASES: NO BAD FAITH WHERE INSURER FOLLOWED INDUSTRY PRACTICES, PROPERLY DEDUCTED SUM FROM PAYMENT DUE, AND TREATED ELECTRONIC SIGNATURE AS BINDING FOR PURPOSES OF A KNOWING WAIVER (Philadelphia Federal)

Published on December 26, 2017 in PA - Claims Handling Procedures. Closed
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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.)

DECEMBER 2017 BAD FAITH CASES: MOTION TO DISMISS DENIED WHERE ALLEGATIONS CONCERNING LACK OF SETTELEMENT OFFERS ARE SPECIFIC ENOUGH AND SUFFICIENT TO SUPPORT BAD FAITH CLAIM (Western District)

Published on December 20, 2017 in PA - Claims Handling Procedures and PA - Procedural Issues. Closed
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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.)

DECEMBER 2017 BAD FAITH CASES: NO BAD FAITH WHERE: INSURER CONTINUALLY INVESTIGATED CLAIM; MADE LOW BUT REASONABLE SETTLEMENT OFFERS; DELAY IN ISSUING EXPERT REPORT WAS BASED ON POTENTIALLY IMMINENT SETTLEMENT; DISCOUNTING OFFER FOR TORTFEASOR PAYMENT FELL WITHIN TOTAL LIABILITY VALUATION (Philadelphia Court of Common Pleas)

Published on December 14, 2017 in PA - Claims Handling Procedures. Closed
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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.

DECEMBER 2017 BAD FAITH CASES: APPLYING NEW YORK LAW OR PENNSYLVANIA LAW, MISTAKE DID NOT CONSTITUTE BAD FAITH (Philadelphia Federal)

Published on December 12, 2017 in PA - Claims Handling Procedures. Closed
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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.)

NOVEMBER 2017 BAD FAITH CASES: NO EVIDENCE OF BAD FAITH OR SUPPORT IN POLICY LANGUAGE THAT INSURER ACTED IN BAD FAITH (Philadelphia Federal)

Published on November 30, 2017 in PA - Claims Handling Procedures and PA - Coverage Issues. Closed
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This case involved coverage based upon a flood during home renovations. The insureds brought breach of contract and bad faith claims, based upon the alleged failures “(1) to pay to replace the entire marble kitchen floor; (2) to pay for a two-bedroom suite; (3) to pay for additional costs for food; and, (4) to pay for depreciation.” The insurer sought summary judgment on the bad faith claims, which the court granted.

The court generally found the coverage and claims handling causes of action lacked factual support, and so could not support a bad faith claim. Its only detailed bad faith analysis went to a claim for providing adequate living accommodations when the insureds had to vacate their home for repairs.

“Plaintiffs claim that [the insurer] refused in bad faith to provide Plaintiffs a two-bedroom suite and now acts in bad faith by not paying the difference. Plaintiffs cite no record evidence suggesting [the insurer] unreasonably refused to provide them a two-bedroom suite. To the contrary, [the insurer] points to evidence that it did attempt to do so — after Plaintiffs requested to move from a two-bedroom suite already being provided by [the insurer] — but there were no two-bedroom suites available in the location Plaintiffs requested. Plaintiffs also do not identify a provision in the insurance contract obligating [the insurer] to pay the difference.”

Date of Decision: November 15, 2017

Barnwell v. Liberty Mutual Insurance Co., CIVIL ACTION NO. 16-4739, 2017 U.S. Dist. LEXIS 188427 (E.D. Pa. Nov. 15, 2017) (Beetlestone, J.)