Archive for the 'PA - Claims Handling (unreasonable)' Category
In this property loss case arising from a home fire, the insurer’s public adjuster estimated personal property damages at over $220,000. The insurer’s various experts estimated the personal property losses at approximately $51,000.
The insurer’s claim handler relied upon two vendors, one to inventory the lost property and the other to value the items inventoried. The claim handler concluded that the public adjuster’s inventory and photographs did not justify the $220,000 claim, so he adhered to the results of the insurer’s expert vendors.
The insured brought claims for breach of contract and bad faith, and the insurer moved for summary judgment on the bad faith claim.
The court denied summary judgment. It found the following facts in the record supported a potential bad faith claim:
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The insureds offered evidence the insurer’s claim handler did not know how his valuation expert obtained the price and depreciation schedules in the lower estimate.
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The insurer’s proof of loss requirements for the burned items was “significantly burdensome.”
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The insurer’s adjuster failed to send a proof of loss.
Taking these facts in the light most favorable to the insureds, the court concluded they may show the insurer knew there was no reasonable basis for failing to increase its value estimate, or recklessly disregarded the absence of a reasonable basis to do so.
Date of Decision: June 20, 2019
Obelkevich v. Safeco Insurance Co., U. S. District Court Middle District of Pennsylvania No. 3:18cv1111, 2019 U.S. Dist. LEXIS 103177 (M.D. Pa. June 20, 2019) (Munley, J.)
In Wilson v. Erie Insurance Group, the Superior Court reversed the entry of a judgment for non pros on a bad faith claim which had been in suit for 16 years.
Among other points, the appellate court observed that the focus in bad faith cases is the insurer’s conduct and state of mind, not the insured’s. Thus, the Court observed:
[B]ad faith applies to “those actions an insurer took when called upon to perform its contractual obligations of defense and indemnification or payment of a loss that failed to satisfy the duty of good faith and fair dealing implied in the parties’ insurance contract.” In order to prove bad faith, a plaintiff must show by clear and convincing evidence that the insurer did not have a reasonable basis for denying benefits under the policy, and knew or recklessly disregarded its lack of reasonable basis in denying the claim. … Thus, the insured’s argue, a bad faith action turns on the reasonableness of the conduct of the insurer, not the insured. …
Similarly, although the [insureds] could not remember the timing of … settlement offers, and the amount of those offers, it did not impair [the insurer’s] ability to defend the case. All of that information is documented in [the insurer’s] files or, in some cases, admitted in the pleadings. The fact that the [the insureds] could not remember if they had any expectations in terms of settlement was of no consequence as their expectations are irrelevant in this bad faith case. See Rhodes v. USAA Casualty Ins. Co., 2011 PA Super 105, 21 A.3d 1253 (Pa.Super. 2011) (holding expectations of the insureds are not material to bad faith liability). It is difficult to imagine how [the insurer] was substantially impaired in its ability to present a defense by the [the insureds’] inability to recall these details. Moreover, if [the insurer] genuinely required that information, it would not have waited until 2018 to take the depositions.
Date of Decision: May 13, 2019
Wilson v. Erie Insurance Group & Erie Insurance Exchange, Superior Court of Pennsylvania No. 717 WDA 2018, 2019 Pa. Super. Unpub. LEXIS 1867 (Pa. Super. Ct. May 13, 2019) (Bowes, Shogan, Strassburger, JJ.)
In Feingold v. State Farm, the Superior Court dealt with an unusual set of procedural circumstances, but we only focus on its discussion of bad faith pleading standards. The court states:
An insured has a cause of action “if the court finds that the insurer has acted in bad faith toward the insured[.]” 42 Pa.C.S. § 8371. To prove a bad faith claim, the insured must present clear and convincing evidence that (1) the insurer did not have a reasonable basis for denying benefits under the policy, and (2) the insurer knew or recklessly disregarded its lack of reasonable basis in denying the claim. …
Based on our review of his complaint, [plaintiff-assignee] failed to allege either requisite element. First, [plaintiff-assignee] averred that after the UIM arbitration award, [the insurer] informed him that it did not believe the [the insureds] were entitled to UIM damages under their policy. [The] complaint did not allege that [the insurer] was without a reasonable basis for denying benefits. Second, [plaintiff-assignee] averred only that [the insurer] did not advise him of a specific reason for denying the … UIM claims. This is not sufficient to demonstrate that [the insurer] knew or recklessly disregarded its lack of a reasonable basis for denying the claim. Accordingly, we find no abuse of discretion or error in the trial court’s determination that the bad faith claim was frivolous.
Date of Decision: May 17, 2018
Feingold v. State Farm Insurance Co., Superior Court of Pennsylvania No. 2340 EDA 2018, No. 2833 EDA 2018, 2019 Pa. Super. Unpub. LEXIS 1931 (Pa. Super. Ct. May 17, 2019) (Kunselman, Murray, Pelligrinia, JJ.)
As we have discussed on this Blog for many years, case law is divided on whether statutory bad faith can exist if no coverage is due. We addressed this in some detail within this October 2018 post, summarizing a federal case where the court stated that Pennsylvania law allows for statutory bad faith even in the absence of any coverage obligation. In that October 2018 post, we additionally noted the presence of case law that would allow a bad faith claim to proceed where coverage is not due for procedural reasons, e.g., an otherwise covered claim is barred by a contractual limitations period. By contrast, this even more recent post summarizes an opinion, from the same federal court, finding there can be no bad faith if no coverage is due.
Linked here is a detailed article addressing whether Pennsylvania’s bad faith statute only addresses bad faith coverage denials and refusals to defend, and does not provide relief for poor claims handling or the like when these underlying benefits are not due. Under this view, poor claims handling or communications failures are evidence of statutory bad faith in denying benefits, but such conduct is not actionable (cognizable) statutory bad faith in itself.
BAD FAITH CLAIM CAN PROCEED EVEN IF COVERAGE NOT DUE UNDER CONTRACTUAL LIMITATIONS PROVISION
In the present case, arising out of the very same federal court as the aforementioned cases, the insured’s breach of contract claim was dismissed as time-barred by the policy’s suit limitation clause. The court, however, permitted the bad faith action to proceed. Specifically, the court stated: “Because Plaintiff asserts bad faith as to conduct beyond [the carrier’s] denial of coverage, the Court must consider the sufficiency of Plaintiff’s bad faith claim even though Plaintiff’s breach of contract claim is time-barred.”
The court quoted from footnote 3 of the 2017 Dagit case: “It is well established that a claim for bad faith brought against an insurer pursuant to 42 Pa. C.S. § 8371 is a separate and distinct cause of action and is not contingent on the resolution of the underlying contract claim. Thus, if bad faith is asserted as to conduct beyond a denial of coverage, the bad faith claim is actionable as to that conduct regardless of whether the contract claim survives.”
[Note: Dagit relies on cases such as Doylestown Electric Supply Co. v. Maryland Casualty Insurance Co., 942 F. Supp. 1018 (E.D. Pa. 1996), March v. Paradise Mutual Insurance Co., 646 A.2d 1254 (Pa. Super. Ct. 1994), and the Third Circuit’s unpublished opinion in Gallatin Fuels, Inc. v. Westchester Fire Ins. Co., 244 F. App’x 424 (3d Cir. 2007). As in the present case, Doylestown Electrical and March involved contractual suit limitations provisions barring coverage, and not lack of coverage under substantive policy provisions. Gallatin Fuels addressed the extraordinary situation where the policy was not in effect at the relevant time, but the court held the bad faith statute still applied because the insurer believed it had a policy in effect and acted poorly while holding that belief. These cases are addressed in the article linked here and above.]
INSURED ADEQUATELY PLEADS BAD FAITH
After finding the bad faith claim could proceed, the court still had to address the complaint’s adequacy. It found the bad faith claim adequately pleaded, stating:
[The insurer] argues that [the insured] does not provide any facts to support his allegation that [the insurer] acted in bad faith by denying him coverage under the insurance policy for the damage sustained to his home by the snowstorm. … To the contrary, [the insured] sets forth a myriad of facts to support his claim. For example, [the insured] alleges he was given contradictory information by [the insurer’s] agents as to the coverage of his policy and how he could collect under his policy and subsequently appeal [the insurer’s] denial of that coverage, which he relied upon to his detriment. … [The insured] also alleges that he was instructed to file multiple claims, which caused him to pay multiple deductibles and which ultimately discredited his claim. … In holding [the insured’s] Second Amended Complaint to a “less stringent standard,” as required of the Court in light of [his] pro se representation, the Court finds that [the insured] sufficiently alleged a claim for bad faith and Defendant’s Motion to Dismiss is denied as to this claim.
Date of Decision: May 10, 2019
Nguyen v. Allstate Insurance Co., U. S. District Court Eastern District of Pennsylvania CIVIL ACTION NO. 18-5019, 2019 U.S. Dist. LEXIS 79822 (E.D. Pa. May 10, 2019) (Kenney, J.)
Three April 2019 decisions out of Pennsylvania’s Eastern District bring up the ongoing issue of whether alleged Unfair Insurance Practices Act (UIPA) violations may be used in any manner to establish statutory bad faith claims under 42 Pa.C.S. § 8371. We also discussed this issue in a February 2019 post that can be found here.
Case holding UIPA violations may be used to prove bad faith
In the April 3, 2019 Blease decision, the court relied heavily on the UIPA in finding the insured adequately pleaded a statutory bad faith case. That opinion is summarized here.
In particular, the court looked to the UIPA code sections governing 45-day status notices when the claim is not resolved within 30 days. Relying on Pennsylvania Superior Court precedent, the Blease Court stated: “This Court further notes that a plaintiff seeking damages for an insurer’s bad faith conduct under 42 Pa. Cons. Stat. § 8371 may attempt to prove bad faith by demonstrating that the insurer has violated one or more provisions of related Pennsylvania insurance statutes or regulations, even if they do not independently provide for private causes of action.”
It is not wholly clear whether this means a UIPA violation may be used as evidence of a statutory bad faith claim, or whether the violation constitutes definitive proof, in and of itself, to establish at least the first prong of the Terletsky/Rancosky bad faith test (unreasonableness).
Case holding UIPA provides an evidentiary yardstick for bad faith cases
On April 23, 2019, another Eastern District Court issued a detailed opinion granting partial summary judgment to the insured, by holding that the insurer acted in bad faith during a very specific period of time. The court left other issues of bad faith, and other time periods, to the jury.
In Shawnee Tabernacle Church v. GuideOne, the court carried out a close factual analysis showing no dispute of material fact that the claim adjusters acted unreasonably and in bad faith in delaying the claim handling process over a period of many months, where there was no excuse for denying coverage or promptly responding to the insured. Thus, the court stated: “As a matter of law, I find that [the insurer] acted in bad faith when it abandoned the investigation and resolution of Plaintiffs’ claim between June 16, 2015 and October 5, 2015, and then further delayed a determination of coverage until December 11, 2015, despite the fact that it possessed all relevant information about the vacancy provision once the EUOs were complete.”
Following Rancosky, the court observed that the insured need not prove ill-will or self-interest to establish statutory bad faith. Moreover, relying on Pennsylvania Superior Court precedent, the court found that “bad faith may include ‘lack of good faith investigation into fact[s], and failure to communicate with the claimant,’ both of which certainly occurred in this case between June and December. … ‘Similarly, a delay in investigation of a claim may constitute bad faith where it involves [i]nexcusable periods of inactivity, unreasonable assumptions, and inadequate communication.’ Here, [the insurer] has offered no excuse for the inactivity with respect to coverage between June 16 and December 11, and it engaged in little to no communication with Plaintiffs about the coverage issue during the same period.”
Getting to the UIPA, again citing Superior Court precedent, the court found that “[t]he lack of communication is a violation of Section 146.7(c)(1) of Title 31 of the Pennsylvania Code, which requires a report to the insured every 45 days explaining the reasons for delay in resolving a claim. Although such a violation does not establish bad faith per se, it constitutes relevant evidence. But Section 146.7(c)(1) has relevance beyond the obligation to communicate. By specifying the frequency with which a carrier must report to its insured, it provides an objective yardstick recognized by the Pennsylvania Insurance Department as to what constitutes a reasonable interval within which a carrier should be able to address the merits of a claim. From mid-June through mid-December, four full intervals elapsed without resolution or explanation, even as [the insured] faced financial peril. This further supports the conclusion that [the insurer’s] conduct was reckless during this period and constituted bad faith.”
UIPA violations cannot be used as evidence of statutory bad faith
By contrast, also on April 23, 2019, a third Eastern District Judge appears to deny any role for the UIPA in determining a statutory bad faith claim. The decision in Horn v. Minnesota Life Insurance Company can be found here. To quote that decision:
At Count IV, Plaintiff asserts that the handling of her claim under the Policy constituted bad faith, thus, entitling her to damages under 42 Pa. Cons. Stat. § 8371. Plaintiff contends that [the insurer] acted in bad faith by, inter alia, denying her claim, engaging in misleading marketing practices, failing to communicate regularly about its investigation, and acting in a manner prohibited by the Unfair Insurance Practices Act (“UIPA”), 40 Pa. Stat. § 1171.1 et seq. “To prevail on a bad faith claim, the insured must prove two elements: ‘(1) that the insurer did not have a reasonable basis for denying benefits under the policy; and (2) that the insurer knew of or recklessly disregarded its lack of a reasonable basis in denying the claim.'” U.S. Fire Ins. Co. v. Kelman Bottles, 538 F. App’x 175, 182 (3d Cir. 2013) (quoting Nw. Mut. Life Ins. Co. v. Babayan, 430 F.3d 121, 137 (3d Cir. 2005)). The insured must prove these elements by clear and convincing evidence, and “the insured’s burden in opposing a summary judgment motion brought by the insurer is commensurately high.” Babayan, 430 F.3d at 137 (internal quotations omitted). Here, this Court finds that [the insurer] had a reasonable basis for denying benefits; namely, [the insured’s] premium had not been paid, and the grace period described in the Policy had expired at the time of [the insured’s] death. As such, Plaintiff cannot prove the first element of her bad faith claim, and summary judgment is granted with respect to that claim.
Notwithstanding the foregoing, Plaintiff argues that Defendants’ bad faith is evidenced by their alleged violation of the UTPCPL and “insurance regulations” such as the UIPA and the Unfair Claims Settlement Practices regulations (“UCSP”), 31 Pa. Code §§ 146.1-146.10. However, Plaintiff is mistaken as these claims fail as a matter of law. See Leach v. Nw. Mut. Ins. Co., 262 F. App’x 455, 459 (3d Cir. 2008) (holding that “insofar as [plaintiff’s] claim for bad faith was based upon an alleged violation of the UIPA, it failed as a matter of law.”); Dinner v. U.S. Auto. Ass’n Cas. Ins. Co., 29 F. App’x 823, 827 (3d Cir. 2002); (“it is apparent from a comparison of bad faith standard [that the Pennsylvania Superior Court] adopted with the provisions of the UIPA and the UCSP that much of the conduct proscribed by the latter is wholly irrelevant” to the bad faith analysis); Watson v. Nationwide Mut. Ins. Co., 2011 U.S. Dist. LEXIS 118873, 2011 WL 4894073, at *4 (E.D. Pa. Oct. 12, 2011) (observing that, since the current bad faith standard was established in Terletsky, “courts in the [Third] circuit have . . . refused to consider UIPA violations as evidence of bad faith.”). Therefore, summary judgment is granted with respect to Plaintiff’s claim of bad faith.
A link to other UIPA cases summarized on this Blog can be found here.
Copies of these April 2019 opinions can be found here:
Blease v. Geico Casualty Co., U.S. District Court Eastern District of Pennsylvania CIVIL ACTION NO. 18-3893, 2019 U.S. Dist. LEXIS 57145 (E.D. Pa. April 3, 2019) (Jones, II, J.)
Shawnee Tabernacle Church v. GuideOne Insurance, U. S. District Court Middle District of Pennsylvania CIVIL ACTION No. 16-5728, 2019 U.S. Dist. LEXIS 68442 (E.D. Pa. April 23, 2019) (McHugh, J.)
Horn v. Minnesota Life Insurance Co., U. S. District Court Eastern District of Pennsylvania CIVIL ACTION NO. 17-238, 2019 U.S. Dist. LEXIS 69016 (E.D. Pa. April 23, 2019) (Quiñones Alejandro, J.)
As we posted earlier today, the theme is plaintiffs adequately pleading bad faith claims in federal court.
In this second post, the insured set out plausible bad faith claims in this property damage case by making specific factual allegations. The key assertions were that the insurer improperly “hired, retained and relied upon the opinion of an engineer or other professional knowing that such opinion would be favorable to [the insurer] on a financial incentive basis; and (2) disregarded information provided to it from the Plaintiffs that [the insurer’s] inspection and engineering report was inadequate, flawed, and erroneous.”
The court found the “complaint, taken as a whole, goes beyond a mere boilerplate recital of the elements of the statute. Rather, as we construe the complaint, it provides a chronology detailing alleged failures … to evaluate this claim in good faith. Instead, according to the plaintiffs [the insurer] relied upon false justifications to deny their claim; under-valuated their property; failed to account for the loss of use of the property; and demonstrated bad faith in its investigation of this insurance claim in 14 different ways, including specific allegations that [the insurer]: (1) hired, retained and relied upon the opinion of an engineer or other professional knowing that such opinion would be favorable to Allstate on a financial incentive basis; and (2) disregarded information provided to it from the Plaintiffs that Allstate’s inspection and engineering report was inadequate, flawed, and erroneous.”
The issue of the expert’s alleged financial bias could not be resolved in a judgment on the pleadings. “Thus, the plaintiffs’ complaint raises questions of motivation and bias which cannot be resolved on the pleadings alone. Therefore, the task of determining whether this expert report provides a defense as a matter of law to the bad faith claim in this case, in our view, may not be performed on consideration of a motion for judgment on the pleadings, where we must simply assess the adequacy of the pleadings. Instead, assessment of any such defense must await a properly documented motion for summary judgment.”
Date of Decisions: January 8, 2019 (Report and Recommendation), adopted by District Court on April 25, 2019
The common theme in today’s two posts is the plaintiffs’ adequately pleading bad faith in federal court.
In this first post, the carrier moved to dismiss the uninsured motorist bad faith claim. The insured alleged bad faith for the carrier’s failing to negotiate or offer adequate compensation for damage claims submitted, with an apparent policy limits ($300,000) demand in place.
The court found the complaint adequately pleaded a bad faith claim, focusing on delays in the claims handling process. Significantly, some of the facts the court relied upon were framed expressly as violations of the Unfair Insurance Practices Act (UIPA). [Note: Compare this decision to the Eastern District Horn case, decided three weeks later, where the court stated “that, since the current bad faith standard was established in Terletsky ‘courts in the [Third] circuit have … refused to consider UIPA violations as evidence of bad faith.'” The Terletsky standards have since been adopted by Pennsylvania’s Supreme Court in Rancosky.]
The following facts were considered sufficient to support a plausible claim: “Defendant unduly delayed the investigative insurance process, which is aptly illustrated by his allegations that: Defendant became aware of Plaintiff’s claim ‘nearly immediately’ after the accident; Defendant failed to conduct a Statement Under Oath until January 5, 2018—nearly 18 months after the accident; Defendant did not perform an Independent Medical Evaluation for the case until May 9, 2018—nearly 23 months after the accident; and, Defendant did not make a first claim offer until two years and nine months after the accident.”
“With that said, the statutory violation would not be found in the delay per se, but rather in Defendant’s alleged failure to send any periodic, statutorily mandated communications, in writing, explaining such delay, and informing Plaintiff of when a decision on the claim might be expected, in violation of 31 Pa. Code § 146.6. Beyond the alleged delay in the investigation of the disputed claim, Plaintiff further pleads Defendant’s complete failure to provide the required written notices in connection with Defendant’s acceptance (or denial) of the disputed insurance claim until 17 months after the accident, in violation of 31 Pa. Code § 146.7(c)(1).” [Note: The court’s footnotes citing these two codes sections are quoted at length below]
“The consistent lack of timely notices, if ultimately proven true, would be relevant in determining the nature of Defendant’s dealings with Plaintiff, particularly so when considering Plaintiff’s averment that he did not receive a settlement offer until two years and nine days after the claimed accident, and for $285,000.00 below [the $300,000.00] policy limits.”
“This Court further notes that a plaintiff seeking damages for an insurer’s bad faith conduct under 42 Pa. Cons. Stat. § 8371 may attempt to prove bad faith by demonstrating that the insurer has violated one or more provisions of related Pennsylvania insurance statutes or regulations, even if they do not independently provide for private causes of action. See Berg v. Nationwide Mut. Ins. Co., 2012 PA Super 88, 44 A.3d 1164, 1174 (Pa. Super. 2012).”
“This Court finds that the extended duration, coupled with the alleged statutory violations, speak to a plausible ‘reckless disregard’ by Defendant as to its duties relating to good faith and fair dealing.”
Date of Decision: April 3, 2019
Blease v. Geico Casualty Co., U.S. District Court Eastern District of Pennsylvania CIVIL ACTION NO. 18-3893, 2019 U.S. Dist. LEXIS 57145 (E.D. Pa. April 3, 2019) (Jones, II, J.)
Footnote 5 states: Section 146.6 sets forth appropriate standards for prompt investigations of insurance claims, providing that “[e]very insurer shall complete investigation of a claim within 30 days after notification of claim, unless the investigation cannot reasonably be completed within the time. If the investigation cannot be completed within 30 days, and every 45 days thereafter, the insurer shall provide the claimant with a reasonable written explanation for the delay and state when a decision on the claim may be expected.” 31 Pa. Code § 146.6.
Footnote 6 states: 31 Pa. Code § 146.7(c)(1) sets forth standards for prompt, fair, and equitable settlements applicable to insurers: “If the insurer needs more time to determine whether a first-party claim should be accepted or denied, it shall so notify the first-party claimant within 15 working days after receipt of the proofs of loss giving the reasons more time is needed. If the investigation remains incomplete, the insurer shall, 30 days from the date of the initial notification and every 45 days thereafter, send to the claimant a letter setting forth the reasons additional time is needed for investigation and state when a decision on the claim may be expected.” 31 Pa. Code § 146.7(c)(1).
This case involved mortgage insurance. The insured alleged breach of contract, conversion, unjust enrichment, and bad faith. The insurer moved to dismiss on a number of grounds. The court refused to dismiss the bad faith count.
Plaintiff alleged bad faith on the basis that the insurer “denied, rescinded, and curtailed coverage for valid claims and refused to reimburse [the insured] for premium overpayments.” The court found the Complaint “replete with allegations arguing that [the insurer] lacked a reasonable basis for its coverage decisions.” Moreover, the insured alleged the insurer “knew and understood that if it wrongfully rescinded, denied and/or curtailed claims that third parties would seek to have [the insured] repurchase these loans.” Thus, both elements of a bad faith claim were satisfied.
The court found the following factual allegations, among others, sufficient to make out a plausible claim under Rule 8 and Twombly/Iqbal: Curtailing benefits through implementing post-hoc servicing guidelines and standards; misinterpreting policy language to deny claims improperly based on lateness and missing documents; rescinding claims based on “post-hoc re-underwriting” loans it had previously agreed to insure; and refusing to return premium overpayments. Further, the plaintiff actually listed over 5,000 specific loans at issue in its complaint.
These allegations could not be treated as conclusory, and the motion to dismiss the bad faith claim was denied.
Date of Decision: March 22, 2019
Nationstar Mortgage LLC v. Radian Guaranty, Inc., U. S. District Court Eastern District of Pennsylvania CIVIL ACTION NO. 18-03798, 2019 U.S. Dist. LEXIS 48164, 2019 WL 1318541 (E.D. Pa. Mar. 22, 2019) (Pappert, J.)
In these two UIM cases, Eastern District Judge Joseph F. Leeson, Jr. addressed motions to dismiss bad faith claims. In Krantz v. Peerless, he dismissed the bad faith claim and remanded the action to state court, but in Perez-Garcia v. State Farm, the bad faith claim survived a motion to dismiss. The pleading differences in these two cases are described below.
Failure to plead to supporting facts results in dismissal of bad faith claim.
In Krantz, the UIM bad faith plaintiff argued that the insurer improperly interpreted the policy in refusing to pay full policy limits. The complaint alleged the insurer relied upon an invalid and unlawful setoff provision in withholding $37,500 out of the $100,000 policy limit. Judge Leeson found, however, the insured failed to plead facts showing the setoff provision was invalid, “or, more importantly, that [the insurer] knew or should have known that it was denying the full amount of benefits based on an invalid provision.”
In granting the motion to dismiss the bad faith claim, Judge Leeson also found the following allegations conclusory because the complaint lacked any other supporting factual allegations that could make these statement plausible:
(1) the insurer did not make any good faith offers to settle despite repeated demands;
(2) the insurer “failed to objectively and fairly evaluate his claim”;
(3) the insurer “failed to promptly tender payment of the fair value of the claim”; and
(4) the insurer failed to reasonably investigate the claim.
Judge Leeson gave examples of the kind of facts needed to support these sorts of conclusory allegations, but such facts were absent from the complaint. He concluded: “’Essentially, Plaintiff’s cursory allegations assert that Defendant lacked a reasonable basis for denying Plaintiff’s claim for benefits, but do not provide any factual allegations from which the Court could make a plausible inference that Defendant knew or recklessly disregarded its lack of a reasonable basis for denying benefits.’”
The case had been removed from the Court of Common Pleas of Lancaster County. After dismissing the bad faith count, plaintiff’s damage claims no longer exceeded $75,000. Thus, Judge Leeson remanded the case.
Date of Decision: March 11, 2019
Krantz v. Peerless Indemnity Insurance Co., U. S. District Court Eastern District of Pennsylvania No. 18-cv-3450, 2019 U.S. Dist. LEXIS 38923, 2019 WL 1123150 (E.D. Pa. Mar. 11, 2019) (Leeson, Jr., J.)
Factual details support the bad faith claim, but UTPCPL claim dismissed.
In Perez-Garcia, the insured alleged he “incurred medical bills and wage loss following an automobile accident caused by an underinsured driver….” The complaint alleged the insured provided “medical documentation clearly setting forth injuries to [his] right knee and injuries to the left ankle caused by the motor vehicle accident….” [Emphasis added.]
To support his bad faith claims, plaintiff further alleged the insurer’s claim specialist “asserted, without medical support, that none of the injuries that Plaintiff sustained were the result of the motor vehicle accident” at issue. The complaint alleged the insurer refused to pay any benefits on the basis on this adjuster’s medical conclusions, despite medical reports to the contrary which had been provided to the adjuster.
The insurer unsuccessfully moved to dismiss the bad faith claim. Judge Leeson first rejected the notion that this was merely a bald claim that the insurer refused to pay UIM benefits after having paid first-party benefits. Rather, the complaint specifically alleged that the insurer had medical documentation in hand that supported the insured’s version of events, but rejected that evidence without any medical evidence to the contrary.
The complaint alleged the insurer did not conduct a proper investigation into the medical history. Rather, the insurer allowed its own claim adjuster — described as “a non-medical reviewer” — to substitute the adjuster’s medical judgment for the judgment of actual medical professionals. These facts were sufficient to state a bad faith claim.
Judge Leeson did dismiss plaintiff’s Unfair Trade Practices and Consumer Protection Law (UTPCPL) claim on two bases: (1) there were no allegations that plaintiff relied upon the conduct at issue in suffering any damages; and (2) the UTPCPL can only address claims surrounding formation of the insurance contract, not post-contract claim denial.
Date of Decision: March 15, 2019
Perez-Garcia v. State Farm Mutual Automobile Insurance Co., U. S. District Court Eastern District of Pennsylvania No. 5:18-cv-03783, 2019 U.S. Dist. LEXIS 42327 (E.D. Pa. Mar. 15, 2019) (Leeson, Jr., J.)
In this UIM bad faith case, the insured’s complaint alleged that the claim history showed the other driver was at fault, and the other driver’s carrier had paid policy limits. Yet, when the insured sought further damages under his UIM policy, the carrier refused to pay over a period of three years.
In its answer, the carrier asserted the facts showed the insured was at fault, not the other driver. The carrier attached the police report and a deposition from the underlying case in support of that position. It moved to dismiss the bad faith claim, or alternatively for summary judgment based on its factual position that the insured caused the accident.
Magistrate Judge Carlson recommended denying the motion to dismiss, and denying the summary judgment motion without prejudice. The insurer could renew the summary judgment motion after a full factual record was developed in discovery. District Judge Mariani adopted the Report and Recommendation based on Magistrate Judge Carlson’s reasoning.
First, the court denied the motion to dismiss. The complaint provided a detailed chronology of persistent refusals to pay UIM benefits spanning several years. The insured further alleged that the insurer’s position in denying the claim was incorrect, unreasonable, and taken in bad faith. The insurer argued the facts showed it was prudent in its decision making, but the court found these arguments required looking beyond the pleadings, something the court could not do on a motion to dismiss.
On the alternative summary judgment motion, the court observed summary judgment is rarely granted when discovery is incomplete. When this does happen, it is typically only when the missing discovery does not implicate material facts on the issue at hand.
The court found that factual issues around which driver caused the accident, and the carrier’s reasonableness in concluding the insured caused the accident, were open issues of material fact on the bad faith claim. Thus, the summary judgment motion was premature until discovery was complete on these issues.
Dates of Decision: December 11, 2018 (Report and Recommendation), January 7, 2019 (Order adopting Report and Recommendation)
Baltzley v. State Farm Mut. Auto. Ins. Co., U.S. District Court Middle District of Pennsylvania Civil No. 3:18-CV-00959, 2018 U.S. Dist. LEXIS 209672 (M.D. Pa. Dec. 11, 2018) (Carlson, M.J.) (Report and Recommendation), adopted by District Court on January 7, 2019 (Mariani, J.)
The court found the insured adequately pleaded a statutory bad faith claim in this UIM case, based on claim handling.
The insured allegedly suffered serious injuries and underwent a wide range of medical treatments. He also claimed over $1 Million in lost wages and benefits.
Plaintiff allegedly proferred a policy confirmation, and provided the insurer with medical records, a police report and an economic report, in support of his policy limits demand. The complaint alleged that the insured had “voluntarily provided and otherwise fully complied with all requests by [the insurer] for medical records, a sworn statement by Plaintiff, an independent medical evaluation, and other information.” Significantly, all information provided supported both the extent of the insured’s injuries and damages, and that the other driver caused the accident.
The insured alleged the carrier did not respond for three months, and subsequently “abruptly denied the claim”.
The court found these pleadings sufficient “to find both that Defendant lacked a reasonable basis for its denying Plaintiff’s claim for UIM benefits under the Policy, and that Defendant knew or recklessly disregarded its lack of a reasonable basis in denying the claim.”
Date of Decision: December 3, 2018
Baldridge v. Geico Insurance Co., U.S. District Court Western District of Pennsylvania No 18cv1407, 2018 U.S. Dist. LEXIS 204117, 2018 WL 6305589 (W.D. Pa. Dec. 3, 2018) (Schwab, J.)
