JANUARY 2013 BAD FAITH CASES: COURT REJECTS MAGISTRATE’S R&R, WHICH DENIED HEARING TO EFFECTUATE SETTLEMENT, BUT DID NOT ADDRESS ASSIGNMENT OF BAD FAITH CLAIM (Middle District)

In Lehman v. Diamond Dev. Co., a magistrate judge denied a motion to effectuate a settlement between an insured corporation and an injured party, who brought suit after sustaining injuries in a slip and fall accident. The parties’ agreement contained: (1) an assignment of the insured corporation’s potential bad faith claim against its carrier for failing to tender indemnity and (2) a $50,000 settlement with a release of all claims against the insured corporation.

The court noted that there is some dispute as to the viability of such an assignment (see this blog), but ruled that the assignment was valid in this instance. Nevertheless, the magistrate recommended that, because counsel for the insured corporation did not disclose his belief that bad faith claims are un-assignable torts, the hearing was unnecessary and found for the injured party on the merits.

The district court rejected the magistrate’s report and recommendation and denied the motion for a hearing to effectuate the parties’ settlement for lack of jurisdiction. However, the court did not address the issue of whether a statutory bad faith claim is assignable under Pennsylvania law.

Date of Report and Recommendation: September 6, 2012
Date of District Court Decision: November 27, 2012

Lehman v. Diamond Dev. Co., No. 4:10-CV-197, 2012 U.S. Dist. LEXIS 171513, U.S. District Court for the Middle District of Pennsylvania (M.D. Pa. Sept. 6, 2012) (Arbuckle III, M.J.),

rejected by, motion denied by, Lehman v. Diamond Dev. Co., No. 4:10-cv-197, 2012 U.S. Dist. LEXIS 167731, U.S. District Court for the Middle District of Pennsylvania (M.D. Pa. Nov. 27, 2012) (Kane, J.)