NO PLAUSIBLE BAD FAITH CLAIM WHERE THERE IS SIMPLY A VALUATION DISPUTE OR REFUSAL TO IMMEDIATELY PAY POLICY LIMIT DEMAND (Middle District)

The insured failed to plead a plausible claim in this UM bad faith case.

The 18-year old insured was rear-ended by an uninsured motorist, and suffered a long list of injuries. She had $100,000 in UM coverage. The carrier offered $11,300 to settle her claims, and rejected a policy limit demand. The insured brought breach of contract and statutory bad faith claims, and the insurer moved to dismiss the bad faith claim.

In determining whether a plaintiff states a plausible bad faith claim, a court must separate conclusory allegations from factual allegations, because conclusory allegations are not entitled to an assumption of truth for Rule 12(b)(6) purposes.

Here, the complaint alleges at least 16 bases for bad faith (listed below). Magistrate Judge Schwab found, however, the complaint “contains mostly conclusory statements that are not supported by factual allegations.” Thus, “[a]lthough long, [the insured’s] list of how the defendant allegedly acted in bad faith contains conclusions, rather than facts.”

Magistrate Judge Schwab cites a number of cases finding these sorts of allegations to be conclusory, including Middle District Judge Caputo’s 2019 Peters decision, 2017 Meyers decision, and 2012 Sypeck decision, Middle District Judge Rambo’s 2018 Rickell decision, Middle District Judge Caldwell’s 2010 Muth decision, as well as the Third Circuit’s frequently cited 2012 Smith decision.

Next, in looking at the factual allegations, the insured merely alleges she was diagnosed with certain injuries, went through physical therapy, gave the insurer notice of her claim, and forwarded various records for the insurer’s review. The insured’s counsel spoke with the insurer’s claims department, and made the carrier aware the insured was 18 at the time of the accident, continued to suffer from visual impairment and post-traumatic headaches, among other injuries, as a result of the head trauma she suffered, and that the insurer offered $11,300 to settle.

“These factual allegations, however, are not enough to state a bad faith claim upon which relief can be granted.”

A disagreement over a claim’s value, without the facts needed to show bad faith, cannot alone create bad faith. Here, the insured did not allege “facts to support an inference that the defendant did not have a reasonable basis for its settlement offer or that the defendant knew or recklessly disregarded any lack of a reasonable basis for such an offer.” Citing the Third Circuit’s Smith decision (above), Judge Caputo’s 2019 Clarke decision and 2019 Moran decision, Eastern District Judge Baylson’s June 2020 Dietz decision, Middle District Judge Kane’s 2019 Rosenthal decision, and the 2009 Superior Court Johnson decision, Magistrate Judge Schwab observes that low but reasonable settlement offers do not constitute bad faith, and that a “low-ball” offer, standing alone, cannot make out a bad faith claim.

Nor can refusing immediately to pay a policy limit demand by itself constitute bad faith. “Indeed, courts have consistently held that a dispute or discrepancy in the valuation of a claim between the insurer and the insured is not alone indicative of bad faith.” The insured simply did not plead facts “from which it can plausibly be inferred that the defendant’s offer was unreasonable and made in bad faith, rather than made as part of the ordinary course of negotiations between insurers and insureds.” (internal quotation marks omitted)

Magistrate Judge Schwab dismissed the bad faith claim, but with leave to amend. This allowed for a second amended complaint to be filed “if appropriate, to state a bad faith claim upon which relief can be granted.”

Durdach v. LM General Insurance Company, U.S. District Court Middle District of Pennsylvania No. 3:20-CV-00926, 2021 WL 84174 (M.D. Pa. Jan. 11, 2021) (Schwab, M.J.)

The litany of conclusory allegations referenced above, include:

1. unreasonably delay[ing] the processing of a valid claim;

2. kn[owingly] or recklessly disregard[ing] the fact that the delay was unreasonable;

3. failing to objectively and fairly evaluate Plaintiff’s claim;

4. engaging in dilatory and abusive claims handling;

5. failing to adopt or implement reasonable standards in evaluating Plaintiff’s claim;

6. acting unreasonably and unfairly in response to Plaintiff’s claim;

7. not attempting in good faith to effectuate a fair, prompt, and equitable settlement of Plaintiff’s claim in which the Defendant’s liability under the policy had become reasonably clear;

8. subordinating the interests of its insured and those entitled under its insured’s coverage to its own financial monetary interests;

9. failing to promptly offer reasonable payment to the Plaintiff;

10. failing to reasonably and adequately investigate Plaintiff’s claim; k. failing to reasonably and adequately evaluate or review the medical documentation in Defendant’s possession;

11. violating the fiduciary duty owed to the Plaintiff;

12. acting unreasonably and unfairly by withholding underinsured motorist benefits justly due and owing to the Plaintiff;

13. failing to make an honest, intelligent, and objective settlement offer;

14. causing Plaintiff to expend money on the presentation of her claim; and

15. failing to make a reasonable settlement offer despite knowing the severity of a visual injury and post-traumatic headaches in an 18-year old.

[The insured] also alleges that the defendant failed to act in good faith and “engaged in wanton and reckless conduct….”