OCTOBER 2010 BAD FAITH CASES NO BAD FAITH WHEN EXCLUSION FOR COVERAGE AS TO INSURED AND INSURED’S EMPLOYEE HAS NO STANDING UNDER POLICY (Middle District)
In Empire Fire & Marine Insurance Company v. Jones, the insured ran a trash collection business. When one of his employees attempted to jump aboard the outside of the truck after throwing a trash bag into the back of the truck, he slipped and fell onto the road, and the truck proceeded to run over the employee’s lower leg, causing him severe injuries.
The insured had a “truckers coverage” insurance policy with the insurer at the time of the accident. The policy included a statement that the insurer would “pay all sums an [insured] legally must pay as damages because of ‘bodily injury’ or property damage to which this insurance applies, caused by an ‘accident’ and resulting from the ownership, maintenance or use of a covered ‘auto.’”
However, the policy also contained an exclusion, which stated that the coverage would not apply to bodily injury to an employee suffered in the course of employment by the insured or performing the duties related to the conduct of the insured’s business.
At issue in the case was whether the injured party was actually an employee of the insured (which would place his under the exclusion), or whether he was simply a “temporary worker,” which would allow the insured to recover from the insurer under the policy. After an analysis of the exclusion clause and the definition of “employee,” the court upheld the magistrate judge’s recommendation that the injured party was an employee instead of a temporary worker, and therefore it decided that the accident was excluded from the insurer’s liability coverage owed to the insured.
The injured party had filed his own counterclaim against the insurer, alleging breach of contract and bad faith by denying him liability coverage. The magistrate judge had recommended that the court dismiss these claims as well, as the insurer had promptly addressed his claims for first party benefits and paid the full amount of medical benefits available to him under the policy.
Also, the court observed that because the injured party was a third party claimant and not an insured, he could not have a cause of action for bad faith.
The court agreed with the magistrate judge’s recommendation, summarized below, and promptly denied the injured party’s cross-Motion for Summary Judgment.
Date of Decision: September 20, 2010
Empire Fire & Marine Ins. Co. v. Jones, 4:09-cv-422, United States District Court for the Middle District of Pennsylvania, 2010 U.S. Dist. LEXIS 94936 (Sept. 13, 2010) (Jones III, J.)
In Empire Fire & Marine Insurance Company v. Jones, the insured ran a trash collection business. When one of his employees attempted to jump aboard the outside of the truck after throwing a trash bag into the back of the truck, he slipped and fell onto the road, and the truck proceeded to run over the employee’s lower leg, causing him severe injuries.
The insured had a “truckers coverage” insurance policy with the insurer at the time of the accident. The policy included a statement that the insurer would “pay all sums an [insured] legally must pay as damages because of ‘bodily injury’ or property damage to which this insurance applies, caused by an ‘accident’ and resulting from the ownership, maintenance or use of a covered ‘auto.’” However, the policy also contained an exclusion, which stated that the coverage would not apply to bodily injury to an employee suffered in the course of employment by the insured or performing the duties related to the conduct of the insured’s business.
The accident victim did not have an employment contract with the business owner, but the parties instead had a loosely understood agreement where the victim would work one or two days a week during certain times. At issue in the case was whether the injured party was actually an employee of the insured (which would place his situation within the policy’s exclusion), or whether he was simply a “temporary worker,” which would allow the insured to recover from the insurer under the policy.
The victim filed a Complaint for breach of contract and statutory bad faith. In the bad faith claim, he asserted that the insurer was liable because of its refusal to pay him first party benefits and because it denied him liability coverage benefits without adequately investigating whether he was a “temporary worker” under the insurance policy.
Citing case law, the court first noted that the “good faith standard requires the insurance company to evaluate the case in an ‘honest, intelligent and objective’ manner.” It then reinforced the Pennsylvania bad faith standard that there must be “clear and convincing evidence that the insurer did not have a reasonable basis for denying benefits under the policy and that the insurer knew of or recklessly disregarded its lack of reasonable basis in denying the claim.”
Using the standards mentioned above, the magistrate judge stated that the insurer did not act in bad faith in this situation. First, the evidence showed that the insurer promptly addressed the victim’s claim for first party benefits and paid the full amount of medical benefits available under the policy.
The magistrate judge also noted that the insurer did not fail to conduct an adequate investigation, as it properly determined that the victim was bringing his Complaint as a third-party claimant, not an insured, and a third party claimant cannot have a cause of action for bad faith under Pennsylvania law. Therefore, the magistrate judge recommended that the court grant the insurer’s Motion for Summary Judgment concerning the bad faith claim. As summarized above, this Report and Recommendation was adopted by the District Court.
Date of Decision: August 19, 2010
Empire Fire & Marine Ins. Co. v. Jones, Civil Action No.. 4:cv-09-0422, 739 F. Supp. 2d 746, United States District Court for the Middle District of Pennsylvania, 2010 U.S. Dist. LEXIS 101046 (Aug. 19, 2010) (Blewitt, U.S.M.J.)
