Search Results for 'amica'
The court found no coverage due for the insured’s business interruption losses resulting from the Covid-19 pandemic. For those interested in the court’s reasoning on this hotly litigated issue, the opinion can be found here. Today, we limit ourselves to insurance bad faith law issues only.
The insured did not pursue a statutory bad faith claim, but only a common law claim for breach of the duty of good faith and fair dealing. Having found no coverage due, Judge Gallagher, rejected the common law bad faith claim, stating:
‘[T]o recover under a claim of bad faith,’ the insured must show 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.’ ” Amica Mut. Ins. Co. v. Fogel, … (quoting Terletsky v. Prudential Prop. & Cas. Ins. Co., 649 A.2d 680, 688 (Pa. Super. Ct. 1994)); see also Treadways LLC v. Travelers Indem. Co., 467 F. App’x 143, 147 (3d Cir. 2012) (“Though we have held that bad faith may be found in circumstances other than an insured’s refusal to pay, ‘[a] reasonable basis is all that is required to defeat a claim of bad faith.’ ” (quoting J.C. Penney Life Ins. Co. v. Pilosi, 393 F.3d 356, 367 (3d Cir. 2004))).
“Pennsylvania courts have held that if the insurer properly denied a claim, the policyholder is unable to state a bad faith claim.” Kahn, … (citing Cresswell v. Pa. Nat’l Cas. Ins. Co., 820 A.2d 172, 179 (Pa. Super. Ct. 2003)). AGLIC properly denied Boscov’s insurance claims, so it did not act in bad faith. AGLIC’s alleged “failure to investigate” the matter also does not amount to bad faith. … Simply put, there was “nothing to investigate: coverage d[id] not exist on the face of [Boscov’s] claim[s].” Clear Hearing Sols., LLC v. Cont’l Cas. Co., … (rejecting bad faith claim premised on insurer’s denial of insurance coverage “without conducting any investigation”); Ultimate Hearing Sols. II, LLC v. Twin City Fire Ins. Co., … (same).
Date of Decision: June 30, 2021
Eastern District Judge Pappert previously dismissed the insured’s UIM bad faith claim. A summary of that decision can be found here.
Presently, Judge Pappert denied the insured’s motion for reconsideration. He cited case law making clear that motions for reconsideration are not second bites at the apple, but must show either: “(1) an intervening change in the controlling law; (2) the availability of new evidence that was not available when the court granted the motion … or (3) the need to correct a clear error of law or fact or to prevent manifest injustice.”
None of these factors existed. Thus, while the insured “may disagree with the Court’s determination, nothing in her motion shows that her bad faith claim was dismissed because of a clear error of law or that its dismissal amounts to manifest injustice.”
In his earlier decision, Judge Pappert also dismissed plaintiff’s claims for treble damages under the Motor Vehicle Financial Responsibility Law (MVFRL), on the basis the insured did not allege wanton conduct against the insurer. That dismissal, however, was without prejudice. The insured raised the same claim in its second amended complaint, but Judge Pappert found this amendment “still lacks sufficient allegations of wanton conduct, as she has not alleged ‘any new facts at all.’”
Rather than dismissing the claim under Rule 12(b)(6), consistent with the insurer’s motion Judge Pappert struck the treble damages claim per Rule 12(f).
Date of Decision: December 18, 2020
Canfield v. Amica Mut. Ins. Co., U.S. District Court Eastern District of Pennsylvania No. CV 20-2794, 2020 WL 7479615 (E.D. Pa. Dec. 18, 2020) (Pappert, J.)
Published on
October 19, 2020 in
PA - Claims Handling (reasonable), PA - Common Law Bad Faith (contractual or fiduciary basis), PA - Delay (Investigation/Claims handling), PA - Estimates, Valuation or Appraisal, PA - Experts, PA - Federal Pleading Inadequate, PA - MVFRL, PA - Negligence not bad faith, PA - Settlement related issues and PA - UIM/UM Cases.
Plaintiff was injured in an auto accident and made both PIP claims and underinsured motorist (UIM) claims. She found the carrier’s settlement offers and negotiations wholly inadequate, and brought statutory bad faith claims, and claims for damages under the Motor Vehicle Financial Responsibility Law (MVFRL) seeking treble damages and super interest for the insurer’s allegedly “wanton” conduct concerning her medical benefit claims.
MVFRL Claims
The court found the insured could proceed on her PIP claim under a breach of contract theory. However, the MVFRL claim for treble damages and 12% interest, under 75 Pa. C.S. § 1797(b)(4), was dismissed without prejudice. Judge Pappert held plaintiff had not pleaded “wanton” conduct, a predicate for gaining the extraordinary remedies under this statute.
The insurer also asserted the MVFRL count actually alleged a breach of the duty of good fair dealing, and moreover constituted an improper effort to get relief under the Bad Faith Statute. It asked the court to strike certain averments related to this putative backdoor bad faith claim.
The court rejected this argument: “Although Count II appears to assert a claim under the MVFRL … it also appears to assert a claim for … alleged breach of the implied contractual duty to act in good faith related to her PIP coverage. … Because [the insured] may pursue a claim for breach of her policy’s PIP coverage obligations and because motions to strike are ‘not favored and usually will be denied unless the allegations have no possible relation to the controversy and may cause prejudice to one of the parties,’ the Court will not strike her allegations regarding the duty of good faith and fair dealing in Count II.”
MVFRL Claims and the Bad Faith Statute
The court then addressed the statutory bad faith claim.
The court first observed that unless the insurer’s “conduct falls outside of the scope of § 1797 of the MVFRL, 75 Pa. C.S. § 1797, and involves a bad faith abuse of the process challenging more than just the insurer’s denial of first party benefits, the MVFRL preempts any statutory bad faith claim concerning … PIP benefits.” The court made clear, “To the extent that the gravamen of [the] bad faith claim is the denial of first party medical benefits and nothing more, [the insurer’s] alleged conduct is within the scope of § 1797 of the MVFRL and therefore [she] is precluded from bringing such a claim.”
However, “[s]ection 8371 bad faith claims remain cognizable when the basis of a benefits denial does not relate to the reasonableness and necessity of treatment, or when an insurer’s conduct is obviously not amenable to resolution by the procedures set forth in Section 1797(b).”
Dispute Over Valuation not Bad Faith
The insured alleged the insurer delayed her claim and denied its value. The court found these allegations did not equate to allegations that the insurer actually deny the UIM or PIP. Rather, there was a dispute over valuation.
Analyzing the matter as a valuation dispute, Judge Pappert found the insured did not allege “facts sufficient to show [the insurer’s] valuation is unreasonable.” The insured’s subjective beliefs as to her claim’s value “is not indicative of bad faith because … subjective belief as to the value of the claim may reasonably, and permissibly, differ.”
Rather, “[t]o state a bad faith claim, [an insured] must do more than call [the insurer’s] offers low-ball.” These kind of conclusory and subjective allegations “suggest nothing more than a normal dispute between an insured and insurer.”
Low but Reasonable Offers Not Bad Faith
Bad faith does not exist “merely because an insurer makes a low but reasonable estimate of an insured’s damages.” Nor does a refusal “to immediately accede to a demand for the policy limit … without more, amount to bad faith.”
Insurer had Reasonable Basis to Deny Claim/No Adequate Claim of Bias
Next, Judge Pappert rejected the argument that the insured adequately pleaded the insurer lacked a reasonable basis to deny the claim’s value. The insurer requested medical records and had an IME performed. It assessed the insured’s injuries based on that information.
The court did not give weight to conclusory allegations the doctor performing the IME was “a biased IME doctor” and “well-known as [someone] who provides so-called Independent Medical Examinations exclusively for and apparently to the liking of insurance companies….” Further, that the plaintiff’s own doctor said she needed surgery did not, by itself, support a bad faith claim. The insurer was not unreasonable in relying on the IME doctor’s assessment that the symptoms requiring surgery were unrelated to the accident at issue.
“In the absence of any supporting facts from which it might be inferred that [the] investigation was biased or unreasonable, this type of disagreement in an insurance case is not unusual, and cannot, without more, amount to bad faith.”
The court, however, permitted plaintiff to amend the statutory bad faith claim “to the extent it is not preempted by the MVFRL and to the extent she is able to allege facts stating a plausible claim for relief.”
Date of Decision: October 2, 2020
Canfield v. Amica Mutual Insurance Co., U.S. District Court Eastern District of Pennsylvania No. CV 20-2794, 2020 WL 5878261 (E.D. Pa. Oct. 2, 2020) (Pappert, J.)
This was the insureds’ second chance at pleading bad faith, after having their original UIM bad faith counterclaim dismissed without prejudice. The earlier post summarizing the first dismissal can be found here.
The second try fared no better. Rather, review of the second amended counterclaim made “clear that any further attempt at amendment would be futile because Defendants cannot plead their bad faith claim with adequate factual support and specificity.”
Once again, the court observed that: “A bad faith claim is ‘fact specific’ and depends upon the insure[r]’s conduct in connection with handling and evaluating a specific claim.” … As the party bringing the bad faith claim under 42 PA. C.S. § 8371, it is [the insured’s] burden to “‘describe who, what, where, when, and how the alleged bad faith conduct occurred.’”
The insureds’ two new paragraphs, set forth below, were deemed conclusory:
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Specifically, Insurance Company has taken [the insured’s] testimony and has been provided all of her documentation, which clearly demonstrates that she was covered under the applicable insurance policy and that her damages are far in excess of the UIM coverage amount.
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However, despite objective and subjective knowledge that [the insured] was covered under the applicable insurance policy and that her damages are far in excess of the UIM coverage amount, Insurance Company refused to honor their obligations under the insurance agreement for the bad faith purpose of seeking to evade their obligations to the Das family under the insurance contract.
The court observed that these paragraphs lacked “’the dates of any actions’ taken regarding the policy to support their allegation of unreasonable delay, nor have [the insureds] explained, in detail, ‘what was unfair’ about Plaintiff’s interpretation of the policy provisions.”
The court added:
Absent specific details that establish a dishonest purpose, it is not bad faith for an insurer to investigate and protect its interests during litigation. Jung v. Nationwide Mut. Fire Ins. Co., 949 F. Supp. 353, 360 (E.D. Pa.1997) (finding that insurer “had a reasonable basis to investigate and deny the claim.”). Moreover, the failure of an insurance company “to immediately accede to a demand for the policy limit” is not, without specific facts, enough to establish bad faith. Smith, 506 F. App’x at 137. [The insureds’] inclusion of two conclusory paragraphs to the Second Amended Counterclaim does not alter that conclusion.
The inability to plead bad faith also required dismissing the punitive damages claim with prejudice as well.
Date of Decision: May 8, 2019
Amica Mutual Insurance Co. v. Das, U. S. District Court Eastern District of Pennsylvania CIVIL ACTION NO. 18-1613, 2019 U.S. Dist. LEXIS 78320 (E.D. Pa. May 8, 2019) (Jones, II, J.)
In this case, the New Jersey Appellate Division provides a detailed analysis of the notice requirements due from insured to insurer in UIM cases, where the underlying tortfeasor is seeking to settle the claim. The key is that notice must be given before the underlying claim has been settled and released, to protect the insurer’s subrogation options and rights. The court also cites generally principles governing an insured’s duty of candor.
The court was particularly concerned with the situation where the insured informs the insurer that a potential settlement is on the table, when the case is already settled and the insurer’s subrogation rights are actually compromised.
In this case, the insureds’ counsel had informed the UIM insurer that a settlement offer was pending, when in fact the case had already settled and potential claims against the tortfeasor were released. The UIM insurer refused to pay benefits in these circumstances, and the insureds sued for UIM benefits.
The court found the New Jersey Supreme Court’s 2018 decision in Ferrante v. New Jersey Manufacturers Insurance Company controlling. In Ferrante, the Supreme Court held that if “the insured, regardless of his state of mind, fails to give the UIM carrier any notice of the UIM claim until after the final resolution of the underlying tort action, thereby causing the irretrievable loss of the carrier’s rights to subrogation and intervention before the carrier has ever learned of the existence of the claim, coverage is forfeited.”
The Ferrante court made general observations about an insured’s duties and obligations. “Our case law has routinely emphasized the importance of candor by insureds and the obligation to act in a forthright, open, and honest manner with their carriers throughout the entire process of their claim.” The insured has a commitment “not to misrepresent material facts [that] extends beyond the inception of the policy to a post-loss investigation.” Insureds have been given incentive to tell the truth, and it “would dilute that incentive to allow an insured to gamble that a lie will turn out to be unimportant.” In the UIM context, these general rules mean that courts should “seek to avoid rewarding insureds for omitting key details in a UIM claim.”
Date of Decision: December 21, 2018
Iellimo v. Amica Mut. Ins. Co., Superior Court of New Jersey Appellate Division DOCKET NO. A-4975-16T1, 2018 N.J. Super. Unpub. LEXIS 2795, 2018 WL 6712251 (App. Div. Dec. 21, 2018) (DeAlmeida and O’Connor, JJ.) (Not Precedential)
This UIM bad faith case involved the insurer’s refusal to pay based on whether a college-aged child was a “resident relative” under her parents’ policy.
In addressing a motion to dismiss the bad faith claim, the court observed that “the party bringing the bad faith claim must describe who, what, where, when, and how the alleged bad faith conduct occurred.” Insurers do not act in bad faith simply by investigating claims to protect their interest during litigation, absent evidence of some dishonest purpose. In this case, the pleadings were conclusory and did not provide this detail.
The bad faith claim was “unsupported by any facts that explain how the alleged bad faith conduct occurred. Indeed, there are no specific facts showing how Plaintiff lacked a reasonable basis in its interpretation, administration, investigation, or delay of UIM benefits….” The allegations that the insurer “unreasonably investigated” the claim were unsupported by facts indicating how the insurer’s claim handling procedures were deficient. Claims about delays failed to set forth the dates of any actions that could show delays were unreasonable. Further, arguments over “obstructive tactics” used to force an “inadequate settlement” lacked specifics in identifying those tactics and did not set out a plausible claim.
The court did give leave to file an amended pleading.
Date of Decision: December 7, 2018
Amica Mutual Insurance Co. v. Das, U.S. District Court Eastern District of Pennsylvania CIVIL ACTION NO. 18-1613, 2018 U.S. Dist. LEXIS 206787, 2018 WL 6435332 (E.D. Pa. Dec. 7, 2018) (Jones, J.)
The court found the following allegations all conclusory in nature, and therefore insufficient to make out a bad faith claim. However, the plaintiff was given leave to amend to file an Amended Complaint. The court made clear that “Plaintiff must specifically include facts to address who, what, where, when, and how the alleged bad faith conduct occurred.”
The conclusory allegations are:
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by sending correspondence falsely representing that Plaintiff’s loss caused by a peril insured against under the Policy was not entitled to benefits due and owing under the Policy;
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in failing to complete a prompt and thorough investigation of Plaintiff’s claim before representing that such claim is not covered under the Policy;
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in failing to pay Plaintiff’s covered loss in a prompt and timely manner;
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in failing to objectively and fairly evaluate Plaintiff’s claim;
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in conducting an unfair and unreasonable investigation of Plaintiff’s claim;
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in asserting Policy defenses without a reasonable basis in fact;
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in flatly misrepresenting pertinent facts or policy provisions relating to coverages at issue and placing unduly restrictive interpretations on the Policy and/or claim forms;
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in failing to keep Plaintiff or their representatives fairly and adequately advised as to the status of the claim;
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in unreasonably valuing the loss and failing to fairly negotiate the amount of the loss with Plaintiff or their representatives;
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in failing to promptly provide a reasonable factual explanation of the basis for the denial of Plaintiff’s claims;
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in unreasonably withholding policy benefits;
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in acting unreasonably and unfairly in response to Plaintiff’s claim;
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in unnecessarily and unreasonably compelling Plaintiff to institute this lawsuit to obtain policy benefits for a covered loss, that Defendant should have paid promptly and without the necessity of litigation.
Dates of Decision: July 12, 2018 (Report and Recommendation) July 30, 2018 (Order adopting Report and Recommendation as Opinion of the Court)
Rosenberg v. Amica Mutual Ins. Co., Civil Action No. 18-406, 2018 U.S. Dist. LEXIS 117116 (W.D. Pa. July 12, 2018) (Kelly, M.J.) (Report and Recommendation), adopted as Opinion of District Court on July 30, 2018 (Fischer, J.)
In this reinsurance litigation, non-party Resolute Management, Inc. (“Resolute”) filed a motion to quash a FRCP 30(b)(6) deposition served upon it by Defendant/insured J.M. Huber Corporation. Resolute sought a protective order barring the insured from inquiring into certain subjects during the future depositions of two of its employees. Additionally, Plaintiff/insurer Continental Casualty moved for a protective order barring the insured from inquiring into certain subjects during the insurer’s 30(b)(6) deposition. The insured opposed both Resolute’s motion and the insurer’s motion.
BACKGROUND
The factual background is as follows: Between 1969 and 1994, the insurer issued policies to the insured that were subject to “incurred loss retrospective premium plans” whereby the insured’s premiums are calculated according to the total number of payments and reserves on claims submitted under the policies. The retrospective premiums are calculated annually on the 1st of December, and continue year to year until all claims submitted are closed or until the maximum premium is reached. These retrospective premiums are called “Rating Plan Adjustments.”
The insurer sued over multiple unpaid invoices from previous Rating Plan Adjustments. The insurer alleged it was owed $33,629 under a March 2012 invoice, $737,116 under a March 2013 invoice, and $978,222 under a February 2014 Rating Plan Adjustment calculation. As such, the insurer brought claims for breach of contract and unjust enrichment.
The insured then filed its answer and brought counterclaims for breach of contract and breach of the duty of good faith and fair dealing. The insured alleged that, for decades, both parties enjoyed a professional and amicable relationship where any questions the insured would have about the Rating Plan Adjustments would be satisfactorily answered by the insurer and then promptly paid.
According to the insured, this all changed in 2010 when Berkshire Hathaway and its affiliates, Resolute and National Indemnity Company (“NICO”) “entered into an agreement with [the insurer] pursuant to which [the insurer’s] legacy asbestos and environmental pollution liabilities were transferred to NICO.”
It was alleged that once NICO assumed the insurer’s liabilities, Resolute became a third-party administrator of the insured’s asbestos and environmental claims. After having questions about the particular invoices on the Rating Plan Adjustments, the insured contends that neither the insurer nor Resolute satisfactorily addressed its concerns, and the insured was never provided with an adequate explanation as to the basis of the contested premiums.
ARGUMENTS
In filing the motion to quash, Resolute wanted to prevent the insured from exploring particular subjects during depositions concerning Resolute’s and the insurer’s (1) corporate practices, (2) claims handling procedures, and (3) the corporate relationships between the insurer, Resolute, NICO, and Berkshire Hathaway. The motion concerns both the Rule 30(b)(6) depositions and the depositions of particular Resolute employees.
The insurer and Resolute argued that the insured’s 30(b)(6) deposition topics were overbroad, would cause an undue burden, and would seek irrelevant information. They argued that the insured should only seek information relevant to the calculation of the retrospective premiums, and that the insured’s efforts were unreasonably duplicative because the insured seeks very similar, if not identical, information from both Resolute and the insurer.
The insured argued that all of the information was necessary for the claims and relevant. Resolute and the insurer also filed a motion for a protective order, seeking to bar the insured from inquiring into certain topics during the depositions of two particular Resolute employees. The insured took the position these employees are key witnesses.
COURT’S ANALYSIS
Initially, in discussing Federal Rule of Civil Procedure 26, the Court stated that “[it] is required to limit discovery where (i) the discovery sought is unreasonably cumulative or duplicative, or can be obtained from some other source that is more convenient, less burdensome, or less expensive; (ii) the party seeking discovery has had ample opportunity to obtain the information by discovery in the action; or (iii) the proposed discovery is outside the scope permitted by Rule 26(b)(1).”
The Court also addressed FRCP 45 governing subpoenas. The Court stated that four circumstances would warrant it to quash or modify a subpoena: (i) if the subpoena fails to allow a reasonable time to comply; (ii) if it requires a person to comply beyond the geographical limits specified in Rule 45(c); (iii) if it requires disclosure of privileged or other protected matter, if no exception or waiver applies; or (iv) if it subjects a person to an undue burden.
Failure to specify basis for objections and harm from compliance
The Court ruled that Resolute failed to (1) state its objections to the insured’s subpoena with specificity, and (2) it further failed to articulate any specific harm that could arise with its compliance. Thus, the court denied Resolute’s motion to quash. For the same reasons, the Court also denied Resolute’s motion for a protective order.
Discovery limited on some topics
Ruling in Resolute’s favor, the Court found that some of the insured’s deposition topics did exceed the scope of permissible discovery, and specifically limited such topics. These included (1) privileged information between Resolute and the insurer, (2) lawsuits against Resolute involving its administration of claims on behalf of other insurers, (3) particular document demands it found unreasonably cumulative, and (4) the insurer’s losses under other policies and Resolute’s knowledge thereof.
Discovery of corporate relationships, claims handling, and operating protocols relevant within limits
The Court further ruled that “discovery into the corporate relationships between [the insurer, Resolute, NICO, and Berkshire Hathaway], along with Resolute’s claims handling practices and operating protocols, is relevant to [the insured’s] claims and defenses in this matter.”
However, the Court went on to limit the discovery here to only relevant pieces of information, such as Resolute’s corporate structure and its affiliations.
The Court further limited the insured’s inquiries to “communications and correspondence regarding Resolute’s administration of Defendant’s claims; and Resolute’s policies, procedures and practices regarding the administration of claims on behalf of Plaintiffs involving retrospective premiums and its financial goals related to the same.”
The Court looked at a prior case involving Resolute, Pepsi-Cola Metro. Bottling Co. v. Ins. Co. of N. Am., No. CIV 10-MC-222, 2011 U.S. Dist. LEXIS 154369, 2011 WL 239655 (E.D. Pa. Jan. 25, 2011). That case also involved a bad faith claim against insurers, where the insureds “sought discovery from the insurers’ claims handler, non-party Resolute Management, Inc. by way of a 30(b)(6) subpoena. The 30(b)(6) subpoena sought information related to Resolute’s corporate relationships and structure and its operating protocols and business practices.
Resolute moved for a protective order and to quash the 30(b)(6) subpoena claiming that the information sought regarding its corporate relationships and business practices was irrelevant to the plaintiff’s claims against its insurers for bad faith.” Resolute argued “that its operating protocols and business practices were irrelevant to the plaintiff’s allegations….”
The Pepsi Court “noted that [t]o show bad faith, as opposed to mere negligence ‘a review of the policies and procedures of the companies in order to determine whether those policies instructed claims handlers to act in bad faith or provided them with an incentive structure that led to bad faith action is necessary,”
“Accordingly, in light of the plaintiff’s contention that the reinsurance relationship between the plaintiff’s insurers and Resolute and their claims handling practices may have resulted in the bad faith denial of the plaintiff’s claims, the [Pepsi] court found that the plaintiff had provided sufficient evidence of the relevance of the information sought by the subpoena and allowed the plaintiff to obtain discovery regarding Resolute’s corporate relationships and structure and its operating protocols and business practices.”
The present Court followed the Pepsi opinion, and agreed with the insureds’ position in concluding “that Defendant has demonstrated the requisite relevance of the information it seeks to its claims in this matter. In this case, Defendant claims that once Resolute became Plaintiffs’ third-party administrator, Defendant received improper and unexplained retrospective premium notices from Resolute and a letter from Resolute ‘abruptly’ denying coverage for a claim which Plaintiffs had long been providing coverage. …. Because Defendant’s bad faith claims against Plaintiffs result from conduct which arose when Resolute began handling Defendant’s claims, Defendant claims that the corporate relationships between Plaintiffs, Resolute, NICO and Berkshire Hathaway, and the corporate practices of these entities as they relate to Resolute’s claims handling practices is relevant to Defendant’s bad faith claim against Plaintiffs.”
Thus, “discovery into the corporate relationships between Resolute and Plaintiffs and Resolute as its affiliates, along with Resolute’s claims handling practices and operating protocols, is relevant to Defendant’s claims and defenses in this matter.” The Court went to limit that discovery: “However, while the Court will permit discovery into Resolute’s corporate relationships and general practices, Defendant’s requests must be narrowed to seek such information only as relevant to the claims in this matter.”
The Court found that the insurer failed to articulate the specific harm it would suffer if it complied with the insured’s subpoena, so its motion for a protective order was denied. Similarly, the Court also limited the scope of the insured’s discovery against the insurer to relevant information.
Date of Decision: December 19, 2017
Continental Casualty Co. v. J.M. Huber Corp., No. 13-4298 (CCC), 2017 U.S. Dist. LEXIS 208182 (D.N.J. Dec. 19, 2017) (Clark, III, M.J.)
In Mirarchi v. Seneca Specialty Insurance Company, the Third Circuit affirmed the District Court’s judgment in the carrier’s favor on a fire loss claim.
The policy at issue had a $600,000 limit, directing that valuation on claims be done according to the property’s actual cash value (ACV). The policy defined ACV as the amount it would cost to repair or replace the property at the time of loss or damage, with material of like kind and quality, subject to a deduction for deterioration, depreciation and obsolescence.
Further, per the policy, the carrier would not pay on any claim until it received a formal proof of loss from the insured. If a disagreement arose as to the value the property value or amount of loss, either party could seek an appraisal. A fire occurred, prompt notice was given, and each party retained experts.
The insurer estimated the ACV at approximately $332,000 and the insured’s expert came in at approximately $692,000. The insurer still paid the first $100,000 on the claim after the insured submitted a partial proof of loss. After receiving a proof of loss based on the $692,000 figure, the insurer paid the balance of the undisputed part of the claim, i.e., the difference between $100,000 and its experts ACV number ($332,000).
The experts continued amicable discussions thereafter on the difference until the insured told his expert that he would not accept anything less than $500,000.
The parties mutually agreed to enter the appraisal process, and each side hired an independent appraiser. The insurer’s appraiser estimated the ACV at $449,550, more than $100,000 higher than the insurer’s original estimate. The dispute was submitted to an umpire, who concluded that the ACV was $618,338.07. The insurer then paid the balance remaining on the $600,000 policy limit.
The insured brought a bad faith claim on the basis of delayed payment. As stated, the District Court granted the insurer summary judgment. The first issues on appeal were challenges to the trial court’s discovery rulings.
First, the trial court found reserves not discoverable because they were irrelevant to the claims. This was a significant issue to the insured, because the carrier had set it reserves at the policy limit, $600,000, well above the initial valuation. The trial court explained that a loss reserve is the insurer’s own estimate of the amount which the insurer could be required to pay on a given claim.
The lower court did recognize that reserve information is sometimes relevant in bad faith cases, but it concluded that the loss reserve figures in this particular case did not represent an evaluation of coverage based upon a thorough factual and legal consideration.
The Appellate Court found that the insured failed on appeal to show that the loss reserve figures were related to the carrier’s considered estimate of the ACV such that they would be relevant to his bad faith claim. Thus, the lower court did not err in its legal analysis of the relevance of loss reserve estimates generally in bad faith cases, and did not abuse its discretion in excluding the evidence in this case based on its lack of relevance to the bad faith claim.
In a footnote, the Third Circuit likewise upheld the lower court’s decision not to permit discovery of communications between the insurer and its reinsurer for the same reasons that it affirmed on the loss reserve issue, i.e., these communication were not evidence of the insurer’s considered evaluation of the value of the insured’s claim.
The Third Circuit also found no abuse of discretion in the trial court’s refusal to extend discovery, compel additional discovery responses or reconsider earlier rulings after the insured retained new counsel.
Turning to the merits, because the insurer ultimately paid the full policy limit, the bad faith claim was based on delay, which required the insured to show that (1) the delay was attributable to the insurer, (2) the insurer had no reasonable basis for causing the delay, and (3) the insurer knew or recklessly disregarded the lack of a reasonable basis for the delay.
The cornerstone of the insured’s argument was the insurer’s second appraiser came in at a significantly higher number than the first expert; and that the insurer acted in bad faith by standing by its adjuster’s initial estimate of ACV pending resolution by the umpire, failing to make an additional partial payment, and failing to make a higher settlement offer.
As to the partial payment issued, an insurer has no duty to advance partial payments, particularly where the claim is disputed. Further, the undisputed evidence showed that the insurer relied on a genuine and considered estimate of ACV by its first expert.
That subsequent estimates assigned a higher value to the claim did not constitute clear and convincing evidence that the insurer acted in bad faith either in arriving at its initial estimate or by standing by that estimate until the appraisal process concluded. The Third Circuit stated: “That is, after all, what the appraisal process is for—settling disputes about the value of a claim.”
The insured failed to show by clear and convincing evidence that the insurer acted unreasonably in the manner it paid the claim, and that no reasonable juror could conclude otherwise. The insured’s breach-of-contract claim, based on a breach of the duty of good faith, failed for the same reasons as his statutory bad faith claim.
Lastly, the court noted that the insured’s used of mathematical calculations regarding the first estimate, the property’s purchase price, and the balance of the insured’s mortgage lacked sufficient explanation to make a persuasive argument for a conspiracy between the insurer and its experts.
Date of Decision: April 29, 2014
Mirarchi v. Seneca Specialty Ins. Co., No. 13-2129 , UNITED STATES COURT OF APPEALS FOR THE THIRD CIRCUIT, 2014 U.S. App. LEXIS 8015 (3d Cir. April 29, 2014) (Ambro, J.)
In Granelli v. Chi. Title Ins. Co., the court granted the carrier’s summary judgment motion seeking to dismiss the insureds’ breach of contract and bad faith claims stemming from the insureds’ purchase of a title insurance policy from the carrier. After the insureds discovered several boundary disputes with adjacent properties, they contacted the carrier, which investigated the claims for a year, sought to resolve the disputes amicably, and subsequently filed a successful quiet title action after a non-legal resolution fell apart.
The insureds nevertheless brought suit for breach of contract and bad faith. The court granted the carrier’s motion on the breach of contract count because the insureds improperly alleged that the carrier failed to provide it with good title. Recognizing that this is not the function of a title insurance carrier, an entity that can only be sued for breach resulting from actions that occur after it issues a policy, the court rejected the claim. The court also rejected the bad faith action because the carrier complied with the terms of the policy in good faith.
Date of Decision: December 6, 2012
Granelli v. Chi. Title Ins. Co., No.: 10-2582, 2012 U.S. Dist. LEXIS 173611, U.S. District Court for the District of New Jersey (D.N.J. Dec. 6, 2012) (Linares, J.)
