Pa. Federal Judge Says Amended Complaint Sufficiently Alleges GEICO Attempted To Avoid UIM Claim In Bad Faith

ACCIDENT

LANCASTER, July 11 –  A Federal District Judge has ruled that an amended complaint sufficiently alleges that GEICO sought to avoid a UIM claim in bad faith on grounds that the vehicle in question was not added to the subject policy.  In Reidi v. Geico Casualty Co., U.S. Middle District Judge Lawrence Stengel found that the insureds sufficiently alleged Geico failed to follow its own policy language guaranteeing coverage for new vehicles if they were reported to the company within 30 days of acquisition.

After granting Plaintiff’s leave to file an amended complaint following a motion to dismiss which Geico filed to the original complaint, the Judge held that the newer pleading sufficiently alleged breach of contract and bad faith.

After purchasing a new car, Ms. Reidi and her son were involved in an accident with an uninsured motor vehicle. The insureds made a claim for UIM benefits to Geico, which denied the claim because the  the newly purchased car was not listed an insured vehicle at the time of the accident. Ms. Reidi brought suit against Geico including claims for breach of contract and statutory bad faith.

In the amended complaint, the insureds attached their automobile policy which assured coverage  to plaintiffs “as long as they request a car be added to the policy within 30 days of acquiring the car.”

Judge Stengel found that reference to the specific policy language re newly acquired vehicles was sufficient allegation of bad faith.  He wrote, “an insurance company ignoring its costumer’s claim in the face of its own policy language clearly guaranteeing coverage for the very claim at issue certainly forms the basis for a bad faith claim.”

Editor’s Note:  This particular fact pattern provides very unfavorable optics for the insurer, and can easily, in the hands of competent plaintiff’s bad faith counsel, be made to look as if the insurer was attempting to use a technicality to avoid its coverage obligation — a technicality that its own policy took care of with the after-acquired vehicle provision.

Reidi v. Geico Cas. Co.CIVIL ACTION NO. 16-6139 (E.D. Pa. Jul. 11, 2017)

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Disability Insurer Prevails: Pre-Existing Condition Justifies Denial, Federal Judge Rules

Witness_stand_in_a_courtroom

HARRISBURG, June 21 — A Pennsylvania federal judge has granted a disability insurer’s summary judgment motion, finding that a refusal of long term disability (LTD) benefits was neither arbitrary nor capricious, because the denial properly relied on a pre-existing condition exclusion in the policy.

In Yvonne Hilbert v. The Lincoln National Life Insurance Co., 15-471, M.D. Pa., 2017 U.S. Dist. LEXIS 93424), U.S. District Judge Sylvia Rambo ruled that Lincoln National Life Insurance Co., did not violate or abuse its discretion under the Employee Retirement Income Security Act, 29 U.S.C. § 1001 et seq. (1974) (ERISA), when it found that Ms. Hilbert’s claim was not covered under a LTD policy it issued to Delta Dental, covering her as an employee.
Hilbert worked at Delta Dental and received benefits under the company’s short term disability policy (STD) for back and leg pain, and depression, claiming she was unable to work.   When Lincoln reviewed her claim for LTD status, the LTD policy in question barred coverage for any condition for which the employee was treated within 3 months of her hire.  Lincoln determined that Hilbert received treatment for depression  during her “look back” period of  Aug. 1, 2011 to Nov. 1, 2011, and eventually denied Hilbert’s claim for LTD benefits pursuant to the pre-existing condition exclusion.  Lincoln contended that Hilbert did not prove she was unable to work independent of her depression.
Following the denial of her administrative appeals, Hilbert sued Lincoln in the Eastern District of Kentucky, but the case was moved by Lincoln to the Middle District of Pennsylvania on grounds that  that it was a more convenient forum.
Following transfer, the parties filed cross motions for summary judgment..Judge  Rambo granted Lincoln’s motion and denied Hilbert’s motion , ruling that Lincoln’s denial of LTD benefits was not arbitrary and capricious.  She rejected Hilbert’s argument that the grant of STD benefits undercut the denial — the STD policy did not have a pre-existing condition exclusion.  She also found that Hilbert failed to prove her inability to work was wholly divorced from her depression:
“[the record] demonstrates that Lincoln considered the relevant medical evidence and supports Lincoln’s decision that Plaintiff was not totally disabled due a physical condition as of September 18, 2012…Lincoln did not act in an arbitrary and capricious manner in characterizing the principal duties and responsibilities of Plaintiff’s occupation…Significantly, although Plaintiff treated with several medical providers, not a single physician — not even her primary care physician or her pain physician — supported her claim… Here, Lincoln’s decision to deny Plaintiff LTD benefits is supported by substantial evidence in the record, and without substituting the court’s judgment for that of the defendant in determining eligibility for plan benefits, the court concludes that Plaintiff is not entitled to benefits under the terms of the LTD Policy and that Lincoln’s decision was neither arbitrary nor capricious.”
The judge also found that Hilbert’s receipt of Social Security disability benefits did not entitle her as a matter of course to LTD benefits under the Lincoln policy, observing that SSDI rules do not bar coverage for pre-existing conditions.

Oklahoma Supreme Court Permits Third Party To Sue State Farm for Bad Faith

PILLARS

Oklahoma City, June 22 – The Supreme Court of Oklahoma has reversed summary judgment for State Farm Insurance in a bad faith claim brought by a third party to an insurance contract  who bought the property in question from State Farm’s insured.

In Hensley v. State Farm Insurance, the Court ruled:

We hold buyer’s action in this case for breach of the implied-in-law duty of good faith by an insurer is based upon his status as an insured or third party beneficiary; and buyer’s equitable title to property arising from a contract for deed is insufficient by itself to confer upon him the status of an insured. We hold buyer presented facts on the issue whether he was an intended third party beneficiary, and these facts and their inferences were disputed by insurer. Whether buyer is a third party beneficiary and an insured under the policy based upon disputed facts and inferences is a matter for the trier of fact and summary judgment for insurer must be reversed.

The Court summarized the relationships of the parties as follows:

Kenneth Hensley and his wife owned real estate containing a mobile home in which they resided. They moved and sold the property to Douglas in May 2000 using a contract for deed. The contract for deed required Douglas to keep the premises insured, and the monthly payments made by Douglas to the Hensleys were required to include the premiums. The contract for deed specified any increase in insurance premiums during the term of indebtedness would be matched with a corresponding increase in monthly payments paid to the Hensleys. The Hensleys had an insurance policy with State Farm Fire & Casualty Company on the property and the Hensleys continued to make the premium payments and the policy continued to be renewed.

In 2008, Douglas reported a vandalism claim.  After the parties could not agree as to whether State Farm’s payment of the claim was adequate, both Douglas and Hensley sued State farm in state court.  State Farm sought and was granted summary judgment, in part on grounds that Douglas was not an insured, was a “stranger” to the insuring agreement, and therefore lacked standing to bring bad faith claims against State Farm.

In reversing the trial court’s ruling in State Farm’s favor, the Oklahoma Supreme Court ruled that while Douglas’ equitable title to the property insured by State Farm did not create a bad faith right of action, Douglas should be entitled on remand to demonstrate he and is wife were intended third party beneficiaries of the insuring agreement between State farm and the Hensleys:

Douglas presented facts that State Farm construed the policy to include Douglas as an insured or beneficiary. Whether Douglas is a third party beneficiary and an insured under the policy is based upon an adjudication of disputed material facts. We are required to take all inferences in favor of the party opposing summary judgment, and when it appears that there are disputed material facts a summary judgment must be reversed.

Hensley v. State Farm Fire & Cas. Co., 2017 OK 57, 2017 Okla. LEXIS 59 (Okla. June 20, 2017)