Bad Faith Claims Against Individual Claims Adjuster Arising Out of UM/UIM Claim Dismissed By Federal Judge

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PHILADELPHIA, Aug. 9 –  A bad faith action against an individual claims adjuster has been dismissed by a U.S. District Court Judge, who found that the joinder of the adjuster  in a coverage and bad faith action arising out of a UM/UIM claim was done fraudulently to defeat federal removal jurisdiction.

In Reto v. Liberty Mutual Insurance, U.S. District Judge Timothy Savage denied Retos’ motion to remand the Retos’ case to state court after Liberty Mutual removed the case, contending that the joinder of Liberty Mutual adjuster Stephania DeRosa was fraudulent for the purposes of destroying federal diversity jurisdiction.

Judge Savage noted that Liberty met its burden in opposing the motion for remand:

“[the]removing party has a heavy burden of persuading a court that joinder is fraudulent….[however] the claims against [the claim representative] are wholly insubstantial and frivolous…there is no basis to support a contract [against the claims handler, and] only the principal [Liberty Mutual] may be held liable.”

Judge Savage ruled that the claim representative was only an agent, without a stand-alone contract with the insured.  Finally, the Court held that the Pa. Bad Faith Statute did not apply to claims representatives, but rather only to insurers.  Accordingly, Judge Savage dismissed Ms. DeRosa as a defendant, and denied the Retos’ motion to remand the case to state court.

Reto v. Liberty Mutual Insurance, U. S. District Court Eastern District of Pennsylvania, CIVIL ACTION NO. 18-2483, 2018 U.S. Dist. LEXIS 133336 (E.D. Pa. Aug., 8, 2018) (Savage, J.)

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Third Circuit Continues To Rule Faulty Workmanship Not Covered By CGL Policy

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PHILADELPHIA, JUNE  6 – The Third Circuit U.S. Court of Appeals  has recently affirmed a ruling in favor of Selective Way Insurance Company, holding that Selective does not have a duty to defend or indemnify an insured contractor for claims of faulty workmanship arising out of a ondominium construction project. 

In Lenick Construction, Inc. v Selective Way Insurance Company, Lenick was impleaded as a third-party defendant in litigation as the general contractor, Westrum, for defects at the Villas at Packer Park Condominium project.   Lenick notified Selective after it was joined,  seeking defense and indemnity and, while denying the request for indemnity, Selective agreed to defend Lenick in the case under a reservation of rights. 

Lenick sued Selective in the Philadelphia Court of Common Pleas, seeking a declaratory judgment obligating Selective to provide defense and indemnity from Selective , after which Selective removed the action to federal court.  Thereafter, the parties filed cross motions for summary judgment. 

In affirming the US District Court’s conclusion that the allegations against Lenick were not covered by the CGL policy issued to Lenick by Selective, the Third Circuit relied upon Kvaerner Metals Div. of Kvaerner U.S., Inc. v. Commercial Union Ins. Co., 589 Pa. 317, 908 A.2d 888, 896-97 (Pa. 2006) and held that the claims in the Joinder Complaint against Lenick did not allege a fortuitous “occurrence” such that the claim would be covered.  In the Opinion written by Chief Judge Hardiman, the Court held that a fair reading of the Complaint against Lenick was that Lenick was guilty of faulty workmanship. 

While Lenick contended that some of the damage to its work occurred as a result of the faulty workmanship of other contractors such that an occurrence could be found, the Court disagreed, referring again to the underlying complaint against Lenick which alleged Lenick’s faulty workmanship, not that Lenick’s work was damaged by the faulty workmanship of others.  Summary judgment in favor of Selective was therefore affirmed.

Lenick Constr., Inc. v. Selective Way Ins. Co., 2018 U.S. App. LEXIS 15197, 2018 WL 2727394

 

 

Keeping the “I” In IME: Pa. Supreme Court Refuses To Overturn Order Barring Plaintiff’s Lawyer From Portions of Neuropsych IME

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HARRISBURG, Jan. 18 –  Defendants in Pennsylvania civil personal injury litigation may have gotten a bit more incentive to try to keep independent medical exams free of interference by Plaintiffs’ lawyers.  This week, the Pa. Supreme Court quashed an interlocutory appeal from a trial court order barring the plaintiff’s counsel from attending parts of his client’s neuropsychological IME or recording the exam.

In Shearer v. Hafer, 2018 Pa. Lexis 353, the Pa. Supreme Court granted allowance of appeal  to consider whether a plaintiff in a civil personal injury action has the right to have counsel present and to record a neuropsychological examination of that plaintiff by a defendant’s neuropsychologist.  At the trial court level in Shearer, a Lebanon County judge issued a protective order ruling that the personal injury Plaintiff’s counsel could be present during the preliminary interview phase of the exam, but that no individual would be permitted in the evaluation room with Mrs. Shearer and the doctor during the standardized testing portion of the evaluation.  The order also provided that  the evaluation could not  be recorded.

On appeal to the Pa. Superior Court, the court affirmed the trial court ruling after finding that the order in question was collateral and properly appealable.   The Plaintiff then sought an allowance of appeal from the state Supreme Court.

In a 6-1 ruling,  the Pa. Supreme Court vacated the Superior Court ruling, and quashed the appeal, finding that an appeal from  the order in question was an unauthorized interlocutory appeal.  In writing for the majority, Justice Sandra McCloskey Todd analyzed the order under a three-part test for the appealability of interlocutory orders.

While finding that the order was separable from the main cause of action of the automobile accident case, thus satisfying the first prong of the analysis, Justice Todd found that the second and third elements of the analysis were not met.  As to the second element, the Court found that the interests in question would not go unprotected without immediate appellate review.  As to the third prong, The Court also found that the right asserted, i.e., to counsel at the entire IME,  would not be irretrievably lost, as the Plaintiff could obtain a new trial following an appeal at the end of the case.

The Court went to some length to discuss that the right of counsel at an IME was not a constitutional one, but rather one granted in the Pa. Rules of Civil Procedure,  Pa.R.C.P. 4010.  Those rules also provide that trial courts can craft protective orders in discovery to balance and accommodate the interests of competing litigants, via Pa.R.C.P. 4012.

While the Supreme Court did not address the merits of the protective order itself, the ruling suggests that if a protective order limiting the participation of the Plaintiff’s lawyer at an IME can be secured from the trial court,  the benefits of such an order are not likely to be disturbed by interlocutory appeal.

 

Application Satisfies Requirement of Written Election of Lower UM/UIM Limits, Federal Court Finds

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HARRISBURG, Dec. 29 – A U.S. District Court magistrate judge has ruled that an original signed application was  a valid means of choosing UM/UIM limits lesser than bodily injury limits under Pennsylvania’s motor vehicle law, even if a separate option selection form was not compliant with the statute.

In Farmland Mut. Ins. Co. v. Sechrist, 2017 U.S. Dist. LEXIS 213618 (M.D. Pa., Dec. 29, 2017)(Arbuckle, M.J.), Plaintiff Farmland Mutual Insurance Company filed a declaratory judgment suit  against Defendants Edward Alfred Sechrist and Gary Bryant Kauffman, employees of Farmland’s insured, Clouse Trucking, seeking a  ruling that the commercial automobile insurance policy issued with a $1 million liability limit  provided $35,000 of combined single limit coverage for underinsured motorist claims arising out of an accident on April 30, 2013 in which both Sechrist and Bryant were seriously injured.

The Employees opposed Farmland Mutual, contending that the UIM limit should be equal to the policy’s bodily injury liability limit of $1 millon, on grounds that there was not a valid election of lesser UIM coverage pursuant to the Pa.M.V.F.R.L.  The employees claimed that the insurance policy should be reformed to include one million dollars of underinsured motorist coverage because the requirement of a signed writing choosing reduced UIM coverage  under 75 Pa.C.S.A. section 1734 was not met.

U.S. Magistrate Judge William I. Arbuckle first agreed with the employees that a specific UIM option selection form did not comply with section 1734 and was therefore not a valid election of lesser coverage:

Section 1734 of the MVFRL allows a named insured to elect limits of underinsured motorist coverage in an amount equal to or less than a policy’s liability limit for bodily injury. 75 Pa.C.S.A. section 1734.   Absent a signed, written election for lesser coverage, it is presumed that the underinsured motorist coverage limit is the same as the bodily injury liability coverage limit. . .

The Underinsured Motorist Coverage Selection form in this case. . .    is signed by Mr. Clouse but does not expressly designate the amount of coverage requested. Accordingly, we find that this form does not satisfy the requirements of  75 Pa.C.S.A. section 1734.

Judge Arbuckle went on to find, however, that the original insurance application prepared by an insurance agent, and signed by Mr. Clouse selecting the lesser amount of coverage, did meet the requirement of a signed writing under section 1734:

The parties dispute whether the Insurance Policy Application in this case satisfies the writing requirement of section 1734. . . Farmland contends that the Farmland Policy Application signed by Mr. Clouse is a valid written election of lower coverage under section 1734. By contrast, the Employees contend that the Farmland Policy Application does not satisfy the requirements of section 1734 because: (1) the Farmland Policy Application does not advise Clouse Trucking of Farmland’s obligation to offer underinsured Motorist coverage limits equal to the Farmland Policy’s limit for bodily injury; and (2) the Farmland Policy Application is not a clear indication of Clouse Trucking’s intent to purchase a underinsured motorist coverage below the Farmland Policy limit for bodily injury because the blanks in the Farmland Policy Application were filled in by an insurance agent.

As an initial matter, I find that Farmland is correct that the Farmland  Policy Application meets the requirements of section 1734. The Farmland Policy Application  is signed by Mr. Clouse, and does request a specific amount of underinsured motorist coverage.

In short, Judge Arbuckle found that the policy documents, including the application, constituted a valid written request for reduced UIM coverage.  He also found that whether or not an insurance agent completed the application itself  was irrelevant, provided, as here, that the insured certified via signature his review and adoption of the statements contained in the application.

Farmland Mut. Ins. Co. v. Sechrist, 2017 U.S. Dist. LEXIS 213618 (M.D. Pa., Dec. 29, 2017)(Arbuckle, M.J.)

Electronic Signature On Limited Tort Form and Medical Peer Review Both Valid; Court Dismisses Bad Faith Claims Against Progressive

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PHILDADELPHIA, Dec. 11 – A Pennsylvania Federal judge has granted summary judgment in favor of Progressive Insurance in a bad faith case, finding in part that an electronic signature on a limited tort form was valid, and that use of a PRO medical review was also appropriate

In Jallad v. Progressive Advanced Ins. Co., 2017 U.S. Dist. LEXIS 202999, Plaintiff Sahar Jallad (“Jallad”) filed suit against a motorist defendant and her own insurer, Progressive Advanced Insurance Company (“Progressive”) in the Court of Common Pleas of Philadelphia County, alleging negligence against the motorist,  Madera causing personal injuries,  and claims of breach of contract and bad faith against Progressive related to its handling of Jallad’s underinsured motorist (“UIM”) claim.

Following removal of the case to the U.S. District Court for the Eastern District of Pennsylvania, U.S. District Judge Robert F. Kelly granted Progressive’s motion for summary judgment on the bad faith claims.

Judge Kelly confirmed a long standing principle that the mere disagreement over the value of the insured’s injuries in the setting of a UIM claim was not a sufficient basis for a prima facie bad faith case against an insurer.

Judge Kelly went on to rule that none of four other arguments made by Jallad created a genuine issue of material fact as to the bad faith claims.  First, Kelly ruled that regardless of whether or not the tortfeasor’s insurer paid a $15,000.00 liability limit insuring Madera,  Progressive was entitled to a credit of that available limit toward the valuation of Jallad’s UIM claim.

Kelly further dismissed Jallad’s argument that her signature on a limited tort election was invalid:

“Jallad provides no citation to any case law or statute that prohibits insurance companies from obtaining electronic signatures for tort waiver forms. Further, Progressive responds that electronic signatures are permissible under both federal and Pennsylvania state law. See 15 U.S.C. § 7001; 73 P.S. § 2260.305. Accordingly, Jallad’s argument is without merit.”

Next, Judge Kelly ruled that Proressive’s use of a PRO reviews of Jallad’s medical records did not, as a matter of law, constitute bad faith:

“Pennsylvania law provides that “[i]nsurers shall contract jointly or separately with any peer review organization established for the purpose of evaluating treatment, health care services, products or accommodations provided to any injured person” and “[s]uch evaluation shall be for the purpose of confirming that such treatment, products, services or accommodations conform to the professional standards of performance and are medically necessary.” 75 Pa. Cons. Stat. § 1797(b)(1). Under the circumstances presented here, we fail to see how sending medical documentation to a PRO to determine whether medical treatment conforms to the professional standards of performance or is medically necessary amounts to bad faith.”

The Court finally ruled that Progressive’s request for documents concerning Jallad’s wage information was appropriate, and  dismissed Jallad’s bad faith claims with prejudice.

Jallad v. Progressive Advanced Ins. Co., 2017 U.S. Dist. LEXIS 202999

Bad Faith Cannot Be Presumed In UIM Claim, Federal Judge Rules

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PHILADELPHIA, Nov. 17 – A federal judge in Pennsylvania has dismissed a bad faith claim against State Farm Insurance arising out of the handling of a UIM claim, ruling that neither the passage of time or the non-payment of the claim in themselves can establish a prima facie case of insurer bad faith under the Pennsylvania Bad Faith Statute.

In Sherman v. State Farm Ins. Co., 2017 U.S. Dist. LEXIS 190363, Judge Mark A. Kearney ruled that the Plaintiffs had not plausibly set forth a bad faith claim against State Farm arising out of a January 2013 auto accident involving Edward Sherman.  After settling with the tortfeasor following the accident,  the Shermans notified State Farm of their intent to pursue a UIM claim u nder their own auto policy in February 2015. 

The complaint alleged that State Farm investigated the claim between Febryary and July of 2015 but that State Farm failed to make any offer of payment.  After the Shermans sued State Farm in 2017, State Farm moved to dismiss statutory and common law bad faith claims  from the complaint.  In granting the motion to dismiss, Judge Kearney wrote:

“After July 1, 2015, we have no idea what happened. As of July 1, 2015, the parties were working together to address the Shermans’ UIM claim. Over two years later on September 27, 2017, the Shermans sued State Farm claiming it never provided the Shermans with UIM benefits…

Our court of appeals has consistently dismissed Section 8371 claims when the complaint lacks factual allegations of bad faith conduct, and only states conclusory allegations…

[The] Shermans allege communications evidencing responsive insurer conduct and then conclude, simply because they have not been paid since, State Farm is liable for bad faith. We have a gap of over two years with no allegation as to what happened. Bad faith is not presumed simply from a conclusory allegation  of no payment. In conclusory fashion, the Shermans allege State Farm failed to make an informed decision regarding their claims, failed to pursue a diligent investigation, and failed to act in good faith.  They also allege State Farm failed to make a settlement offer, and these actions were intentional, taken in bad faith, and aimed solely at reducing State Farm’s expenditures. These are the types of conclusory allegations which do not suffice. Failing to plead explanations or descriptions of what an insurer actually did, or why they did it, is fatal to a bad faith claim.  We cannot measure the reasonableness of the insurer’s conduct absent facts. Legal conclusions are insufficient.”

Judge Kearney also dismissed the Plaintiff’s Breach of Implied Covenant of Good Faith and Fair Dealing claims, and further  ruled that the Plaintiffs could not plead or recover attorneys’ fees on the remaining Breach of Contract claim.

Sherman v. State Farm Ins. Co., 2017 U.S. Dist. LEXIS 190363 (E.D. Pa. Nov. 17, 2017)(Kearney, J.)

Liquor Liability Exclusion In CGL Policy Unambiguous, Federal Judge Finds

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PHILADELPHIA, Nov. 20 – A federal district judge has ruled that a liquor liability exclusion in a CGL policy is unambiguous, and relieved an insurer from the duty to defend or indemnify its insured in underlying liquor liability litigation.

In Transportation Ins. Co. V. Healthland Hosp. Group, No. 15-4525, 2017 U.S. Dist. LEXIS 191951 (E.D.Pa. 2017), the U.S. District Court for the Eastern District of Pa. ruled that Transportation and CNA Insurance companies had no duty to defend or indemnity Healthland Hospitality, a group that operated bar service for the Woodbury Country Club.    Healthland was sued in state court after an over-served patron killed another motorist in a motor vehicle accident.

The exclusion in the CGL policy excluded defense or indemnity to Healthland for losses arising from:

“Bodily injury” or “property damage” for which any insured may be held liable by reason of:

(1) Causing or contributing to the intoxication of any person;

(2) The furnishing of alcoholic beverages to a person under the legal drinking age or under the influence of alcohol; or

(3) Any statute, ordinance or regulation relating to the sale, gift, distribution or use of alcoholic beverages.

This exclusion applies only if you are in the business of manufacturing, distributing, selling, serving or furnishing alcoholic beverages.

CNA denied coverage to Healthland, citing the exclusion.

Healthland argued in opposition, however,  that the exclusion’s  “in the business of” language was ambiguous.  The Court disagreed after the parties filed cross-motions for summary judgment:

“Here, reading the relevant “in the business of” language in the context of the entire policy and the exclusion, it is clear that the provision is intended to distinguish an insured who occasionally serves alcohol from an insured who is involved with the service of alcohol with such regularity that the insured represents a significantly greater insurance risk. Indeed, numerous courts, including the Pennsylvania Superior Court, have reviewed identical or nearly identical liquor liability provisions and found them to not be ambiguous.”

Since the Court found the exclusion unambiguous, it found the underlying state court liquor liability litigation to be squarely within the exclusion, and held that CNA did not have a duty to defend or indemnify Healthland in those cases.  The Court granted the insurers’ motions for summary judgment, and denied Healthland’s cross-motion for summary judgment on coverage.

Transportation Ins. Co. V. Healthland Hosp. Group, No. 15-4525, 2017 U.S. Dist. LEXIS 191951 (E.D.Pa. 2017)