Category: Pennsylvania

Insurer’s Correct Position On Coverage Bars Homeowners’ and Bad Faith Claims

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PITTSBURGH,  Jan. 10 – A federal judge from the Western District of Pa. has dismissed both bad faith and coverage claims in which a homeowner sought coverage for defective workmanship on the home as part of a demolition and rebuild.

In Wehrenberg v. Metro. Prop. & Cas. Ins. Co., No. 14-1477, 2017 U.S. Dist. LEXIS 3242 (W.D. Pa. Jan. 10, 2017), U.S. District Judge Mark R. Hornack granted summary judgment to Metropolitan P&C Insurance Company on both breach of contract and bad faith claims brought by insured homeowner, Wehrenberg.  leased the house to a tenant, Hyatt, and authorized Hyatt to demolish and reconstruct the house.

Hyatt abandoned the house after gutting it, and the house, which had structural problems, was left unfinished.  Wehrenberg  submitted a claim the Metropolitan regarding the condition of the house, calling it “vandalism.”  Metropolitan denied the claim and Wehrenberg filed suit, claiming both breach of contract and bad faith.

Relying on policy language, Metropolitan moved for summary judgment on all claims on the following grounds:  (1) the loss was not “sudden and accidental direct physical loss or damage” under the terms of the Policy, (2) even if the loss is covered, the insured did not timely notify Metropolitan of the loss, and  (3) the damages claimed were explicitly excluded from coverage under the Policy, which did not cover construction related damage, and stated that the insurer was not responsible to pay for vandalism if the property was vacant for more than thirty days.

In granting the motion for Metropolitan, Judge Hornak held:

“First, the Court concludes that Plaintiff cannot, on the record before the Court, meet his burden of proving that his loss is covered by his Policy in the first instance. The Policy specifically provides that Defendant will only cover “sudden and accidental direct physical loss or damage to [Plaintiff’s] property.”. . . Under Pennsylvania law, “sudden and accidental” “mean[], respectively, ‘abrupt’ and ‘unexpected or unintended.'” U.S. Fire Ins. Co. v. Kelman Bottles, 538 F. App’x 175, 181 (3d Cir. 2013).”

The judge also dismissed the bad faith claims made by the insured, holding:

“In this case, as explained, there is no viable breach of contract claim, so the first part of Plaintiff’s bad faith claim cannot succeed. Second, Plaintiff argues that Defendant acted in bad faith by failing to adequately investigate his claim. In his papers, Plaintiff lists a variety of ways in which he asserts Defendant’s investigation was inadequate, including that Defendant did not conduct enough interviews to uncover the facts of the case and that Defendant did not look into allegedly stolen tiles brought into the house. ECF No. 88 at 12. Defendant however, asserts that an adequate investigation was conducted  and that it included an inspection of the house, interviews of Plaintiff and Hyman, consultation with its legal counsel, and the taking of Plaintiff’s Examination Under Oath. ECF No. 82 at 20. Plaintiff’s claim ultimately fails because he has not cited to anything in the record to support his argument—he merely alleges problems existed without providing any record evidence to prove them.”

Wehrenberg v. Metro. Prop. & Cas. Ins. Co., No. 14-1477, 2017 U.S. Dist. LEXIS 3242 (W.D. Pa. Jan. 10, 2017)

 

 

 

 

 

 

Unsubstantiated Claims of Poor UM/UIM Claims Handling Not Sufficient Bad Faith Pleading, Federal Judge Rules

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PITTSBURGH, Dec. 21 — An insured failed to sufficiently plead bad faith in the handling of his underinsured motorist coverage claim by State Farm Insurance Company,  a federal judge ruled Dec. 21 in granting the insurer’s motion to dismiss without prejudice.

Robert R. Mondron was injured as a passenger in an auto accident, which allegedly caused injuries including head neck and facial injuries and internal injuries.  The driver of the vehicle tendered his full liability limits of $110,000 under his own policy, and Mondron sought UIM benefits from his insurer, State Farm.

According to Mondron, State Farm  “failed to make a reasonable offer of settlement,” sued the insurer in the Allegheny County, Pa., Court of Common Pleas, alleging breach of contract, bad faith,  and violation of the Pennsylvania Unfair Trade Practices and Consumer Protection Law (UTPCPL).

State Farm moved to dismiss the bad faith claims after removing the case to the  Western District of Pennsylvania.  In granting the motion, U.S. District Judge Cathy Bissoon held that dismissal of the bad faith claim is proper:

 “The gravamen of Plaintiff’s bad faith claim is that the Defendant unreasonably denied UIM [underinsured motorist] benefits to which Plaintiff is entitled under the terms of his parents’ insurance policy.  As noted, he alleges that Defendant ‘unreasonably delayed’ the handling of his claim, ‘inadequately investigated’ the claim, ‘failed to make a reasonable offer of settlement’ and ‘knew of or recklessly disregarded its lack of reasonable basis in evaluating Plaintiff’s underinsured motorist claim.’  These types of conclusory allegations are insufficient to state a plausible basis for relief.”

Judge Bissoon also found that Mondron’s Pennsylvania Unfair Insurance Practices Act (UIPA) claims should also be dismissed, holding “these allegations are nothing more than redundant and conclusory re-assertions of Plaintiff’s prior bad faith  allegations…Plaintiff’s generic invocation of statutory language is insufficient to satisfy his federal pleading burden.” Judge Bissoon stated. She similarly dismissed UTPCPL claims, all without prejudice.

Robert R. Mondron v. State Farm Mutual Automobile Insurance Co., No. 16-412, W.D. Pa.; 2016 U.S. Dist. LEXIS 17604

Low Settlement Offer Not Conclusive Proof of Bad Faith

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A federal district court judge has dismissed a bad faith complaint in which the only allegation against the insurer was that it made a low offer of settlement in a UM/UIM case.  In West v. State Farm, U.S. District Judge John Jones dismissed a bad faith claim in an amended complaint on a motion to dismiss filed by the insurer, but allowed a breach of contract claim to proceed.

In West, the insured was rear-ended in an automobile accident, and filed UM/UIM claim with his insurer, State Farm. The insured submitted medical records and $8,232.00 in medical expenses, in response to which State Farm offered $1,000.00.

In the amended complaint, the insured alleged that the low offer was itself sufficient support for the allegation that State Farm recklessly disregarded a reasonable basis for paying more on the UM/UIM claim.  Judge Jones found the argument to be lacking, finding that the bad faith count of the complaint failed to allege sufficient factual support:

Plaintiff argues that the offer of $1,000 to settle $8,232.00 worth of medical bills shows bad faith. The Court finds that these facts are not sufficient, as a matter of law, to sustain a claim for bad faith. Plaintiff has not presented facts to show that Defendant “knew or recklessly disregarded its lack of reasonable basis in” in offering a “low-ball” offer. A “low-ball” offer alone does not suffice to support a claim for bad faith. “[B]ad faith is not present merely because an insurer makes a low but reasonable estimate of an insured’s damages.” Johnson v. Progressive Ins. Co., 987 A.2d 781, 784 (Pa. Super. Ct. 2009) (citing Condio v. Erie Ins. Exchange, 899 A.2d 1136, 1142 (Pa. Super. 2006)). “[T]he failure to immediately accede to a demand for the policy limit cannot, without more, amount to bad faith.” Smith v. State Farm Mut. Auto. Ins. Co., 506 F. App’x 133, 136 (3d Cir. 2012) (non-precedential).

The Court granted the Plaintiff  an additional thirty days to file a second amended complaint in an attempt to revive the bad faith claim.

West v. State Farm, CIVIL ACTION NO. 16-3185 (E.D. Pa. Aug. 11, 2016)(Jones, J.)

 

 

 

 

 

Bad Faith Claim Satisfies Federal Amount In Controversy Requirement

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PHILADELPHIA, Sept. 28 – A federal judge has denied a remand request in a removed action against Omni Insurance company, holding that while the amount of the coverage claim was only $28,000.00, a bad faith claim also in the suit satisfied the $75,000.00 jurisdictional amount.

Plaintiff Richard Duncan originally sued a motorist insured by Omni Insurance arising out of an automobile accident.  Omni denied its insured defense and indemnity on grounds of an unlicensed driver exclusion in the applicable policy.

Duncan won $28,000.00 in an arbitration against Omni’s insured who, after the award, assigned all rights it had against Omni to Duncan.  Duncan then filed coverage and bad faith claims against Omni in Philadelphia County, seeking the amount of the arbitration award, along with bad faith damages.  Omni removed the case to the U.S. District Court for the Eastern District of Pa., and Duncan moved to remand the case.

Eastern District Judge Harvey Bartle, III denied the remand motion, citing the 3rd Circuit precedent requiring reasonable reading of pleadings to determine amount in controversy, and holding:

“Because of the bad faith claim, we deem the amount in controversy requirement to have been met.”

Judge Bartle also granted summary judgment to Omni on the merits in the case, finding that the unlicensed driver exclusion was not void as against public policy, and that it barred coverage for the underlying loss.

Duncan v. Omni Insurance Company, CIVIL ACTION NO. 16-1489, 2016 U.S. Dist. LEXIS 133134 (E. D. Pa., Sept. 28, 2016)

 

BREAKING NEWS — Pa. Supreme Court To Consider Whether Ill Will Is Prerequisite To Establishing Bad Faith

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HARRISBURG, Aug. 30 – The Pa. Supreme Court issued a ruling granting  appeal in a bad faith case to consider whether proof of ill will or motive is a prerequisite to establishing liability under the Pa. Bad Faith Statute, 42 Pa.C.S.A. §8371.

In Rancosky v. Wash. National Ins. Co. , 2016 Pa. LEXIS 1910 (Pa. Aug. 30, 2016), the state’s highest court ruled it will undertake limited review of a Pa. Superior Court ruling which granted a new trial to a bad faith plaintiff, an estate executor, after the trial court found for Washington National following a non-jury trial in a dispute over a cancer insurance policy.

The Supreme Court Order indicates it will review only the following issue:

“Whether this Court should ratify the requirements of Terletsky v. Prudential Property & Casualty Insurance Co., 649 A.2d 680 (Pa. Super. 1994), appeal denied, 659 A.2d 560 (Pa. 1995), for establishing insurer bad faith under 42 Pa.C.S. § 8371, and assuming the answer to be in the affirmative, whether the Superior Court erred in holding that Terletsky factor of a “motive of self-interest or ill-will” is merely a discretionary consideration rather than a mandatory prerequisite to proving bad faith?

While recognizing that the state legislature did not define bad faith, the Superior Court held that a statutory bad faith claim under Pennsylvania’s bad faith statute had two elements:  (1) the insurer did not have a reasonable basis for denying benefits under the policy, and (2) the insurer knew of or recklessly disregarded its lack of reasonable basis in denying the claim.  According to the Superior Court opinion, the trial court granted judgment to the insurer in part because the Plaintiff “failed to prove that Conseco [predecessor to Washington Mutual]  had a dishonest purpose” or a “motive of self-interest or ill-will.”

The Superior Court ruled it was sending the case back to the trial court for a new trial because the trial court’s finding that Plaintiff failed to prove the first element of the bad faith claim was in part premised upon  the Plaintiff’s failure to prove that the insurer in the case acted will ill will or a dishonest purpose.

The following passage from the Superior Court opinion, which could be seen as exalting form over substance, refers to an insurer’s ill will or dishonest purpose as  merely “probative.”  This aspect of the opinion could be what drew the Supreme Court’s attention:

We conclude that the trial court’s verdict is faulty based on its erroneous determination that Rancosky failed to establish the first prong of the test for bad faith because he failed to prove that Conseco had a dishonest purpose or a motive of self-interest or ill-will against LeAnn. As noted above, a dishonest purpose or a motive of self-interest or ill-will is probative of the second prong of the test for bad faith, rather than the first prong.. . .  The trial court could not have considered whether Conseco had a dishonest purpose or a motive of self-interest or ill-will unless it had first determined that Conseco lacked a reasonable basis for denying benefits to LeAnn under the Cancer Policy. However, because the trial court made no such determination, its consideration of a dishonest purpose or a motive of self-interest or ill-will was improper. Accordingly, we conclude that the trial court erred as a matter of law by using standards applicable to the second prong of the test for bad faith in its determination of whether Rancosky had satisfied the first prong of the test for bad faith.

Rancosky v. Wash. National Ins. Co. , 2016 Pa. LEXIS 1910 (Pa. Aug. 30, 2016)

 

 

State Farm Wins Auto Claim After Court Finds Insured Misrepresented Residency

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ALLENTOWN, July 22 — A federal judge in Pennsylvania has entered judgment on the pleadings in favor of State Farm Fire and Casualty Co., finding that the denial of an automobile insurance claim was appropriate where the insured stated in his application that he resided in Pennsylvania when he in fact resided in New York.

U.S. Judge Lawrence F. Stengel of the Eastern District of Pennsylvania held that George A. Hancle’s statement regarding where he lived was a material item, and that State Farm would not have issued the policy if it was aware Hancle did not live in Pennsylvania.  Judge Stengel also found that State Farm relied on Hancle’s statement of residency.

State Farm issued an automobile policy to Hancle on Jan. 31, 2014, for his vehicle, a 2013 Nissan Pathfinder. On the policy application, Hancle said he lived in Pennsylvania and that his truck was kept in a garage there.  Hancle and his wife were involved in an accident in February of 2014 in Brooklyn, N.Y.

State Farm sued the Hancles and Nissan Motor Acceptance Corp.  in Pennsylvania federal court on Oct. 27, 2014, seeking a declaration it owed no coverage to Hancle because he made misrepresentations in the application and did in fact not live in Pennsylvana. Hancle did not submit a response to the complaint, and a default judgment was entered in favor of State Farm in June of 2015.

State Farm filed a motion for judgment on the pleadings in the fall of 2015, and the insured again failed to respond. Nissan Motor Acceptance Corp. a defendant in the declaratory judgment action, argued that the motion for judgment on the pleadings should not be granted because the state of Hancle’s residence was a genuine issue of material fact.

Judge Stengel disagreed, stating:

“There are no inferences left in this action to be drawn, and no material issues of fact to be resolved,” the judge concluded. “The well-pleaded factual allegations in State Farm’s complaint are considered admitted, and I accept them as true.”

State Farm Fire and Casualty Company v. Gregory A. Hancle, et al., No. 14-6140, E.D. Pa.; 2016 U.S. Dist. LEXIS 95084

Policy Limits, Premium, Excluded From Jury In UM/UIM Case

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PHILADELPHIA, July 19 – A federal judge has ruled in a UM/UIM case that neither the policy limits nor the amount of premium paid for the UM/UIM coverage was relevant, and should be excluded from admission into evidence at trial.

U.S. District Judge Gene E.K. Pratter granted a motion in limine filed by the insurer, Geico Insurance Company, to exclude these items from the jury’s consideration in a case brought by Darren Lucca for UM/UIM benefits.  Lucca originally filed a complaint in state court,  alleging breach of contract, bad faith, and violation of the UTPCPL, but after the case was removed to federal court only the breach of contract count remained at issue.

The only remaining issue in the case is the extent of damages Lucca allegedly suffered, which will determine whether he is entitled to any UM/UIM benefits, over and above the $75,000.00 Lucca received from the tortfeasor.

Judge Pratter wrote:

“On April 8, 2011, Lucca was involved in a car accident due to the negligence of another motorist, causing him to suffer various personal injuries. At the time, his car was insured by defendant Geico. . . As part of his policy, Lucca had underinsured motorist benefits. The other motorist had $100,000 in coverage through his insurance carrier, which Lucca alleges was insufficient to cover his injuries. . . “Geico denied his claim, believing that Mr. Lucca had received $75,000 from the other motorist’s insurance as an award in binding arbitration, not in settlement, and that therefore the other motorist was not underinsured.”

In granting Geico’s motion in limine, Pratter  observed the very limited amount of available case law on the subject, and ruled that neither the UM/UIM limits, nor the premium paid for those limits was relevant to the issue to be tried — the nature and extent, and therefore the value, of Lucca’s injuries:

“Geico filed a motion in limine, asking the Court to bar Lucca from offering evidence or testimony regarding the amount of underinsured motorist coverage provided for in the insurance policy at issue or regarding the amount of any premiums paid for the coverage. . . Indeed, not only is the policy limit irrelevant in this case, introducing evidence of the policy limit may very well serve to prejudice Geico by giving the jury an anchor number that has no bearing on Lucca’s damages. . . For these reasons, the Court will exclude at trial any mention of the policy limits or the amount of premiums paid. Once a verdict has been rendered by the jury on the amount of damages suffered by Lucca, the Court can mold the verdict appropriately to reflect the limits of both Lucca’s policy and the third party tortfeasor’s policy. . . ”

“The only issue for the jury to decide in this matter is the extent of Mr. Lucca’s injuries from the accident. That Mr. Lucca’s policy includes a $900,000 underinsured motorist limit or that his stepfather paid a certain amount in premiums for the policy does not have ‘any tendency to make (any fact at issue in this case) more or less probable than it would be without the evidence.”

Lucca v. Geico, E.D. Pa., July 7, 2016 (Pratter, J.)

House Vacancy Open Question In Coverage Dispute Over Frozen Pipes

 

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PHILADELPHIA, July 12 – A Pa. Federal judge has ruled that questions of fact existed concerning occupancy of a home at the time of a burst water pipe, precluding summary judgment for the insurer in a coverage action related to the loss.

Economy Premier Assurance Co. removed a coverage suit filed by homeowners Joseph and Robin Jugan in Pa. state court seeking coverage for water damage after a frozen pipe burst in their home while they were away for an extended period of time.  The insurer denied the claim, relying on an exclusion from coverage any damage from frozen pipes in an  unoccupied home.  There is an exception to the freezing exclusion if reasonable care is used to heat or drain the pipes during any period of non-occupancy.  The Jugans claimed they took reasonable care to avoid freezing pipes while they were gone.

In response to the insurer’s motion for summary judgment, Judge Jeffrey L. Schmehl found that the homeowners did not use reasonable care to safeguard the pipes in their absence, and therefore that the Freezing Exclusion applied.  He also ruled, however, that there is a question of fact as to whether the home was unoccupied prior to the loss, affecting whether the Jugans could recover for contents damage. The judge found the term “unoccupied” undefined in the policy, and therefore subject to several interpretations.  The Judge believe this left the occupancy issue open for the jury to decide:

“If the jury concludes that the house was not ‘unoccupied’ at the time of the loss, the occupancy exclusion will not apply and plaintiffs would be entitled to recover the value of their contents under Coverage C. If, however, the jury were to find that the house was ‘unoccupied’, the burden would shift to plaintiffs to show that they used reasonable care to maintain heat in the house. Since the Court has already concluded that plaintiffs did not use reasonable care to maintain heat, the exclusion would apply and plaintiff could not recover the value of their contents under Coverage C of the Policy.”

Joseph Jugan, et al. v. Economy Premier Assurance Co., No. 15-4272, E.D. Pa.; 2016 U.S. Dist. LEXIS 87876

Motion for JOP Denied In Water Damage Coverage Dispute

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HARRISBURG, July 8  — A Pennsylvania federal judge declined to grant an insurer’s motion for judgment on the pleadings  in a homeowner’s coverage suit involving water damage, finding that genuine issues of fact existed as to whether  exclusions for defective construction, seepage, neglect or known loss applied to the loss.

Jonathan and Deborah Drenocky filed an insurance claim with their homeowners insurer, The Cincinnati Insurance Co., for water damage to their home.  The Drenocky’s suit against the contractor for defective construction was terminated due to the construction company’s bankruptcy.  During window replacement in the fall of 2013, additional damage was found behind the Drenocky’s stucco walls.  A construction expert hired by the insureds opined that there was the lack of a vapor barrier, allowing water seepage around windows and doors.
After the Drenockys filed a claim with their homeowners’ insurer, Cincinatti Insurance Co., the insurer  denied the claim in October of 2013.  Cincinnati’s construction inspector, Brent Leisenring, P.E., found that the water damage  resulted from improper window installation.
In 2015, Cincinnati sued its insureds in the U.S. District Court for the Middle District of Pennsylvania, seeking a declaratory judgment that it owed no coverage to  the Drenockys. Cincinnati argued that a defective construction exclusion applied, as did a the seepage exclusion, the known loss doctrine, the policy’s coverage period , the neglect exclusion and the concealment and fraud exclusion.

U.S. District Judge Christopher Connor denied Cincinnati’s motion for partial judgment on the pleadings.  The Court held that the cause and specific time of manifestation of the water damage were both material and disputed. The judge cited to conflicting versions of the cause of the loss, and ruled that these conflicts precluded decision on the coverage exclusions.Cincinnati also claimed Mr. Drenocky falsely testified during an examination under oath, but Connor also decided that issue, including the intentional nature of the inaccurate statements under oath,  should proceed  also:

“Considering the multitude of projects at the house, the complexity of the underlying damage, and the passage of time, a reasonable jury could determine that Drenocky simply forgot about the MacKinney letter during his examination under oath. Accordingly, the court must deny Cincinnati’s request for judgment pursuant to the intentional concealment clause at this juncture. The fraud and concealment exclusion contains a second relevant prong. The false statement clause purports to bar coverage if an insured makes a false statement, irrespective of the insured’s state of mind.”

The Cincinnati Insurance Co. v. Jonathan Drenocky and Deborah Drenocky, No. 15-762, M.D. Pa.; 2016 U.S. Dist. LEXIS 87711

Insured Attorney Disqualified In Pa. Bad Faith Suit; Necessary Fact Witness

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PHILADELPHIA, June 30 – A policyholder’s attorney has been disqualified from serving in a breach of contract and bad faith case by a Pennsylvania federal judge, because he will be a necessary fact witness in that case, the Court held.

The Plaintiff in the underlying case, Susan Adeniyi-Jones was allegedly injured by an  underinsured driver on Oct. 11, 2011. After receiving the offending driver’s liability policy limits of $25,000, Adeniyi-Jones, through her attorney, Rhonda Hill Wilson, contacted State Farm Mutual Automobile Insurance Co., Adeniyi-Jones’  own insurer, and had communications regarding a claim for underinsured motorist benefits.

State Farm offered Jones $15,000 to settle but Adeniyi-Jones demanded $1.5 million.  Adeniyi-Jones sued State Farm in the Philadelphia County Court of Common Pleas, alleging breach of contract and bad faith, after which State Farm removed the action to the U.S. District Court for the Eastern District of Pa..

During discovery in the federal action District Court granted State Farm’s motion to compel the deposition of Adeniyi-Jones’ lawyer, Wilson,  but the deposition was limited to pre litigation dealings between the parties.  Ultimately, State Farm filed a motion for summary judgment regarding the bad faith claim which was denied, in part because of what the Court felt were genuine issues of fact regarding communications among the parties.

Eastern District  Judge Harvey Bartle III  also held that the plaintiff’s lawyer, Wilson, had to be removed from serving as trial ounsel:

“With regard to all of the plaintiffs’ allegations, since her testimony ‘is central to the plaintiffs proving and State Farm defending against the claims that State Farm acted in bad faith in failing to request a statement under oath or independent medical examination.’”

Judge Bartle also found that Wilson’s testimony was also central to the plaintiff’s claim of bad faith delay, and to the Plaintiff’s claim that State Farm’s $15,000 settlement offer was unreasonable and unjustified, further holding:

“[t]he reasonableness of the $15,000 settlement offer depends on the content of the information State Farm had before it at the time it made that offer. . .
As the individual who supplied all relevant documents and oral representations concerning medical bills, treatment, and wage loss to State Farm, Wilson is a necessary fact witness as to whether the settlement offer was reasonable. Wilson is the only fact witness who can respond on behalf of the plaintiffs to Lukens’ claims.”

Judge Bartle further held that Wilson’s testimony was also relevant to the Plaintiff’s breach of contract claims, calling Wilson a “key fact witness.”  Judge Bartle recognized that  although disqualifying Wilson “burdens the plaintiffs with obtaining new trial counsel,” the “balance of interests favors disqualifying Wilson as trial counsel in this action.” Judge Bartle’s analysis was based in Part on Pa. Rule of Professional Conduct 3.7 and Eastern District Local Rule 83.6 regarding disqualification of counsel.

Susan Adeniyi-Jones v. State Farm Mutual Automobile Insurance Co., No. 14-7101, E.D. Pa.; 2016 U.S. Dist. LEXIS 85053