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


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


“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


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


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


Cincinnati Insurance Owes Indemnity For Contractor’s Negligence


PITTSBURGH, June 13  — An insurer must indemnify  its contractor and pay for a  homeowner’s recovery of $174,553.04 for defectively installed structural panels, a federal judge in the Western District of Pa. has ruled.

Gary Gadley hired Jerry Ellis Construction  to build a timber home made from Thermocore Structural Insulated Panel Systems SIPs. In 2011, Gadley bought the panels directly from Thermocore for use in his roof.

Gadley  claimed that Ellis was negligent in installing the SIP’s out of sequence and in violation of manufacture guidelines and specifications, sued Ellis for the error, and sought damages relating to repair and reconstruction.  In the underlying case, Ellis’ insurer, Cincinnati Insurance Co.,  defended Ellis subject under a reservation of rights.

Gadley won a verdict in the underlying case.  Specifically, the jury found that Ellis did not breach its contract with Gadley to install the SIPs. The jury found that while  Ellis did not breach his construction contract, he instead  breached expressed and implied warranties made to Gadley about the proper installation of the SIP’s.   Gadley was awarded $108,000 in damages for Ellis’ breach of the express and implied warranties reduced by nearly a third based on the jury’s finding that Gadley did not fully mitigate his damages.

Cincinnati sued Ellis and Gadley seeding a declaration of no coverage, and in that case moved for summary judgment.  They argued that the policy provided indemnity only for property damage caused by an occurrence, and that coverage was also excluded by a “damage to your own work exclusion.”  Gadley argued that this exclusion only applied to $25,000.00 of the verdict specifically allocated to damage to the SIP’s themselves.

U.S. District Judge Kim R. Gibson denied the motion for summary judgment,  pplying Indiana law to find that Ellis’ errors were not intentional and therefore, they were a covered “occurrence” under the policy:

“Because the jury determined that Jerry Ellis Construction did not engage in intentional or reckless conduct, the Court declined to grant Gadley’s request for treble damages. Instead, the Court doubled the damages that the jury awarded to Gadley. In applying the jury’s verdict in the underlying action to the instant matter, the Court cannot conclude that the Ellis Defendants’ faulty workmanship was intentional. Rather, the faulty workmanship was ‘unexpected’ and ‘without intention or design.’ The Ellis Defendants’ faulty workmanship therefore constitutes an ‘accident’ that is covered by the Policy.”

Judge Gibson also ruled that damages under Pennsylvania’s Unfair Trade Practices and Consumer Protection law were also covered:

“Plaintiff does not cite any provisions of the Policy to support its argument that Gadley’s UTPCPL damages are excluded. Rather, Plaintiff only argues that the Policy does not provide coverage for Gadley’s UTPCPL damages because the ‘property damage’ that Gadley sustained is not covered by the Policy. As discussed above, the Ellis Defendants’ faulty workmanship constitutes an ‘accident’ that is covered by the Policy. Accordingly, because the damages awarded to Gadley are not excluded by the Policy and are below the Policy’s limits, Plaintiff must indemnify the Ellis Defendants.”

Cincinnati Ins. Co. v. Jerry Ellis Construction  (W.D. Pa.., June 9 2016)


Life Insurer Did Not Act In Bad Faith In Interpleader

life insurance

HARRISBURG, Pa., June 24 —  A federal judge in Pennsylvania has ruled that the  executrix of an estate failed to establish a right to relief for a life insurer’s alleged bad faith in denying her claim for benefits under a policy of life insurance.

MONY issued Steve Eckert a life insurance policy with a death benefit of $127,000.  His wife at the time, Carol, was named the beneficiary.  In 1989, however, The Eckerts divorced, but Steve Eckert failed to remove his ex wife as the beneficiary.   Eckert remarried to Pamela Eckert in 2006.

Eckert died, and the beneficiary was never changed.  MONY filed an interpleader complaint in the U.S. District Court for the Middle District of Pennsylvania, seeking to pay the proceeds into court.  Eckert’s current wife, Pamela, and former wife, Carol,  both filed answers and crossclaims.  Pamela also filed a bad faith claim against MONY, and a claim alleging violation of the Pennsylvania Unfair Insurance Practices Act.

MONY moved to dismiss the three counterclaims filed by Pamela Eckert.  District Judge William W. Caldwell denied the motion in part, but ordered breach of fiduciary duty and bad faith claims dismissed.  Pamela Eckert filed an amended answer, again alleging bad faith, and MONY again filed a motion to dismiss.

Judge Caldwell dismissed the bad faith claims again, finding that aside from her allegation that MONY denied her the policy proceeds, Pamela’s pleading did not support a bad faith claims since it was “wholly unconnected to a denial of benefits.”  He wrote:

“Subparagraphs (a), (d), (e) and (f) [of Eckert’s opposition brief], relate to a transfer of ownership, not to a denial of benefits. Even if they alleged actionable conduct (and we express no opinion on that matter), this conduct could not be understood to bear on a claim for policy proceeds. In other words, Eckert may be correct (at least in this case) that a transfer of ownership led to a denial of (or at least a dispute about) her claim for the proceeds of the policy, but the fact that an insurer’s conduct leads to a transfer of ownership does not mean it gives rise to a claim for denial of benefits after that transfer has been made. As judicially construed, section 8371 covers bad faith in denial of benefits, not bad faith in the transfer of ownership in a policy. Section 8371 does not reach the latter conduct.”

MONY Life Insurance Co. v. Carol Snyder, f/k/a Carol Eckert, and Pamela Eckert, No. 15-2109, M.D. Pa.; 2016 U.S. Dist. LEXIS 34371)(Caldwell, J.).


Bad Faith Claims Dismissed in Household, Regular Use Exclusion Case


SCRANTON, June 13 — A federal judge in Pennsylvania has dismissed a number of breach of contract and bad faith claims, arising out of an auto  insurance claim which the judge said was potentially barred by the policy’s household or regular use exclusions.

According to the opinion written by U.S. District Judge Richard P. Conaboy, Plaintiff Richard Myerski was involved in a car  accident with an uninsured driver while Myerski was driving his mother’s car, which was insured through First Acceptance Insurance Co. Inc.  Myerski was neither a named insured nor a member of his mother’s household at the time of the accident.

First Acceptance denied a claim for benefits with First Acceptance made by Myerski’s mother, however, contending that Myerski lived with Morris at the time of the accident, even though the police report listed Myerski at a different residence address.  Myerski told the insurer he lived with his mother and drove the car “all the time.”

Myerski sued First Acceptance in the Lackawanna County, Pa., Court of Common Pleas, for breach of contract, bad faith, and  breach of the covenant of good faith and fair dealing, in addition to breach of contract and negligence claims.  The case was removed to the U.S. District Court for the Middle District of Pennsylvania and First Acceptance moved to dismiss good faith and fair dealing, bad faith, negligence and vicarious liability claims.

In granting the motion, Judge Conaboy held that dismissal of the bad faith claims were appropriate:

“[t]he facts alleged show that Defendants reasonably denied the claim for damage to the insured’s vehicle based on the policy exclusion: Plaintiff himself stated that he lived with his mother and drove the vehicle ‘all the time’…Even if there is evidence which could support a claim that Plaintiff mistakenly made the August 25, 2015, statement about his residence, Plaintiff does not point to evidence undermining his statement that he used the car ‘all the time,’ usage which would fall under the ‘regular or frequent operator’ exclusion. In fact, Plaintiff does not assert that this exclusion does not apply. Importantly, Defendants’ August 25, 2015, correspondence to Ms. Morris indicates there is no coverage for damage to her auto based on the exclusion set out above — it does not limit the application of the exclusion to Plaintiff’s place of residence. Given the admissions in Plaintiff’s statement and the basis for denial identified in Defendants’ August 25, 2015, correspondence, Plaintiff’s assertion that bad faith is evidenced by Defendants’ failure to properly investigate Plaintiff’s residence is not an accurate assessment of the bases upon which the exclusion may apply in this case. It follows that Defendants’ alleged refusal to further investigate Plaintiff’s residence and failure to pay for damage to Ms. Morris’ auto cannot be considered ‘frivolous or unfounded’ refusals.”

Judge Conaboy further wrote:

“Given the lack of factual support in the record supporting Plaintiff’s assertion of PIP [personal injury protection] and UM [underinsured motorist] claims at the early stage of the claims handling process, the fact that there is no evidence that Plaintiff sought clarification regarding PIP and UM coverage following the call where [First Acceptance claims adjuster Beverly] Bowers allegedly denied all claims, and the fact that the Police Report states that no one was injured and the other vehicle was insured, the ‘clear and convincing evidence’ that Defendants acted in bad faith on the basis of Ms. Morris’ conversation with Ms. Bowers is lacking. Thus, I conclude the record does not provide the evidentiary requirements for establishing a bad faith claim during the initial period and Plaintiff’s statutory bad faith claim is properly dismissed.”

The Judge permitted breach of contract and statutory claims under the Pa.M.V.F.R.L to proceed, and permitted the Plaintiff an opportunity to amend the bad faith allegations, though recognizing that doing so would likely be “futile.”

 Myerski v. First Acceptance Ins. Co., (M.D. Pa. June 1, 2016, Conaboy, J.)



Pa.: State Farm Adequately Pled Chiropractor Billing Fraud


PHILADELPHIA, May 20 — A federal judge has denied a motion to dismiss State Farm Mutual Automobile Insurance Co.’s amended complaint of billing fraud against a chiropractic and physical therapy practice.  It ruled also that State Farm need not prove justifiable reliance on the bills at this stage of the case.

U.S. District  Judge J. Curtis Joyner of the Eastern District of Pennsylvania also found that State Farm’s  amended claims were both timely, and adequately alleged misrepresentation in the billing submitted by the defendants.

State Farm alleges that  Eastern Approach Rehabilitation LLC, Aquatic Therapy of Chinatown Inc., Leonard Stavropolskiy, P.T., D.C., and Joseph Wang, P.T., D.C., submitted false and fraudulent insurance claims on behalf the practice’s patients.  State Farm claims that the defendants  created a series of records for patients suffering from “moderate-to-severe joint dysfunctions, pain, and muscle spasms across multiple regions of the spine,”  and that these impressions from initial examinations were copied and pasted into subsequent treatment notes.  The amended complaint contends that planned treatments recorded in the notes were simply pre-determined, and not individually tailored to each patient.

State Farm also alleges claims that dating back to 2010, the practicioners took action to hide the nature of the fraudulent activity through the use of software to randomize and synonymize similar observations and diagnoses.  The amended complaint alleges that this conduct created the impression that diagnosis and treatment of patients was individualized when in fact it was not.

State Farm alleges damages in excess of $850,000.

On Feb. 17, Judge Joyner granted the motion to dismiss the original complaint,  but allowed State Farm to file an amended complaint.  He ruled that the amended complaint, however, sufficiently set forth misrepresentations allegedly made by the defendants, and that, at least at the pleading stage, the insurer need not show  justifiable reliance on the misrepresentations allegedly made in the billings.

State Farm Mutual Automobile Insurance Company v. Leonard Stavropolskiy, P.T., D.C., et al., No. 15-cv-5929, E.D. Pa.; 2016 U.S. Dist. LEXIS 65234

Bad Faith Allegations Too General, Dismissed Again In Pa. Federal Court


PHILADELPHIA, June 8 – A  federal magistrate judge in Philadelphia has found that overly broad bad faith allegations in a complaint filed against New Jersey Manuracturers Insurance Company should be dismissed.  The Court ruled that the insured plaintiff made only conclusory allegations insufficient to withstand the early challenge.

Mary Camp settled and auto accident claim with the tortfeasor’s insurer for $82,000, and then made a demand to her insurer, New Jersey Manufacturers Insurance Co. (NJMIC), for UIM benefits, seeking $221,412 for future medical treatment requirements.  NJMIC denied the claim, and Camp sued the insurer in the U.S. District Court for the Eastern District of Pennsylvania.  The complaint included claims for breach of contract and bad faith.

NJMIC filed a motion to dismiss the bad faith claims as insufficiently conclusory pursuant to F.R.C.P. 9.  NJMIC contended that the bad faith claims were simply  “a generic and non-specific reference to bad faith without enumerating any specific conduct of the defendant other than a disagreement over the value or amount of the claim.”

It was the second time Magistrate Judge Marilyn Heffley granted a motion to dismiss.  She earlier granted the same motion in March, but granted Camp leave to amend her complaint.  Camp’s amended complaint was not sufficiently different, according to Judge Heffley, with withstand dismissal.  In dismissing the similarly conclusory allegations, she wrote:

“The bad faith allegations in subsections (i) through (k) of paragraph 35 of the Amended Complaint remain unchanged from Camp’s original pleading. They include claims that NJMIC ‘engag[ed] in dilatory and abusive claims handling,’ ‘fail[ed] to adopt or implement reasonable standards in evaluating plaintiff’s claim,’ and ‘act[ed] unreasonably and unfairly in response to plaintiff’s claim.’ These allegations are devoid of factual specificity as to what claims handling practices were abusive or how NJMIC acted unreasonably. As the Third Circuit [U.S. Court of Appeals] ruled in Smith [Smith v. State Farm Mutual Automobile Insurance Co. (506 F. App’x 133, 136 [3d Cir. 2012])], without such details, a plaintiff has “fail[ed] to allege a legally sufficient cause of action for bad faith under [Pa. Consolidated Statutes] § 8371…

Alhough bad faith may be found where an insurer fails to communicate its reasons for denying a claim to an insured, in this case, according to the facts pled by Camp in her Amended Complaint, NJMIC actually did provide a reason for denying the claim. In paragraph 23 of the Amended Complaint, Camp alleges that in response to her submission for UIM coverage, NJMIC responded that it ‘[would] not be making a settlement offer as “it appears [Plaintiff] has been fairly compensated by the tort carrier for the injuries she sustained in the loss.”’ Thus, the facts alleged in the Amended Complaint clearly contradict the legal conclusion that Camp asks this Court to accept. Accordingly, Camp’s bad faith claim is insufficient to state a claim upon which relief can be granted.”

(Mary Camp v. New Jersey Manufacturers Insurance Co., No. 16-1087, E.D. Pa.; 2016 U.S. Dist. LEXIS 74496)

Allstate’s Denial of Water Leak Claim Reasonable, Court Rules


PHILADELPHIA, May 5  — A Pennsylvania federal judge on May 5 granted judgment in favor of an insurer in a water damage suit after determining that the company’s reliance on a maintenance exclusion to deny the claim was reasonable.

David Dougherty filed sued Allstate in state court for breach of contract and bad faith.   The suit was removed the U.S. District Court for the Eastern District of Pennsylvania on diversity jurisdiction grounds. Allstate denied Dougherty’s homeowner’s  water damage claim, contending that coverage was barred by the policy’s occupancy/heat exclusion and the planning, construction or maintenance exclusion.

The home was vacant and unoccupied at the time of the water loss, which occurred in winter weather.

Following cross motions for summary judgment Judge Thomas N. O’Neill Jr.held  Allstate met its burden in proving that it properly applied the policy’s maintenance exclusion in denying coverage. He held that the evidence presented

“supports a conclusion that the incident was caused by a failure to maintain the furnace at the property…On the record before me, viewed in the light most favorable to plaintiff, I find that a reasonable jury could not conclude that Allstate breached its obligation to plaintiff in applying the maintenance exclusion to bar plaintiff’s claim.”

Allstate’s summary judgment motion was also granted as to the bad faith claim.  The Judge held:

“It was not unreasonable for Allstate to focus its claim investigation on the condition of plaintiff’s furnace given that the water damage to the property occurred in January in Pennsylvania in an unoccupied property where the gauge on the oil tank read empty at the time of the loss (even though the gauge was later determined to be faulty.”

Dougherty v. Allstate Property And Casualty Insurance Company, (E.D. Pa. May 5, 2016, O’Neill, J.)

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