Pa. Judge: Bad Faith Case Severed, Jury To Hear Common Law Bad Faith Claims

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Pennsylvania’s  Westmoreland County Court of Common Pleas has denied a motion to stay of discovery in a  bad faith case pending completion of a UIM case, but has also ordered severance of trial of the bad faith claims under which common law bad faith claims will be tried by a jury, and statutory bad faith claims will be tried by the judge.

In Madeja v. State Farm Mutual Automobile Ins. Co., No. 5493 of 2016 (C.P. Westmoreland Co. April 11, 2017 Scherer, J.), the plaintiffs advanced both common law bad faith claims and statutory bad faith claims,  The trial court ordered those claims severed from the underlying UIM claim.  In a bit of a quirk, however, the court ruled that depending on the verdict returned on the UIM claim,  the common law bad faith claims would be heard with the same jury that determined the UIM claim while the court would hear the statutory bad faith claim on a non-jury basis.

A copy of the trial court order can be found here.

Editor’s note:  The trial court order in this case points out the somewhat unique nature of bad faith law in Pennsylvania — it is a two-headed creature with both a common law component and a statutory law component.  In this writer’s experience, trials of both statutory and common law bad faith claims is not the norm — statutory bad faith claims are usually singly tried to the bench in state court.  The court order in question sets up for a potentially unruly and cumbersome bad faith trail, given the likelihood of overlapping evidence presented on the common law and statutory bad faith claims.   The Court might streamline the process by simply taking evidence in a single bad faith proceeding, and then letting the jury render a verdict on the common law claims, with the Court issuing a decision on the statutory bad faith claims. 

The ruling could serve as an incentive to the plaintiffs’ bar to not only plead common law bad faith claims, but seek trial of those claims in an effort to work around what has traditionally been the province of the trial judge in bad faith cases. 

 

 

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No Bad Faith Claim Where UIM Claim Not Covered Under Antique Auto Policy

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PITTSBURGH, March 13 – U.S. District Magistrate Judge Cynthia Reed Eddy has dismissed both a bad faith and breach of contract claim against an issuer  of an antique auto policy where the alleged injury occurred in a vehicle not covered under the UM/UIM portion of the policy.

Bish v. Am. Collectors Insurance, Inc., et. al., (W.D. Pa., March 13, 2017)(Eddy, U.S.D.M.J.)

UM/UIM Rejection Form Need Not Comply Verbatim With Statute, State High Court Rules

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HARRISBURG, Feb.22 – In a 5-2 decision, the Pennsylvania Supreme Court ruled that a UM/UIM rejection form which did not comply verbatim with the statutory requirements for rejection was valid, finding the differences between the form and the statutorily required language “inconsequential.”

In Ford v. Am. States,  the Plaintiff rejected UM/UIM coverage in her auto policy by signing a form which, according to the opinion, was identical to the statutorily required waiver in 75 Pa.C.S.A. sec. 1731 except for the following:  1.) the form referenced “motorists” instead of “motorist” in its title line and first sentence, and 2.) it injected the word “motorists” between  Underinsured” and “coverage” in the second sentence.

The American States form read, therefore, as follows:

REJECTION OF UNDERINSURED MOTORISTS PROTECTION

By signing this waiver I am rejecting underinsured motorists coverage under this policy, for myself and all relatives residing in my household. Underinsured motorists coverage protects me and relatives living in my household for losses and damages suffered if injury is caused by the negligence of a driver who does not have enough insurance to pay for all losses and damages. I knowingly and voluntarily reject this coverage.

In affirming summary judgment in favor of American States, Justice Max Baer rejected Ford’s argument that the form she signed violated Section 1731, and cited to Robinson V. Travelers Indemnity Co., 520 Fed. Appx. 85 (3d Cir. 2013).  In Robinson, the identical language used by American States was found to be in compliance with the Pa.M.V.F.R.L.:

“the Third Circuit observed that the MVFRL does not define the phrase “specifically comply” and that courts have not been uniform in their treatment of UIM coverage rejection forms that add language to the statutory form. Robinson, 520 Fed.Appx. at 88. As to the specific circumstances in the case, the court reasoned that the addition of the word “motorists” into the rejection form did not introduce any ambiguity and, in fact, made the form consistent with the rest of the MVFRL. Id. While the court opined that it is a better practice for  insurance companies not to supplement the statutory language of the MVFRL’s rejection form, the court nonetheless concluded that the insurer’s rejection form was valid because: it included the entirety of the statutory text; the addition of the word “motorists” did not introduce ambiguity into the form and did not alter the scope of the coverage.”. .  when a UIM rejection form differs from the statutory form in an inconsequential manner, the form will be construed to specifically comply with Section 1731 of the MVFRL.”

Justice Baer did caution, however, that the safer practice for insurers was to replicate the statutory language to avoid any question of non-compliance of UM/UIM rejection forms.

Ford. v. American States Ins. Co. (Pa., Feb. 22, 2017) (Baer, J.)

Washington Supreme Court Ruling May Limit Suits Under Insurance Fair Conduct Act

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WASHINGTON STATE, Feb. 2 – Washington state’s Supreme Court has potentially limited insured’s rights to sue insurers under the state’s Insurance Fair Conduct Act.

In Perez-Santos v. State Farm, the state Supreme Court held that State Farm could not be held liable based on alleged unfair conduct in handling claims for medical bills arising out of a car accident.  The Court ruled that the IFCA does not create an independent right of action for regulatory missteps, but allows a right of action when an insurer unreasonably denies or delays benefits.

Practitioners in the state say that the ruling, however, may raise more questions than it answers, according to a recent report in Law360.com.

In the case, the insured,  Perez-Crisantos, was in a car accident in November 2010 and alleged more than $50,000 in medical bills. State Farm agreed to pay the $10,ooo in first party personal injury protection (PIP) benefits. The insurer denied, however, the insured’s  underinsured motorist(UIM) claim, after concluding the claims included bills for excessive chiropractic treatment and unrelated shoulder surgery.

Perez-Crisantos sued State Farm in Washington state court, and  ultimately won another $24,000 from the insurer on his UIM claim in an arbitration.  Thereafter,
Perez-Crisantos amended the state court civil complaint alleging State Farm’s violation of a Washington Administrative Code provision prohibiting insurers from forcing a first-party policyholder to litigate to recover “amounts due under an insurance policy by offering substantially less than the amounts ultimately recovered in such actions.”

A state judge granted State Farm’s motion to dismiss, concluding there was no evidence of “some sort of incentive program to ‘lowball claims.'”

On appeal to the state Supreme Court,  Perez-Crisantos argued regulatory violation alone could support an IFCA claim, but the justices disagreed. The Supreme Court, in an opinion written by  Justice Steven C. Gonzalez, found  no indication that the Washington state Legislature intended to create an independent cause of action under the statute solely for regulatory violations.   “Instead, IFCA makes regulatory violations relevant to the apportioned attorneys’ fees and damages associated with that derivative violation,” Gonzalez wrote.

IFCA permits courts to award successful claimants attorneys’ fees and authorizes courts to award triple damages.

Washington Justice Debra L. Stephens wrote in a concurring opinion that she favored affirmed the judgment in favor of State Farm without tackling the issue of whether a regulatory violation gives rise to an independent cause of action under the IFCA. She wrote, “I fear that the majority’s gratuitous ‘holding’ on IFCA will lead to confusion and will frustrate the intent of this remedial statute.”

Perez-Santos v. State Farm (Wash. Feb. 2, 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 Claims Dismissed in Household, Regular Use Exclusion Case

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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.)