Judge Rules No Bad Faith In Insurer’s Low But Reasonable Valuation of UM/UIM Claim

penalty2_5139_356

PHILADELPHIA, Aug. 17 – A Pennsylvania state court judge has granted summary judgment in favor of Travco Insurance Company, ruling that a $25,000.00 offer in a UIM claim which later ended in a $45,000.00 arbitration award was not so unreasonably low as to constitute bad faith.

In Boleslavksy v. Travco Insurance Co., Travco offered its insured $25,000.00 to settle a UIM claim in response to the insured’s  policy limits demand of $50,000.00.  After reviewing some additional information on the claim, Travco increased the valuation of the claim to $28,000.00 but did not change it’s offer in light of the policy limits demand.

The UIM case went to arbitration where the insured won an award of $45,000.00.  The insured thereafter  filed sued Travco for bad faith in the Philadelphia County Court of Common Pleas, arguing first  that insurer’s final settlement offer of $25,000 was inadequately low in light of the ultimate arbitration award, and second that Travco never notified the insured of the valuation increase.

Travco filed a motion for summary judgment, arguing that its offer and claims conduct were reasonable as a matter of law.  The Court agreed with the insurer, granted the motion and found Travco’s offer to be low but reasonable, and therefore not in bad faith.  The Court also found that Travco continued to reasonably evaluate information concerning the claim, and that offers of settlement which were made in the context of that information were not without basis.

Finally, the court ruled Travco had no obligation to increase its offer to $28,000.00 because the insured had unambiguously hewed to a policy limits demand, signaling no desire to negotiate.

Boleslavksy v. Travco Insurance Co., No. 151000886, 2017 Phila. Ct. Com. Pl. LEXIS 257 (Phila. C.C.P. Aug. 17, 2017) (Anders, J.)

Advertisement

Attorney Client Privilege Waived In Bad Faith Case Despite No Advice of Counsel Defense, Federal Magistrate Rules

acp

HATTIESBURG, Aug. 15 — A federal magistrate judge in Mississippi has ruled Nationwide Insurance must produce documents and that the insurer’s former counsel must produce billing records in a bad faith case related to the handling of an uninsured/underinsured motorist’s claim, finding the insurer waived protections under the attorney-client privilege and the attorney work product doctrine, even though it did not formally assert the advice of counsel defense.

In Craig Flanagan, et al. v Nationwide Property and Casualty Insurance Company,  U.S. Magistrate Judge Michael T. Parker  found that while Nationwide did not formally assert the advice of counsel defense opening the door to prior counsel’s work product and communications, it did pick and choose certain potentially privileged documents to produce in  aid of  its defense in the case, thereby waiving attorney – client and work product protections.

Nationwide’s insured, Craig Flanagan was severely injured in a motor vehicle accident on  May 31, 2014 while driving a vehicle owned by owned by Flanagan Construction Co. and insured by Nationwide Property and Casualty Insurance Co.  The Nationwide Policy provided UM/UIM Coverage, out of which Nationwide paid  $1 million statutory limits for noneconomic damages and $1.5 million for the medical expenses.  After Nationwide failed to pay the remaining $4.15 million in remaining UM/UIM limits, Flanagan, his wife,  and Flanagan Construction sued Nationwide in the U.S. District Court for the Southern District of Mississippi. In the suit, the  Plaintiffs sought the remaining UM/UIM limits ,  and also alleged fad faith, for which they sought punitive damages.

During the course of the case the Plaintiff’s filed a motion to compel production of a number of Nationwide claims documents, including investigative documents, and the files of outside counsel, Bill McDonough of Copeland Cook Taylor and Bush, relating to the claims. The Plaintiffs also sought the billing records of McDonough and the Copeland firm,  which was retained initially by Nationwide  to investigate the claim, but was later retained to represent Nationwide in the UM/UIM claim as well.

In granting the motion to compel, Judge Parker wrote:

“Plaintiffs argue that Nationwide is relying upon the advice and actions of McDonough as a defense despite Nationwide’s insistence that it is not asserting an ‘advice of counsel’ defense.  According to Plaintiffs, ‘Nationwide has produced a number of communications between Nationwide and Copeland Cook in support of its defense to the bad faith allegations, but has chosen to cherry-pick which communications to produce in discovery and which communications to withhold on a claim of privilege.’ . . .  Plaintiffs also point to the fact Nationwide identified McDonough as a witness in its initial disclosures and point to Nationwide’s interrogatory response.”

Nationwide opposed the motion to compel,  and argued that did not plead advice of counsel.  It also argued that the documents it did produce showing communication between Nationwide and McDonough contained only “objective facts,” and neither legal advice nor attorney work product.

Judge Parker disagreed, however, writing:

“review of the documents produced by Nationwide . . . reveals that Nationwide did not simply disclose ‘objective facts’ as it alleges, but also disclosed McDonough’s opinions regarding Flanagan’s evidence supporting his loss of income claim, Flanagan’s ability to prove cognitive impairment, the need to hire experts, the benefits and risks involved in scheduling a medical examination, and the timeliness of Nationwide’s investigation and payment to Flanagan…

An insured cannot force an insurer to waive the protections of the attorney-client privilege merely by bringing a bad faith claim.  Nationwide’s prior production, however, has put at issue Nationwide’s confidential communications with McDonough.  Nationwide has voluntarily injected its counsel’s advice into this case by purposely disclosing, inter alia, its counsel’s opinion that Nationwide has not ‘unnecessarily delayed payment of [Flanagan’s] claim.  . . .

To allow Nationwide to use the attorney-client privilege to withhold additional information related to counsel’s advice ‘would be manifestly unfair’ to Plaintiffs.”

Judge Parker also  found that Nationwide’s disclosure of certain documents containing McDonough’s opinions and impressions constituted waiver of the work product doctrine as well, and ordered the documents to be produced.

Editor’s Note: The price of asserting the Advice of Counsel Defense in a bad faith case is always waiver of attorney – client privilege and the attorney work product doctrine.  The calculus of the costs and benefits of asserting the defense must therefore always  be done thoroughly and carefully.   Insurers and their lawyers must be mindful that there are many ways to assert Advice of Counsel, and few, if any, to try to put it back in to the bottle once it has been let out.  Formal assertion of the defense is but one way to waive the protections of   attorney – client privilege and the attorney work product doctrine.  The defense can be asserted by conduct as well, leading to inadvertent waivers of privilege and work product protection. 

Craig Flanagan, et al. v Nationwide Property and Casualty Insurance Company, No. 2:17-cv-33-KS-MTP, S.D. Miss., Eastern Div., 2017 U.S. Dist. LEXIS 123204

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

ACCIDENT

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

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

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

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

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

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

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

Insurer’s Failure To Obtain Stacking Waiver On Added Vehicle Results In Stacked Benefits, Pa. Judge Rules

insurance%20coverage-x

 

STROUDSBURG, May 30 –  A Pennsylvania state court judge has decided that a driver was entitled to $400,000 in stacked coverage because the driver did not sign stacking waivers when adding the most recent vehicles to his policy.

In Newhook v. Erie Ins. Exchange, Monroe County Court of Common Pleas Judge David J. Williamson granted declaratory relief sought by  Kenneth Newhook when he filed a complaint against Erie seeking entitlement  to the stacked coverage.   Newhook was involved in a rear end accident when he was struck by a drunk driver, and he alleged he sustained severe injuries in the collision.

Erie paid $100,000 in single-vehicle coverage but denied Newhook’s claim for $300,000 in additional stacking benefits based on 3 other vehicles listed on the policy.  Newhook neither selected nor waived stacking  when adding the most recent vehicles, Williamson noted in his opinion.

Williamson declined to follow Erie’s argument that it had no duty to obtain new stacking waivers for the recently added vehicles after the insured initially declined stacking on the former vehicles:

“It appears that the existing case law varies regarding availability of stacked UM/UIM coverage when it is not selected by an insured, but also not specifically waived in writing…From a pure public policy standpoint, and in conformity with the intent of Section 1738 of the [Motor Vehicle Financial Responsibility Law], it would seem that when more benefits are available, a written waiver of those benefits should be given…Clearly, a significant change was made when the Ford Fusion was added to the policy. No stop-gap insurance was needed because Erie was informed and issued a new declaration and also renewed the insurance policy prior to the accident. No new waiver was executed.”

Williamson ruled in favor of stacking despite the fact that the vehicle in the accident, a Ford Fusion, was a replacement for an automobile on which stacking had originally been rejected.  The judge ruled that acquisition of the new cars was akin to the purchase of a new vehicle, on which a stacking waiver would be required.

A link to the opinion appears below.

Newhook v. Erie Ins. Exchange (Monroe C.P., May 30, 2017)(Williamson, J.)

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

Witness_stand_in_a_courtroom

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. 

 

 

.

 

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

alert

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

What-does-an-auto-insurance-policy-look-like-2-e1310427553251

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

discovery

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

discovery

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

Witness_stand_in_a_courtroom

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.)

 

 

 

 

 

%d bloggers like this: