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.)

 

 

Ninth Circuit: Payment Delay In UM/UIM Claim Not Bad Faith

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SAN FRANCISCO, May 25 — Summary judgment in favor of an insurer in an insurance breach of contract and bad faith lawsuit was appropriate because an insured failed to submit timely support of her claim, a Ninth Circuit U.S. Court of Appeals panel has ruled.

Plaintiff Carol Sierzega was insured by Country Preferred Insurance Co., and filed a claim after she was involved in an accident with Shirleen Okelberry, who was uninsured at the time of the mishap.  Sierzega recovered a trial verdict of more than $4 million against Okelberry, and Country Preferred tendered Sierzega the $50,000 underinsured motorist policy limits.   Sierzega sued County Preferred  for breach of contract, breach of the implied covenant of good faith and fair dealing and violation of the Nevada Unfair Claims Practices Act for failing to pay the claim more promptly.

After removing the case to the U.S. District Court for the District of Nevada, County Preferred won summary judgment on all claims,  after which Sierzega appealed to the Ninth Circuit.

The Ninth Circuit affirmed the summary judgment in County Preferred’s favor, ruling that the District Court did not err in granting summary judgment on the breach of the implied covenant of good faith and fair dealing claim because there was no clear basis upon which County Preferred was on notice of a potential UIM claim, the Court ruled.
“Upon receiving notice of the claim, Country Preferred requested additional information, but it took Sierzega’s counsel more than five months to respond, with a demand letter. Once counsel sent the demand letter making clear that Sierzega was making an underinsured claim, Country Preferred promptly requested that Sierzega provide Okelberry’s policy limits and her medical records. Country Preferred also sent requests for records to Sierzega’s medical providers and notified Sierzega that some of the providers had not responded. Despite these efforts, Country Preferred still was not in possession of medical bills that established expenses greater than Okelberry’s policy limit at the time the judgment was entered in Sierzega’s civil case against Okelberry.”
The three-judge panel held that the summary judgment in favor of the insurer on the bad faith claims were proper because:
“[t]he delay in obtaining Okelberry’s policy limit information was a result of Allstate’s initial refusal to release the information, and there is no evidence that Sierzega was unable to obtain her own medical records from the non-responding providers and provide them to Country Preferred…Once Country Preferred obtained sufficient information about the policy limits and established that Sierzega’s medical bills exceeded Okelberry’s policy limit, Country Preferred paid Sierzega’s full claim. As a result, no reasonable jury, viewing the evidence in a light most favorable to Sierzega, would infer that Country Preferred was ‘act[ing] unreasonably and with knowledge that there [was] no reasonable basis for its conduct.”
Summary judgment on the breach of contract and unfair claims practices claims were also affirmed by the panel of  Circuit Judges M. Margaret McKeown and Michelle T. Friedland and Senior Judge Joan H. Lefkow of the Northern District of Illinois, who was sitting by designation.
Carol Sierzega v. Country Preferred Insurance Co., No. 14-15979, 9th Cir.; 2016 U.S. App. LEXIS 9087

Pa. Bad Faith Claim On Lapsed Policy Dismissed

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PHILADELPHIA, May 11 – The Pa. Superior Court has dismissed a bad faith claim filed against Progressive insurance, finding that the policy in question had lapsed, and that it was not bad faith for theinsurer to originally remove the case to federal court, despite a later remand.

The trial court entered summary judgment in favor of appellee Progressive Insurance Company and against appellant Anne Racioppi on her claims of breach of contract and bad faith.  Racioppi had allowed her policy to lapse for non payment of premium, and she did not purchase a new policy until the day following the accident from which she made her UIM claim.

In affirming the trial court, the Pa. Superior Court rejected Racioppi’s claim that Progressive failed to provide statutory  notice of cancellation/non-renewal of her policy.  The court ruled that Act 68 did not apply where an insurer offered to renew the policy and the insured refused to pay the premium — such an act was sufficient evidence of the insured’s intent to cancel the policy, the court ruled. Progressive sent the insured multiple renewal notices instructing her to pay the renewal premium by a certain date, the court observed. Racioppi did not deny receiving the notice.

Judge Kate Ford-Elliot further found that Progressive did  not act in bad faith in removing the case to federal court.  She ruled that Racioppi initially sued an entity of Progressive Insurance domiciled in Ohio. As a result, appellee removed to federal court based on diversity jurisdiction as a legitimate  litigation tactic. Once the proper division of Progressive was substituted, however, the case was properly remanded.  The court held that Progressives engagement in a legitimate litigation strategy did not constitute  bad faith.

Racioppi v. Progressive Insurance Company, (Pa. Super. May 11, 2016)(Ford Elliot, J.)

Geico Loses Summary Judgment Bid In Florida Bad Faith Case

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TAMPA, Fla., May 12 — On May 12, GEICO Insurance lost a bid in Florida federal court to dismiss a bad faith suit premised upon its alleged failure to adequately defend a GEICO insured in a personal injury action.  The Court ruled that a genuine issue of material fact existed as to whether the insurer acted in bad faith in its handling of the claim.

The insureds,  Manuel A. and Aleli Gonzalez bought auto insurance from GEICO General Insurance Co. and added their grandson Ishmael Ramjohn as an additional insured. Ramjohn allegedly injured Lisa Anderson in an automobile accident in February 2009, whereupon Anderson’s attorney attempted to settle Anderson’s claim with GEICO .

Anderson’s lawyer and GEICO communicated several times during 2009, leading to his sending a demand for the $100,000.00 bodily injury policy limit insuring Ramjohn. GEICO offered $2,581.16 to resolve the claim.  Later, GEICO increased its offer to $22,500.00 after receiving additional information on Anderson’s injuries.

After  Anderson sued the insureds in the Hillsborough County, Fla., Circuit Court for damages,  GEICO offered the $100,000 policy limits, which Anderson rejected.  A jury in that case returned a verdict for Anderson in the amount of  $398,097.82.

The insureds then sued GEICO in the U.S. District Court for the Middle District of Florida, alleging bad faith in handling Ramjohn’s defense.

In denying GEICO’s motion for summary judgment, Judge James S. Moody Jr. held:

“the record reflects facts that could permit a jury to find that GEICO acted in bad faith…In other words, this case, like most bad-faith cases, presents a genuine dispute that requires a jury’s resolution…For example, [insureds’ expert Peter] Knowe’s testimony creates a genuine issue for trial. Knowe testified that GEICO’s handling of the Anderson claim deviated from industry standards in several key respects. Remarkably, GEICO does not address or reference Knowe’s expert opinion anywhere in its motion…there is also evidence suggesting that GEICO did not evaluate Anderson’s claim from the perspective of a reasonable insured facing unlimited exposure.”

Judge Moody added that a reasonable jury could find that GEICO’s offer strategy in the case was executed in aid of a policy to reduce average loss payments.

Gonzalez et al v. GEICO General Insurance Company, (M.D. Fla. 2016)(Moody, J.)

Tender of Limits Does Not Moot Jury Valuation of UM/UIM Claim, Florida Supreme Court Rules

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TALAHASSEE, Feb. 25 – The Florida Supreme Court in a 5-2 decision  has ruled that a UM/UIM insured is entitled to a trial on underlying liability and damages before proceeding to litigate a bad faith claim, and that such a right is not mooted by the insurer’s tender of policy limits.

In Fridman v. Safeco Insurance Company of Illinois, the Supreme Court of Florida reversed a trial court ruling which vacated a $1,000.000 verdict in favor of the insured.  The trial court reasoned that Safeco’s pre-verdict tender of the policy’s  $50,000 UM/UIM limit mooted litigation of the UM/UIM claim.

After largely unproductive settlement negotiations, in February 2011, about 30 days before Fridman’s UM/UIM claim against Safeco was to be tried, Safeco tendered its $50,000 policy limit to Fridman.  The tender came more than four years after the underlying automobile accident, and more than a year after the plaintiff demanded the policy limits from Safeco.

Fridman twice refused accepting the tender, and Safeco moved to confess judgment in the amount of the policy  limits, which was denied by the trial court.  At the trial of the UM/UIM claim, the jury awarded Fridman $1,000,000, but an intermediate appeals court ruled that the judgment should be amended to omit any reference to the verdict, or to the trial court retaining jurisdiction to entertain a follow – on bad faith claim arising out of the excess verdict.

In reversing the Fifth District Court of Appeals, the Florida Supreme Court revewed a long line of decisions holding that the insured retained the right to litigate underlying liability a damages as a prerequisite to a bad faith proceeding against the insurer, because such items were required elements of proof in a bad faith proceeding in Florida.  Justice Barbara Pariente wrote:

Certainly, the insured is not obligated to obtain the determination of liability and the full extent of his or her damages through a trial and may utilize other means of doing so, such as an agreed settlement, arbitration, or stipulation before initiating a bad faith cause of action. See, e.g., Dadeland Depot, Inc. v. St. Paul Fire & Marine Ins. Co., 945 So. 2d 1216, 1234-35 (Fla. 2006). But the availability of other alternatives does not change the insured’s entitlement to a determination of liability and the full extent of damages in the first instance. Therefore, for all these reasons, we conclude that an insured is entitled to a determination of liability and the full extent of his or her damages in the UM case prior to filing a first-party bad faith action.

 

The Court went on to hold that these underlying determinations of liability and damages in a UM/UIM proceeding were subsequently binding upon the insurer provided the insurer had a full and fair opportunity to offer defense on those items in the UM/UIM proceeding.

We conclude that an insured is entitled to a jury determination of liability and the full extent of his or her damages, which may be in excess of the policy limits, in the underlying UM case, prior to litigating a first-party bad faith cause of action. This determination is then binding in the subsequent bad faith action, provided the parties have had the opportunity for appellate review of any trial errors that were timely raised. An approach such as the one taken by the trial court in this case—that is, going forward with the trial, including the verdict amount in the final judgment, and reserving jurisdiction to consider a motion to amend to add the bad faith cause of action—appropriately addresses how the parties can review that jury determination of the extent of the damages for error prior to it being used in the subsequent bad faith litigation as an element of damages.

 

The Supreme Court quashed the ruling of the Fifth District Court of Appeals and remanded the case for further proceedings.

Fridman v. Safeco Insurance Company of Illinois (Fla., Feb. 25, 2016)

Judge Rules DWI Victims Adequately State Bad Faith Claim Against Progressive

PHILADELPHIA, Feb. 4 – U.S. District Judge Timothy J. Savage has denied a motion to dismiss filed by Progressive Insurance Company in response to a bad faith complaint filed by Progressive insureds Jeffrey and Aimee Kelly arising out of a UM/UIM claim.    The Court did dismiss, however, claims the Kellys made against progressive under the Pa. Unfair Trade Practices and Consumer Protection Law.

The Kellys were injured in 2010 when their vehicle was struck from behind by a drunk driver.  They settled with the drunk driver for the driver’s policy limits, and then filed a UM/UIM claim with their own carrier, Progressive.  Progressive denied the claim, and the Kelly’s filed suit.

The Judge stated succinctly:

The Kellys allege that Progressive failed to pay their claims, make a reasonable settlement offer, investigate their claims properly, and consider medical and other documentation. These allegations suffice to state a claim under § 8371… The insurance bad faith statute applies to post-contract formation conduct. The UTPCPL, on the other hand, applies to conduct surrounding  the insurer’s pre-formation conduct.  The UTPCPL applies to the sale of an insurance policy.  It does not apply to the handling of insurance claims.

Kelly v. Progressive Advanced Ins. Co., (E.D. Pa. Feb. 4, 2016)(Savage, J.)

Zurich Asks 3rd Circuit To Reverse $1M UM/UIM Award

PHILADELPHIA, Jan. 13.  Zurich American Insurance company has asked the U.S. Court of appeals  for the Third Circuit to reverse a lower court’s ruling ordering it to pay $1 million in uninsured motorist (UM) benefits, arguing that a sign down form setting UM limits at $35,oo0.00 was valid and enforceable.

Stefan Freeth alleged injury while working on a truck owned by roadway contractor Road-Con Inc.  He sought UM/UIM benefits under Road – Con’s commercial auto policy with Zurich, and was awarded $1 million in U.S. District Court for the Eastern District of Pa., following Zurich’s removal of the case from the Chester County, Pa. Court of Common Pleas.

On appeal, Zurich contends that the sign down form completed by a company executive was a sufficient “express designation” within the meaning of the Pa. M.V.F.R.L.  to constitute a valid election of UM/UIM limits lower than the commercial auto policy’s bodily injury limits of $1 million dollars.  Freeth’s counsel claims the form is ambiguous, stating,  “there is no affirmative written election of the amount of $35,000.00 by Road-Con. There is no handwritten entry by the named insured or check mark or initialing of the amount of $35,000.00 on the Summary Form.”

Stefan Freeth v. Zurich American Insurance Co., No. 15-2924, (3rd Cir 2015)

Editor’s Note:  For copies of the briefing, email me at chaddick@dmclaw.com

Federal Judge Denies Stay, Upholds Insurer’s Work Product Privilege In Bad Faith Case

Reading, Pa., Jan. 19.  U.S. District Judge  Joseph Leeson  has denied a motion filed by Allstate Insurance Company to sever and  stay a  bad faith claim, including  discovery,  in a combined breach of contract and bad faith case, but has ordered that Allstate may properly assert work product privilege protection as to matters genuinely prepared in anticipation of litigation.

In Wagner v. Allstate, Judge Leeson conceded that while there may be a basis for separate trial of the breach of contract and bad faith claims under F.R.C.P. 42 , there was no need to prevent simultaneous discovery in both the breach of contract and bad faith claims.

Judge Leeson also granted in part and denied in part Plaintiff’s motion to compel discovery of Allstate’s claims file, ruling that the Court needed more information to make a complete ruling on the motion.  The Court ruled that Allstate did have the right to assert privilege over materials in its claims files which were prepared in anticipation of litigation, while observing the parties disputed the date at which time Allstate’s anticipation of litigation over the underlying UIM claim was bona fide.

Wagner v. Allstate Ins. Co., E.D. Pa. 2016 (Leeson, J.)

Phila. Judge Recommends Bad Faith Dismissal

Philadelphia, Jan. 20.  A Philadelphia Common Pleas Judge has recommended that the Pa. Superior Court affirm her dismissal of breach of contract and bad faith claims filed against Progressive Insurance Company.   In an opinion written pursuant to Pa.R.A.P. 1925(a) in Racioppi v. Progressive Ins. Co.,2015 Phila. Ct. Com. Pl. LEXIS 415 , the Court dismissed the Plaintiff’s claims for UM benefits under her Progressive auto policy following an automobile accident.  The Plaintiff  had previously collected policy limits of the tortfeasor, Insured by Geico.

The Court held that both the breach of contract and bad faith counts suffered from the same fatal defect:  The Plaintiff failed to proved that she paid for a policy which was in force at the time of the collision.  While the Court conceded there were circumstances in which a bad faith claim could proceed in the absence of a breach of contract claim, it found that such circumstances were not presented by the Plaintiff’s UM claim at issue:

Since the breach of contract claim is without evidence, this component of the bad faith claim must immediately be rejected; Appellee-Defendants cannot have failed to pay in reckless disregard of the contract when Appellant-Plaintiff fails to offer any evidence that there was a contract between the parties on the date of the accident.

The Court dismissed the claims by way of a motion for summary judgment filed by Progressive.

Racioppi v. Progressive Ins. Co., 2015 Phila. Ct. Com. Pl. LEXIS 415 (Shreeves-Johns, J.)

3rd Circuit Affirms Denial of Remand Motion, Upholds UM/UIM Waiver

In Lieb v. Allstate, the 3rd Circuit Court of Appeals affirmed district court rulings 1.) denying the insured’s remand motion after Allstate removed the case from state court; and 2.) affirming dismissal of breach of contract claims under an automobile insurance policy, finding the insured’s waiver of UM/UIM coverage to be valid under the Pa.M.V.F.R.L.

The district court properly looked to  assessing jurisdictional amount as of the time of the removal, the appeals court found.  At that time, the Plaintiff’s complaint contained a claim for insurance bad faith, thus taking the value of the case in excess of the $75,000 jurisdictional limit.

The appeals court also affirmed the dismissal of the insured’s suit for UM/UIM benefits, finding a signed waiver form in compliance with Pa. law.

Lieb v. Allstate (3rd Cir. 2016)

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