October Bad Faith Case Roundup



Claims Files / Reserve History

Parisi vs. State Farm, 2017 US Dist. LEX, 162161 (Western District of PA, Oct. 2, 2017) (Gibson, J.)Court ordered in camera inspection of State Farm’s claims file including portion of the file designated “free-form attorney” to make determination of whether or not information contained is protected by the attorney-client privilege or attorney work-product doctrine.   Court also held reserve history of claim is discoverable.


Adequately Pleading Bad Faith/Handling UIM Claim

Thomas vs. Protective Insurance Company, 2017 US Dist. LEX 166955 (M.D. Pa. Oct. 10, 2017) (Caputo, J.) – The Court denied Protective’s Motion to Dismiss Plaintiff’s Amended Complaint pursuant to F.R.Civ. P. 12(b)(6) finding that Plaintiff sufficiently stated bad faith cause of action when making specific averments concerning insurer’s conduct of handling UIM claim.  Plaintiff specifically alleged Protective’s failure to investigate, failure to communicate, failure to evaluate, and misrepresentation to the insured as well as violation of Pennsylvania Insurance Department regulations.

Irving vs. State Farm, 2017 US Dist. LEXIS 164390 (E.D. Pa. Oct. 4, 2017) (Slomsky, J.) – Court granted State Farm’s Motion to Dismiss Plaintiff’s bad faith claims pursuant to F.R.Civ.P 12(b)(6).   Disagreement over the value of the UIM claim, without more, does not constitute bad faith.   Plaintiff granted leave to attempt to amend Complaint to state bad faith cause of action.


Summary Judgment

Defense and Indemnity Provided To Insured

State Auto Property vs. Stucky, 2017 W.V. LEXIS 759 (Oct. 10, 2017) (Ketchum, J.) West Virginia Supreme Court held that Plaintiff failed to state a bad faith claim as a matter of law where it was provided defense and indemnity in an underlying trespass suit.   Court observed that State Auto provided the insured, CMD, with a defense and settled the underlying tort suit for $325,000, well within the insured’s $1 million dollar policy limit.
Delays Processing UIM Claim,  Collection of Records,  Investigation

Radolfi vs. State Farm, 2017 U.S. Dist. LEXIS, 165013 (M.D. Pa., Oct. 5, 2017) (Carlson, J.) – Court grants summary judgment in favor of State Farm in UIM claim,  holding no inference from which a finding of bad faith could be made.   The Court observed that while there were delays in processing the claim, including the collection and review of medical records, the delays were not attributable to State Farm.  The Court found that State Farm’s request to the Plaintiff’s attorney for medical records were not complied with, including requests for updated medical records.  The Court held that Plaintiff also failed to provide employment records despite making a claim for wage loss.  The Court also held that a new contractual bad faith cause of action was barred by the law of the case, in that it had previously dismissed a statutory bad faith claim, and that State Farm’s initial error in stating coverage limits to the insured did not constitute bad faith.


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


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