"> April 2014 Bad Faith Cases | UIM Case Leads to Other Allegations

April 2014 Bad Faith Cases: Court Finds: (1) Pleading Of Claims Handling Adequate To Survive Twombly Challenge; (2) No Sufficiently Clear Claim Denial To Trigger Statute Of Limitations; (3) Claims Of False Advertising Prior To Inception Of Policy Not Actionable Under Bad Faith Statute; (4) Claim Of Breach Of Fiduciary Obligation Not Material Element Of Section 8371 Claim; (5) Claim Of “Indifference” To Policy Holders Generally Stricken Where Case Was Not A Class Action; (6) Allegations Concerning Reserves Could Be Material; And (7) Claims Of UIPA Violations Were To Be Stricken, Though Basis May Have Been Lack Of Opposition By Insureds (Middle District)

In Clemens v. New York Cent. Mut. Fire Ins. Co., the Court addressed a UIM case, where the accident arose in August 2009, plaintiff gave notice of a possible UIM claim in April 2010, and the carrier gave plaintiff consent to settle against the third party’s carrier in July 2011.  Plaintiff alleges numerous conversations between April of 2010 and July 15, 2013, and items of correspondence were exchanged with the insurer’s agents concerning Plaintiff’s efforts (1) to obtain a status report from the Defendant regarding its claim investigation; (2) to schedule an arbitration of the UIM claim, and (3) to schedule Plaintiff’s “Statement Under Oath”. On May 25, 2011, during the time the aforementioned matters were being discussed by the parties, Plaintiffs submitted a demand letter to Defendant detailing their injuries and supporting documentation including medical records, photographs and authorizations requested by Defendant.  On August 26, 2013, Plaintiffs brought suit.

The carrier moved to dismiss the bad faith claim, and strike certain other allegations.  It argued plaintiffs did not plead their bad faith claim with “the requisite level of facts to properly state a claim upon which relief may be granted.” The Court disagreed, finding that the various factual allegations at could be plausibly read to indicate a possibility that there was a duplicitous delay by an insurer in the claims handling process.
The court also rejected a statute of limitations argument. The carrier argued that because the Plaintiffs’ brief indicates that the medical records it submitted should have been sufficient to convince the insurer to pay the claim, and because the docket indicates that those records were provided more than two years before the Complaint was filed, the case should be dismissed.  The court found that this did not constitute the kind of clear notice existing in prior precedent triggering the statute. In this case, the parties were still attempting to resolve this matter well into the year 2013 or, at least, that Defendant was sending signals that it was actively considering the claim. Thus, the insurer had not provided the type of clear notice that the claim was being denied within the two years immediately preceding the filing of the Complaint as required by the Third Circuit.

The court did agree to strike Plaintiffs allegation that the carrier’s failure to act to help their insureds was inimical to the advertising through which the Defendant solicited policyholders. Section 8371 does not provide relief for false advertising in the procurement of an insurance policy. The carrier also sought to strike allegations of a fiduciary obligation from the Complaint; however, the court essentially found that the phrase had no functional effect on the bad faith, and denied the motion to strike as the term was basically irrelevant to the case. The court did agree to strike the allegation that the carrier was indifferent toward its policyholders generally, as it was not a class action.
The insurer also moved to strike an allegation that it set a grossly inadequate reserve for Plaintiffs’ claim, as a source of bad faith. The Court recognized that a great discrepancy between the size of a reserve and the amount offered in settlement of a claim is not, without other evidence, proof positive of bad faith on an insurer’s part, it believed that the presentation of such evidence is potentially germane to the determination of the bad faith issue. It thus denied the motion to strike.
The insurer also moved to strike allegations relating to alleged violations of the Unfair Insurance Practices Act.  The carrier cited numerous cases holding that, unless and until the Pennsylvania Supreme Court holds otherwise, evidence of violations of portions of UIPA are irrelevant to the maintenance of a bad faith claim. The insureds did not respond to Defendant’s argument in this regard, and those allegations were stricken and the Court stated that it would not admit evidence directed to establishing violations of UIPA. Interestingly, this same court followed Pennsylvania Superior Court precedent in a case decided 10 days earlier, permitting consideration of UIPA violations, which as observed in that case summary, is different that the position taken by many federal courts in the absence of a Pennsylvania Supreme Court ruling.

Dated:  February 24, 2014
Clemens v. New York Cent. Mut. Fire Ins. Co., Case No. 3:13-CV-2447, 2014 U.S. Dist. LEXIS 22534 (M.D. Pa. February 24, 2014) (Conaboy, J.)