In Condio v. Erie Insurance Exchange, plaintiff decedent’s car drove over an embankment with decedent and his friend inside. Decedent was found dead in the passenger’s seat, while the friend was found alive on top of the decedent. The applicable insurance policy would only cover decedent if he was the passenger. The carrier continued pursuing the investigation and took the position that the decedent was the driver. The Superior Court of Pennsylvania held the insurer did not act in bad faith. The court noted that in the context of Pennsylvania’s bad faith statutes, in the absence of evidence of a dishonest purpose or ill-will, it is not bad faith to take a stand with a reasonable basis. In describing the balance, the court stated: “While the legal relationship of the parties may change in the context of a U-claim, i.e., become adversarial, the insurer’s duty does not change … an insurance company’s duty to its insured is one of good faith and fair dealing. It goes without saying that this duty does not allow an insurer to protect its own interests at the expense of its insured’s interests. Nor does it require an insurer to sacrifice its own interests by blindly paying each and every claim submitted by an insured in order to avoid a bad faith lawsuit.”
Also, there was no bad faith in allegedly failing to take action in response to the estate’s initial letter, as the letter did not make a firm claim or demand for coverage, instead using the terminology that there was the “potential for the underinsured/uninsured claim.” The Superior Court reasoned that common sense dictates that a claim cannot be denied until it has been made, and a claim is a demand for payment by a claimant and not an inquiry concerning coverage. Thus, where the insurer’s claims adjuster wrote a letter to the estate’s attorney stating that the insurer was taking the position that the decedent was the operator of his own vehicle, this did not constitute a bad faith denial since, at that point, no claim had been made so no denial could have been made.
Date of Decision: April 25, 2006
Condio v. Erie Ins. Exch.,
Superior Court of PA, Nos. No. 841 WDA 2004, 1032 WDA 2004, 2006 PA Super. 92 (Pa. Super. Ct. 2006) (Hudock, J.) (reargument denied).