JANUARY 2015 BAD FAITH CASES: UIM BAD FAITH PLAINTIFF ADEQUATELY PLEADS CLAIM WHERE CARRIER SWITCHES POSITIONS ON BASIS FOR DENIAL (Philadelphia Federal)

In Lyman v. State Farm Mutual Automobile Insurance Company, plaintiffs brought breach of contract and bad faith claims against their UIM insurer.  The carrier sought to dismiss the claims, asserting they were mere boilerplate and could not stand under Twombly.  The court disagreed.

The court found that the complaint alleged specific acts of bad faith, including allegations that: the insurer asked the insured to undergo an evaluation conducted by a chiropractor selected by the insurer,  who opined in her report that the insured’s “condition was caused by the accident in question; that her condition was not going to improve into the future and had reached the maximum level of improvement; and that further medical care … was not warranted because it would not make her any better.” The complaint alleged “that, notwithstanding the report’s findings, [that chiropractor] and the defendants ignored [the insured’s] need for palliative care, i.e., care administered to relieve pain as opposed to achieving a rehabilitative cure.”

The insured also alleged that “the defendants abused and/or violated the Peer Review … by finding that medical treatment was not reasonable or necessary without following the procedures set forth in the statute.”  The insured further alleged “that the defendants refused ongoing medical care for her, which prevented ongoing medical documentation and medical proof of her injuries admittedly caused by the accident, in order to frustrate and/or limit her claim for underinsured motorist benefits.”  These allegations supported the claim that “the defendants knew of their lack of a reasonable basis to deny medical treatment and to deny underinsured motorist benefits.” Further, the complaint alleged “that while the defendants refused to change their position on the denial of benefits, they shifted their reasons for denying them,” and that in “stark contradiction to their adoption of the chiropractor’s findings, the defendants suddenly denied that the ongoing care was related to the injuries caused by the accident in question.” The assertion was that this shift occurred to deny medical care and eliminate UIM exposure.  The court stated that: “By subsequently changing their position and asserting that [the insured’s] ongoing medical condition was not caused by the accident, a position contrary to the medical conclusions and determinations of their own chiropractor, the defendants give credence to the plaintiffs’ allegation that the defendants knowingly denied underinsured motorist benefits without a reasonable basis.” Date of Decision:  December 16, 2014

Lyman v. State Farm Mut. Auto. Ins. Co., CIVIL ACTION NO. 14-6235, 2014 U.S. Dist. LEXIS 173345(E.D. Pa. December 16, 2014) (Stengel, J.)