JULY 2012 BAD FAITH CASES: COURT DISMISSES INSURED’S SECOND SUIT FOR BAD FAITH UNDER DOCTRINE OF RES JUDICATA (Philadelphia Federal)

In D’Orazio v. Hartford Underwriters Ins. Co., the court heard the carrier’s motion to dismiss the insured’s suit for breach of contract and bad faith. The suit arose from the carrier’s denial of first-party injury coverage under the insured’s automobile policy.
The insured previously filed a similar suit against the carrier for bad faith and breach of contract, but did not prevail because the court granted the carrier’s summary judgment motion in 2011. (See this blog). Nevertheless, the insured thereafter filed a similar action in state court. The carrier removed the case to federal court and raised claim preclusion and issue preclusion in support of its motion.
Addressing the carrier’s defense, the court reasoned that a claim preclusion defense will succeed where the prior suit (1) ended in a final judgment on the merits; (2) involved the same claim; and (3) involved the same parties.
The court examined these factors in light of the insured’s renewed claims. First, in 2011, the insured’s suit ended with a grant of summary judgment to the carrier, a final judgment on the merits. The insured cited no case law to the contrary in support of its suit.
Second, the court considered whether the insured’s claims were identical, reasoning that there was an “essential similarity of the underlying events giving rise to various legal claims.” For instance, the insured’s amended complaint was copied verbatim from its earlier motions. The only difference now was that the insured included medical reports and wage loss information in the reintroduced complaint.
As such, the court also held that the second claim preclusion element was met because the insured’s bad faith claims were still predicated on the carrier’s failure to pay medical benefits under the insured’s policy. With respect to the third element, the parties were the same in the instant action, satisfying that prong of the court’s inquiry.
Therefore, the court granted the carrier’s motion to dismiss, ruling that claim preclusion applied due largely to the “trivial changes in the pleadings.” In support of its holding, the court highlighted the fact that the only real difference between the insured’s two complaints was that, in the present case, the “[carrier] was given more time to not pay [the insured’s] insurance claims.” The court ruled that such factual aversions could not form the basis of a separate lawsuit.
Lastly, the court did not address the carrier’s issue preclusion, or “collateral estoppel,” defense because the case was already dismissed under the claim preclusion doctrine.
Date of Decision: June 19, 2012
D’Orazio v. Hartford Underwriters Ins. Co., No. 11-cv-7443, 2012 U.S. Dist. LEXIS 84681, U.S. District Court for the Eastern District of Pennsylvania (E.D. Pa. June 18, 2012) (Joyner, J.)