JUNE 2008 BAD FAITH CASES BAD FAITH CLAIM DISMISSED WHEN ASSERTED AGAINST A NON-INSURANCE COMPANY (Middle District)

In Stephano v. Tri-Arc Financial Services, Inc., the United States District Court for the Middle District of Pennsylvania addressed the question of who is an insurer subject to Pennsylvania’s bad faith statute.  The Court was confronted with claims stemming from an insurer’s denial of first-party benefits to plaintiff as a third-party beneficiary for injuries stemming from a motor vehicle accident. 

Defendant Frontier Adjusters filed a Motion for Summary Judgment as to plaintiff’s complaint including the bad faith claim arguing that it was not an insurer under Pennsylvania law.  The Court stated that to determine who is an insurer for purposes of bad faith requires examining: “(1) the extent to which the company was identified on the policy documents; and (2) the extent to which the company acted as an insurer” with the second factor being the most important.  The Court found that Frontier’s conduct was limited to conducting an investigation as to the alleged existence of an insurance policy.  No evidence was produced demonstrating that Frontier assumed any risks or contractual obligations under the insurance policy at issue or that Frontier was licensed to conduct insurance business in Pennsylvania.  Therefore, since plaintiff was unable to allege that Frontier was an insurer under 42 Pa. Const. Stat. § 8371, plaintiff’s claim was dismissed. 

Date of Decision: March 4, 2008

Stephano v. Tri-Arc Financial Services, Inc., No. 3:CV-07-0743, 2008 U.S. Dist. LEXIS 16673 (M.D. Pa. March 4, 2008) (Vanaskie, J.)

J.T.L.