In Wiseman Oil Co. v. TIG Ins. Co., the insured brought suit against its carrier seeking a declaratory judgment as to the carrier’s duty to defend, alleging breach of contract claims and statutory bad faith. The carrier thereafter filed a motion for judgment on the pleadings. The original suit arose from the government’s 1997 claim for environmental damage against the insured, filed pursuant to CERCLA. When the insured sought coverage under its pollution policy with the carrier in 2004, the carrier was unable to provide coverage because it could not determine that the insured was a policy-holder. It notified the insured of its findings in 2005, reserving its rights under the terms of the missing policy.
The litigation was administratively closed until 2009, when the insured produced certificates of insurance issued by the carrier. However, in early 2010, the carrier indicated that it could not find copies of the insured’s policy and would not proceed further in handling the insurance claim. According to testimony of the carrier’s representatives, the company had “no central database” and would “stick stuff in boxes.” There were apparently 160,000 unopened boxes in storage at the time of his deposition, rendering it nearly impossible to figure out if the insured’s policy was in any of the boxes.
With respect to the insured’s bad faith claims, the point of contention between the carrier and the insured was the commencement of the statute of limitations. The carrier claimed that the two-year limitation commenced in 2005 when it advised the insured that is was “unable to locate evidence sufficient to establish the terms, conditions and/or provisions of the policy.” The 2005 letter also went on to “reserve all of the [insurer’s] rights and defenses . . . .” The carrier alleged that this letter began the two-year period and that the insured was unable to pursue its claim.
In the Report and Recommendation, the Magistrate Judge disagreed, reasoning that the letter bears more resemblance to a reservation of rights. To commence the statute of limitations under Pennsylvania’s bad faith law, the carrier is required to deny coverage. Since the 2005 letter does not explicitly deny coverage, the court reasoned, it is more functionally equivalent to a reservation of rights, which fails to commence the limitation period. As such, the statute did not begin to run until early 2010 when the carrier advised that it would “take no further action” with respect to the insured’s claim. The Magistrate Judge therefore recommended that the carrier’s motion for judgment on the pleadings be rejected.
The time period for objections remained open at the time of this posting.
Date of Decision: May 22, 2012
Wiseman Oil Co. v. TIG Ins. Co., 878 F. Supp. 2d 597, No. 011-1011, 2012 U.S. Dist. LEXIS 71138, U.S. District Court for the Western District of Pennsylvania (W.D. Pa. May 22, 2012) (Lenihan, M.J.).