MAY 2013 BAD FAITH CASES: COURT DISMISSES CLASS ACTION COMPLAINT, RULES THAT BAD FAITH CONDUCT BEFORE THE FORMATION OF AN INSURANCE CONTRACT IS NOT ACTIONABLE (Middle District)

In Grudkowski v. Foremost Ins. Co., the court heard a carrier’s motion to dismiss an insured’s amended class action complaint, which alleged breach of contract, unfair trade practices, unjust enrichment, and bad faith claims. The claims arise from a classic car policy that the insured purchased from the carrier. According to the insured, the policy was represented as containing “stacked” underinsured motorist coverage. In actuality, the policy contained stacked coverage requiring than an insured is an occupant of the vehicle, but defined “insured” in a manner that eliminated the possibility of stacked coverage. The core of the insured’s claim was that the carrier intentionally issued a policy containing unlawful or inherently contradictory provisions that do not align with representations originally made about inter-policy stacked coverage.
First, the court dismissed the insured’s breach of contract claim, reasoning that the carrier lawfully sold classic car policies without stacked coverage, making it impossible that the carrier breached a contractual duty. Second, the court dismissed the insured’s unfair trade practices claim, ruling that the restricted coverage in this case was not contrary to public policy because it was clear and unambiguous. Third, the court dismissed the insured’s unjust enrichment claims because there was no dispute over the existence and validity of the insurance contracts.
The court also dismissed the insured’s bad faith claim, reasoning that pre-contractual bad faith is not actionable under Pennsylvania’s bad faith statute. The insured was arguing that the carrier misrepresented the nature of stacked coverage within the classic car policy. As such, the court held, the bad faith claim is not related to the carrier’s performance of its contractual obligations.
Date of Decision: March 5, 2013
Grudkowski v. Foremost Ins. Co., No. 3:CV-12-1847, 2013 U.S. Dist. LEXIS 30567, U.S. District Court for the Middle District of Pennsylvania (M.D. Pa. Mar. 5, 2013) (Caputo, J.)