In NIA Learning Ctr., Inc. v. Empire Fire & Marine Ins. Cos., the insured was involved in a car accident with Kim Stewart. As a result of the accident, Stewart’s vehicle was damaged and a pedestrian, Aaron Jones, was struck and injured. The insured’s policy with Empire provided coverage in the amount of $100,000 for “all claims arising out of the same accident.” Stewart’s car insurance company made a subrogation claim, which Empire settled for approximately $13,000.
A “policy limits” demand was made on behalf of Jones for injuries he sustained in the accident. The insurer paid $87,739.68 to Jones for his injuries and obtained a joint tortfeasor release. Two years after the accident, Stewart sued the insured for personal injury damages from the accident. The insurer sent a letter to the insured that it would not provide a defense to in the lawsuit. The insured retained private counsel to defend the suit and Stewart was awarded $20,000 in arbitration.
The insured sued the carrier for bad faith pursuant to 42 Pa. Cons. Stat. § 8371, among other causes of actions. The insured alleged that the insurer voluntarily exhausted the policy limit “despite the fact that it knew or should have known that there were other potential claims,” thereby “knowingly and intentionally exposing its insured to loss that would not be indemnified under the policy.” The insurer argued that the insured’s entire claim should be dismissed because its duty to defend and indemnify was terminated when the insured’s policy limit was exhausted based on the explicit language in the insurance policy concerning the insurer’s duty.
The court stated that an insurer is under no obligation to wait to settle a claim until all possible claims have been filed. The court held that the insured failed to make any showing of bad faith conduct on the part of the insurer. The court concluded that the claim files demonstrated that the insurer had conducted a reasonable and good faith investigation into the liability regarding the accident in question and that, based on the investigation’s results, the insurer had acted in good faith when entering into the settlements that exhausted the insured’s policy limits.
Date of Decision: October 1, 2009
NIA Learning Ctr., Inc. v. Empire Fire & Marine Ins. Cos., Civil Action No. 05-5178, United States District Court for the Eastern District of Pennsylvania, 2009 U.S. Dist. LEXIS 92991 (E.D. Pa. October 1, 2009) (Baylson, J.)