In Greene v. GuideOne Mutual Insurance Company, the state trial court, in an underinsured motorist’s claim, without providing a summary of the facts as the Opinion supplemented an earlier ruling and was written for purposes of appeal, recommended that its earlier decision finding bad faith been upheld on appeal.

The carrier’s counsel originally recommended settling for $10,000, but later reversed this position and said the claim was worth nothing.  The UIM arbitration panel awarded $75,000.  The Court found that the lawyer’s earlier position was more credible and the later position was taken for reasons that were understandable, but not a basis for supporting the position taken.  The Court observed:  “It is no secret that insurance defense work is a very competitive field, and that a single failure to perform to the company’s expectations and demands can result in the loss of all future legal work for that company.”  The Court found that counsel’s position that the case was worth nothing was not as credible and that another counsel’s testimony on value was credible, which supported a punitive damage award of less than one-half of the arbitrators’ award.  The Court gave some value to the carrier’s claims that it had relied upon the lawyer’s revised opinion that the case had no value, and a medical report from a doctor, but “found it to be very clear that the refusal to make any offer was determined by the desire for profit rather than by a cool, dispassionate and thorough assessment of the actual fair value of [plaintiff’s] underinsured claim.”

The Court also found that the carrier’s investigation was inadequate and outdated, as it relied upon a biased medical report which it should have realized would be treated as incredible by the UIM panel.  This information was given to its counsel, and so undermined the idea that the legal advice was truly an independent professional opinion.  Further, the lawyer’s saying that the carrier was insulated from liability because of an IME failed because of the apparently dubious nature of the IME under the circumstances.  Simply calling a report an “independent” medical examination does not make it so, when the report may be biased and used for biased purposes.  This kind of bias is something that a truly independent legal analysis would have investigated; rather than adopting the report without such independent review or analysis of the issue of the doctor’s bias.

The Court rejected the argument that the carrier was insulated from liability because it used an IME from another carrier’s documents.  First, that other carrier did not even find that medical report credible since that carrier paid 90% of its policy limit.  Further the report was from a single exam five years after the injury, with parameters unknown to the carrier attempting to now use it.  Moreover, the Court was clearly trouble by the absence of any effort to obtain a sworn statement which is nearly a universal practice in such cases. 

The Court found that the adjuster was inexperienced and improperly trained, and required greater supervision. 

The Court was particularly disturbed on the challenge to the attorney’s fee award under the statute, fees which it found necessitated by the bad faith refusal to pay the claim.  It called to mind “the apocryphal story of the man that murdered his parents and sought mercy from the Court because he was an orphan.”

In a final admonishment, the Court cited to the UIPA about how an insurer cannot take the gamble that by fighting on a sufficient number of cases where it should pay, it will achieve reductions in payments on a statistical basis that make some losses worth that endeavor.  However, the question must be raised here as to whether the Court meant 42 Pa.C.S. § 8371, rather than the UIPA, as there is no private cause of action under the UIPA, and the Court did not address to what extent violations of specific UIPA sections can be used in determining bad faith conduct under section 8371.

Date of Decision:  September 13, 2006

Greene v. GuideOne Mut. Ins. Co., Court of Common Pleas, Fayette County, No. 1497 of 2002, 2006 Pa. Dist. & Cnty. Dec. Lexis 478 (CCP Fayette, September 13, 2006) (Leskinen, J.)