In Allstate Property & Casualty Insurance Company v. Vargas, the insured filed a bad faith counterclaim arising from a car accident in which she sustained injuries. The insured was injured when her vehicle was side swiped by a cab owned by Ali & Amir Cab Company. At that time, the insured was under an Automobile policy which the insurer issued to a third party. The defendant was identified on the policy as the spouse of the policyholder.
The policy provided for rental reimbursement coverage, collision coverage and UIM coverage with stacking for two vehicles. On the day of the accident, the defendant insured notified the insurer of the collision. In her recorded statement, the defendant stated she was the policyholder’s fiancée. Subsequently the defendant filed a third party lawsuit against the Cab Company, and defendant’s attorney notified the insurer that defendant intended to seek UIM coverage under the policy. The defendant insured’s attorney also requested that the claim for UIM coverage be sent to arbitration without delay.
The insurer’s agent handling the claim advised the defendant insured that $200,000 UIM coverage was available. For approximately the next year, the insurer prepared for the arbitration proceeding. Before the arbitration, the insurer’s agent determined that the defendant insured and the policyholder were not married at the time of the accident and therefore advised the defendant insured that she was not entitled to stacked coverage. Accordingly coverage was limited to $100,000. The insurer made a tender offer to the defendant insured of $100,000 , the unstacked UIM policy limit.
The insurer filed a declaratory judgment in the United States District Court for the Eastern District of Pennsylvania seeking a determination of whether the defendant insured was a “resident spouse” under the Policy so as to entitle her to stacking benefits. The defendant insured’s third amended answer asserted counterclaims for breach of contract, bad faith and fraud/misrepresentation. The insurer then filed a motion for summary judgment .
This court found that the defendant insured was not a Class I insured and therefore was not entitled to stacked benefits, and granted the insurer’s motion. This court also concluded that the insurer’s payment of $100,000 in unstacked UIM benefits fully satisfied its contractual obligations under the policy. Thereafter the insurer moved to dismiss the remaining counterclaims.
The defendant insured opposed the insurer’s motion to dismiss and asserted new rationales in support of the bad faith claim. All of the defendant’ insured’s counterclaims were dismissed with the exception of the bad faith counterclaim. The defendant insured contends that the insurer acted in bad faith by: failing to make a reasonable investigation of her UIM claim, delaying in the investigating her claim, delaying in offering the undisputed unstacked limit on the policy, delaying in providing consent to settle with the Cab company, delaying in filing a declaratory judgment and misrepresenting the amount of coverage available under the policy.
The defendant insured largely relied on expert opinions to support her bad faith claim. However the court found that both expert opinions failed to create a genuine issue of fact or provide clear and convincing evidence of bad faith. Both opinions failed to consider any of the unique facts and circumstances relevant to the insurer’s conduct as to defendant’s insured’s UIM claim.
With regard to the defendant insured’s bad faith claims, the court found that they were without merit and fell short of clear and convincing evidence of bad faith. The insurer reasonably investigated and the nature of a UIM claim is inherently and unavoidably adversarial. While delay is a relevant factor in determining bad faith it does not necessarily constitute bad faith and in this case the evidence was not clear and convincing for bad faith. The record demonstrates that the insurer encountered significant difficulty and delay in developing a complete file and given the scope of the investigation the period of time was neither unreasonable nor evidence of bad faith. The insurer diligently investigated the UIM claim.
The insurer’s delay in providing consent to settle with the Cab Company and in filing a declaratory judgment standing alone does not provide clear and convincing evidence of bad faith and at best constitutes evidence of negligence which does not provide a sufficient legal basis for a bad faith claim. Also even though the insurer’s agent initially stated to the defendant insured that she was entitled to $200,000 in stacked UIM and then stated she was only entitled to $100,000, the insurer did not act in bad faith. The original belief that the defendant insured was entitled to $200,000 in stacked UIM was based upon the agent’s mistaken belief that the defendant insured was married to the policyholder at the time of the accident. This mistaken belief and failure to discover conflicting statements concerning the defendant insured’s marital status are classic examples of negligence and poor judgment and there is a lack of evidence of ill will or self interest to have this rise to bad faith. Therefore, the court granted the insurer’s motion for summary judgment dismissing this bad faith counterclaim.
Date of Decision: August 29, 2008
Allstate Prop. & Cas. Ins. Co. v. Vargas, United States District Court For the Eastern District of Pennsylvania No. 2:06-CV- 3368-LDD, 2008 U.S. Dist. LEXIS 67516 (E.D. Pa. August 29, 2008) (Davis, J.)