OCTOBER 2008 BAD FAITH CASES
DISMISSAL GRANTED DUE TO LACK OF SUBJECT MATTER JURISDICTION AND LACK OF PRIVITY BETWEEN THE PLAINTIFFS AND INSURER (Philadelphia Federal)
In Rose v. Allstate Insurance Company, third party plaintiffs brought a bad faith claim against the defendant insurer. The insurer issued an insurance policy to a woman. Subsequently, the insured’s automobile, driven by another individual, struck the plaintiff’s daughter’s vehicle causing her death. The insurer did not accept any claim brought by the third party plaintiffs against the insured’s insurance policy.
The third parties then filed suit against the insurer and alleged that the insurer’s failure to accept their claim contravenes the language of the policy and is in bad faith. The insurer filed a motion to dismiss this claim arguing that the court does not have subject matter jurisdiction over this case because the amount in controversy is less than $75,000. The insurer argues that the maximum amount that the plaintiffs can recover from them is $50,000 because the Auto Policy at issue, which the third party plaintiffs attached to their complaint, has a liability limit of $50,000 for each person. The insurer acknowledges that the complaint alleges bad faith but they argue that the third party plaintiffs do not have standing to assert a bad faith claim against the insurer under state law because there is no privity between the third parties and the insurer. The bad faith issues were governed by North Carolina law.
The court found that nothing in Plaintiff’s complaint asserts that there is any privity between plaintiffs and the insurer and plaintiffs do not have a judgment against the insured which is required by law in order for a third party to assert a bad faith claim. Therefore the court found that the plaintiffs’ complaint does not state a claim of bad faith and there is no federal jurisdiction because the amount in controversy is not met. Therefore the court must grant the insurer’s motion to dismiss.
Date of Decision: August 21, 2008
Rose v. Allstate Ins. Co.,
United States District Court for the Eastern District of Pennsylvania, No. 08-2620, 2008 U.S. Dist. LEXIS 63953 (E.D. Pa. August, 21, 2008) (Giles, J.)