OCTOBER 2015 BAD FAITH CASES: COURT REFERENCES UNFAIR INSURANCE PRACTICES ACT AS JUSTIFICATION FOR INSURER NOT HAVING INTERFERED WITH CONTRACTUAL RELATIONS BETWEEN INSURER AND THIRD PARTY (Philadelphia Federal)

In Charbonneau v. Chartis Property Casualty Company, the Court had previously dismissed bad faith claims directly against the insurer, brought by an assignee of the insured.  After a non-jury trial, the court addressed the assignee’s claims against the insurer for alleged intentional interference with contract between the assignee and the insured.  In finding that there was no such interference, and that the insurer’s actions in settling the claim were justified, the court stated:

“[U]nder Pennsylvania’s Unfair Insurance Practices Act (“UIPA”), an insurer is prohibited from engaging in ‘an unfair method of competition’ or ‘an unfair or deceptive act or practice.’ 40 Pa. Stat. § 1171.4. Those terms are set out in the UIPA to encompass ‘unfair claim settlement or compromise practices,’ which specifically include ‘[n]ot attempting in good faith to effectuate prompt, fair and equitable settlements of claims in which the company’s liability under the policy has become reasonably clear.’ Id. § 1171.5.”

After addressing the investigation and facts leading up to the settlement between the insurer and the insured, the court stated that where the insured “was willing to resolve his homeowner’s claim for $18.5 million, it may well have amounted to an unfair claim settlement practice for [the insurer] to have refused to settle. Indeed, as [the insurer] further notes, such a refusal could have bolstered a claim of bad faith against the insurer under 42 Pa. Cons. Stat. Ann. § 8371. See Parasco v. Pac. Indem. Co., 920 F. Supp. 647, 655 & n.5 (E.D. Pa. 1996) (noting that ‘a violation of the UIPA does not constitute bad faith per se; rather, the UIPA serves as a reference from which a court may determine whether an insurer has acted in bad faith in a given case’). It cannot be the case that [the insurer] violated ‘the rules of the game’ when it avoided acting in bad faith toward [the insured], its homeowner’s policyholder, as it did in settling his claim.”

Date of Decision:  September 21, 2015

Charbonneau v. Chartis Prop. Cas. Co., CIVIL ACTION NO. 13-4323, 2015 U.S. Dist. LEXIS 126733 (E.D. Pa. September 21, 2015) (Yohn, J.)