OCTOBER BAD FAITH CASES INSURER MAY HAVE ACTED IN BAD FAITH WHEN IT FAILED TO ADVISE INSURED THAT CLAIMS WERE COVERED BY UM PROVISIONS OF POLICY (Philadelphia – Commerce)

In Harhai v. The Travelers Companies, Inc., Plaintiff sued Defendant claiming breach of contract, breach of fiduciary duty of good faith and fair dealing, and for bad faith under 42 Pa. C.S.A. §8371.  Plaintiff was a pedestrian who was struck by an unidentified vehicle in a hit and run accident.  Plaintiff sustained serious injuries resulting in a six-day hospital stay.  Plaintiff was insured by a commercial auto insurance policy issued by The insurer.  The policy provided no-fault Personal Injury Protection (“PIP”) up to $100,000 and Uninsured Motorist (“UM”) benefits in the amount of $350,000.  Plaintiff submitted a claim to the insurer for hospital and medical bills, wage loss and other economic costs stemming from the accident.  The insurer paid Plaintiff the policy’s PIP coverage; however, the PIP benefits did not cover all of Plaintiff’s expenses resulting from the accident. 

The policy’s UM benefits would have compensated Plaintiff for the costs that exceeded the PIP coverage.  Despite several conversations concerning non-compensable costs under the PIP coverage, the insurer’ claim representative never advised Plaintiff of the additional UM coverage which would have paid these claims.  The insurer admitted that it had no reasonable basis for denying the additional benefits available under the UM provision of the policy when the PIP coverage had been depleted. 

The Court found that the insurer actively deceived Plaintiff by advising him that certain claims were not fully covered under the policy when in fact Plaintiff’s claims were covered under the UM provisions of the policy. The Court held that the carrier’s actions may have been in bad faith and denied its motion for summary judgment as to Plaintiff’s claim of bad faith under §8371.  The Court held that in the first party context, there is no direct claim for a duty of good faith except for the statutory bad faith claim under 42 Pa. C.S.A. §8371.  The Court granted the insurer’ motion for summary judgment as to breach of contract and breach of fiduciary duty. 

Date of Decision: July 27, 2009

Harhai v. The Travelers Companies, Inc., July Term 2008, No. 3747, Court of Common Pleas of Philadelphia County (C.C.P. Philadelphia)(Bernstein, J.) (Commerce Case Management Program)