SEPTEMBER 2006 BAD FAITH CASES CUMULATIVE EFFECT OF CONDUCT, INCLUDING MISLEADING OWN COUNSEL, SHOWS BAD FAITH (Philadelphia)

In Zappile v. AMEX Assurance Company, Plaintiff originally filed a first-party underinsured motorist claim against AMEX, which AMEX later refused.  Plaintiff brought suit against AMEX alleging, among other things, bad faith under Pennsylvania’s bad faith statute.  Specifically, AMEX was aware of Plaintiff’s undisputed, correctly filed lost wages claim, yet AMEX withheld the undisputed compensation without showing any reasonable basis for doing so.  Additionally, despite estimates by AMEX’s counsel and AMEX itself, that the value of the claim was approximately $50,000, AMEX never increased its offer beyond an initial $32,180.  Philadelphia’s Court of Common Pleas held that while such tactics as delaying payments, withholding the full amount of damages, compelling the insured to seek arbitration, and making an offer substantially less than what was ultimately awarded may not, in and of themselves, constitute bad faith, the cumulative effect of AMEX’s conduct shows beyond a clear and convincing standard that AMEX exhibited bad faith.  Among other behavior found to be colored with bad faith was AMEX agreeing to the selection of an arbitrator whom its counsel described as a “strong advocate for the defense.”  The Court rejected AMEX’s defense that it reasonably relied upon the advice of its counsel in handling Plaintiff’s claim, as the evidence showed that Defendant misled its own counsel in a letter expressing an alleged settlement impasse.  The Court accordingly held that AMEX exhibited bad faith conduct in breaching its fiduciary duty to its insured.

Date of Decision:  August 30, 2006

Zappile v. AMEX Assur. Co., November Term 2004, No. 3881, 2006 Phila. Ct. Com. Pl. LEXIS 357 (C.C.P. Philadelphia 2006) (Lynn, J.)

 

This case was subsequently reversed on appeal by the Superior Court (Superior Court’s Opinion).  See June 2007 archive on this web site, including two summaries, under “Claims Handling” and “Experts“.