In Lublin v. Am. Fin. Group, Inc., plaintiff brought suit against his insurer for claims of bad faith in settling his underinsurd motorist claim. Plaintiff was driving in Philadelphia when he was forced to abruptly stop because another driver opened their door into the driving lane while parking their car. Plaintiff was then rear-ended. Plaintiff pursued a claim against the driver in the collision, whose insurer agreed to settle the claim for the $15,000 policy limit. Plaintiff then filed an underinsured motorist claim under his own policy that included a stacking option in addition to $100,000 per individual and $300,000 per accident limits. The carrier from whom plaintiff purchased the policy agreed to an arbitration of the claim with a neutral arbitrator. The arbitrator awarded plaintiff $232,000 with a $15,000 set off. Following the arbitration award, plaintiff filed suit in Montgomery County contending defendant engaged in multiple actions which constituted bad faith prior to the arbitration award.
First, plaintiff argued that the insurer’s failure to notify him his policy had been transferred to another insurer and that a new claims agent had been assigned to it constituted bad faith. Under Pennsylvania law, misrepresentations made by an insurer or its attorney can amount to bad faith. Plaintiff contended he submitted the claim in December 2002, but was not notified of the policy transfer until July 2005. He also contended the insurer’s attorney misled him as to which insurance company he represented. The court determined even if the alleged misrepresentations took place, such misrepresentation would not be sufficient to meet the bad faith standard, in particular because it was unclear how the alleged misrepresentations affected resolution of the underinsured motorist claim.
Next plaintiff alleged the insurer requested unnecessary documentation for the purpose of harassing plaintiff and delaying settlement. The insurer argued the requested documents were reasonable and necessary to fully assess the claim, and that plaintiff had not returned all necessary documentation, in particular, evidence of lost wages and earning capacity. Under Pennsylvania law, investigative efforts are permissible when a claim’s value is ambiguous. Specifically, determining a loss of income earning capacity is determined by whether there is a loss of earning power and of the ability to earn money. Plaintiff supplied the carrier with a letter from his employer indicating he earned $35,000 less between the time of the accident and the end of the calendar year, but the insurer presented evidence plaintiff’s billable hours had not actually decreased. The court found the delay in settlement was not sufficient to establish bad faith, and the rest of the evidence was not sufficient to reach the clear and convincing evidence standard required for bad faith given the ambiguities of the claim.
Plaintiff also argued the insurer’s settlement offer of $75,000 was improper, particularly because the insurer’s counsel initially suggested a settlement range of $150,000 to $175,000. The insurer argued the initial range was based on plaintiff’s demand, but a lower offer was made when plaintiff failed to produce evidence demonstrating a wage loss and loss of earning capacity. The court found the insurer’s valuation of plaintiff’s injuries and the eventual settlement offer were not prima facie evidence of bad faith given the ambiguities surrounding plaintiff’s lost wages and earning capacity calculations, and therefore fell short of the clear and convincing evidence standard.
Finally, plaintiff argued the insurer acted in bad faith by asserting a defense claiming plaintiff failed to protect the insurer’s subrogation interests. While there was some ambiguity in the policy’s language regarding the subrogation rights, merely asserting a subrogation defense is not clear and convincing evidence of bad faith, and furthermore, the insurer had not asserted any subrogation right as an affirmative defense in the action.
Based on these findings, the court granted the insurer’s motion for summary judgment and denied plaintiff’s request for sanctions.
Date of Decision: June 20, 2013
Lublin v. Am. Fin. Group, Inc., No. 07-3422, 2013 U.S. Dist. LEXIS 87218 (E.D. Pa. June 20, 2013) (Robreno, J.).