By Charles E. Haddick Jr.
Special to the Legal
In this final installment reviewing the Western District Court bad faith opinion, Wisinski vs. American Commerce Insurance, I am taking a look at three final areas where the court may have departed from conventional established Pennsylvania law. (Check out Part I, Part II and Part III here.)
In finding that American Commerce committed bad faith by failing to inform its insured of the correct policy limits (American Commerce, it turns out, did inform the plaintiff of the correct limits of $50,000; just not that the limits were stacked for total applicable coverage of $100,000), the court cited with approval Hollock vs. Erie Insurance Exchange Company. In so doing, the court found, "Erie Insurance intentionally mislead its insured for over a year regarding coverage available."
This is correct insofar as it goes. However, the court in Wisinski may have attempted to apply a case involving intentional conduct to a case in which the court had already recognized it was aware of no evidence of intentional conduct with respect to disclosure of policy limits.
In place of such knowledge, the court patched the hole in logic, saying "While not as egregious as the conduct in Hollock, ACIC's conduct in the instant case in representing the policy limits to Ms. Wisinski is unreasonable and reveals either intentional or reckless conduct on the part of ACIC." (emhasis added)
Allow me to respectfully suggest two difficulties with this patch. First, the court's analysis appears to dismiss out of hand the possibility of mistake or inadvertence in Wisinski in favor of intentional or reckless conduct so as to make Hollock the right size. In truth, the court conceded it had no more evidence of one possibility than the other when it came to the policy limits issue.
Second, this patch blurs to the point of indistinguishable that which makes bad faith bad faith: the element of state of mind -- intentional or reckless disregard for the rights of the insured. The difference in the established degrees of conduct in Wisinski and Hollock -- evidence of intentional misrepresentation v. no direct evidence of intentional misrepresentation -- is the very difference under Pennsylvania law between negligence and actionable conduct under the bad faith statute. The court recognized the disparity as the essence of the difference between bad faith conduct and negligence, and yet it transmuted one into the other.
Finally, the court held that American Commerce was guilty of bad faith conduct because it violated its own claims guidelines regarding prompt confirmation of policy limits and the state Unfair Insurance Practices Act, which prohibits insurers from portraying to insureds a "policy of appealing from awards."
As with claims underwriting guidelines, courts have previously held that failure to follow state insurance practices regulations is "equally consistent with a mistake as with bad faith," according to Employers Mutual v. Loos and Pittas v. Hartford Life Ins. Co. See also Oehlmann v. Met Life Ins.Co.
Moreover, even if this were an appropriate bad faith standard, the Unfair Practices Act section upon which the court relied, on its face, would not impose bad faith conduct on American Commerce in the case. The statute precludes insurers from having a policy of appealing from awards. Yet, in the Wisinski opinion, the court referred only to evidence that American Commerce wanted to convey to the claimant that it was contemplating an appeal of the single possible arbitration award in the case. The statute is aimed at a pattern and practice of portraying a conduct policy to insureds. The court cited to no pattern or practice evidence, and no multiple awards from which appeals were to have been taken by ACI.
Over the last several posts, I have subjected the Wisinski opinion to a lot of scrutiny and criticism. In fairness, American Commerce could have been more precise in its claims handling to avoid the outcome that befell it, and Cohill did put together a comprehensive and factually rich opinion.
There is no question, however, that the opinion in Wisinski stands out, somewhat, against the backdrop of the last five to seven years of bad faith opinions at both the state and federal level. Whether it will prove to be a temporary departure from the general trend, or a sign of the change in direction of judicial bad faith opinions, is not yet known.
Charles E. Haddick Jr. is a partner with Dickie McCamey & Chilcote. I welcome feedback from readers, along with any suggestions for topics you would like to see discussed in this space. Please e-mail me at [email protected].
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