The Legal Intelligencer Blog

Judge Dismisses Bad Faith Claim Under Iqbal Ruling

By Charles E. Haddick Jr.
Special to the Legal

Recently, U.S. District Judge Thomas N. O’Neill Jr. of the Eastern District of Pennsylvania dismissed a bad faith claim against Allstate Insurance Co. arising out of a property damage claim made by plaintiffs Paul and Mary Ann Blasetti in the case of Blasetti v. Allstate.

O’Neill reviewed the claim’s brief history, noting that there was some discrepancy in the insureds’ reporting of the date of loss. He also wrote that the insureds undertook repairs of their structure before ever reporting the claim to Allstate. While O’Neill thought there were minimally sufficient allegations to allow the breach of contract claim to proceed past the motion for judgment on pleadings stage, he did not feel so inclined concerning the bad faith claim.

O’Neill noted that conclusory allegations are not entitled to an assumption of truth and are insufficient to support legal claims in federal court, citing Ashcroft v. Iqbal, a 2009 U.S. Supreme Court opinion. In looking at the plaintiffs’ bad faith allegations through this lens, O’Neill stated: “In asking that I deny defendant’s motion, plaintiffs would have me infer reckless indifference from the mere fact that Allstate denied their request for coverage. Plaintiffs do not provide sufficient factual allegations to suggest an absence of a reasonable basis on the part of Allstate for denying their request for coverage.”

In the wake of Iqbal, insurers may be more likely to obtain motions for dismissal under Federal Rule 12(b)(6) and/or motions for judgment on the pleadings by invoking scrutiny for the factual nature, or lack thereof, of a plaintiff’s allegations of bad faith.

Charles E. Haddick Jr. is a partner with Dickie McCamey & Chilcote. He welcomes feedback from readers, along with any suggestions for topics you would like to see discussed in this space. He can be reached at [email protected].

E.D. Judge: No Bad Faith Claims in State Farm Class Action

By Charles E. Haddick Jr.
Special to the Legal

On July 21, Chief Judge J. Curtis Joyner of the U.S. District Court for the Eastern District of Pennsylvania granted State Farm Mutual Automobile Insurance Company's Rule 12(b)(6) motion seeking dismissal of a bad faith claim in  a class action complaint arising out of the denial of first-party medical benefits. 

In McWalters v. State Farm Mutual Automobile Insurance Company, Joyner took up the question of whether the plaintiff class was precluded from pursuing a bad faith claim arising out of the non-payment of benefits under the Pennsylvania Motor Vehicle Financial Responsibility Law, specifically 75 Pa.C.S.A. §1797.

Joyner noted that Section 1797, under statutory construction rules, was more specific than the bad faith statute, and the specific provisions should prevail and be construed as an exception for the general provision. The judge also noted that under several federal decisions, the prevailing view was that Section 1797 pre-empts Section 8371, but also pointed out that "where an insurer’s malfeasance goes beyond the scope of Section 1797, courts have reconciled the two statutes and found bad faith claims to supplement claims under Section 1797," citing Hickey v. Allstate Property and Casualty.

Joyner examined the allegations in the class action complaint carefully and determined, "We surmise that the gravamen of Plaintiffs' bad faith claim is the denial of first party medical benefits and nothing more.

Indeed, there are no allegations that Defendant did not properly invoke or follow the PRO process, denied or refused coverage, improperly invoked a coverage exclusion or otherwise misinterpreted or misapplied the insurance contract."

The judge felt, based on that analysis, that the plaintiff's bad faith claim fell within the scope of Section 1797 and dismissed the bad faith claim on pre-emption grounds.

It is unclear as to how far this decision will reach, in light of the judge's correct observation that Section 8371 and 1797 claims often accompany one another. The biggest lesson practitioners can take from the ruling is that special attention should be paid to the pleading requirements when pleading parallel 8371 and 1797 claims.  

Charles E. Haddick Jr. is a partner with Dickie McCamey & Chilcote. He welcomes feedback from readers, along with any suggestions for topics you would like to see discussed in this space. He can be reached at [email protected].

Problems With Filing Bad Faith, UM/UIM Claims as Insurer's First Notice of Suit

By Charles E. Haddick Jr.
Special to the Legal

Can an insured file concurrent bad faith and UM/UIM suit when the suit is the first notice to the insurer of a UM/UIM claim? Under Koken v. Insurance Federation of Pennsylvania, the answer, at least in theory, is "yes."

In practice, however, where the first notice to an insurer of a UM/UIM claim is a civil complaint, which also contains a bad faith count, it is rather like a patient handing his surgeon a medical malpractice complaint while he is being wheeled into the OR. The practical problems created by this animal are the subject of today’s post. 

Perhaps the best place to begin is Pa.R.C.P. 1023.1, which states that an attorney's signature on the pleading certifies that the claim is not being presented for an improper purpose; the claims defenses and legal contentions are warranted by existing law; and the factual allegations have evidentiary support or they specifically identify or likely to have evidentiary support after a reasonable opportunity for further investigation or discovery. 

By its very nature, a bad faith claim is a statement by an insured that the his or her claim has not been handled by the insurer in a reasonable manner. How can such a statement be made, however, when the insurance claim that is the subject of the bad faith action has not yet been made? 

Until now, courts have dealt with thorny issues around the periphery of this question, such as the discoverability of an insurer's claims activity logs in a bad faith case while at the same time such would be not discoverable in a concurrent UM/UIM proceeding.  One example is Wutz v. Smith, from the Court of Common Pleas of Allegheny County. Bifurcation and severance address issues like discovery problems, but to my knowledge no court has ever addressed whether or not a bad faith claim concerning a UIM claim can properly be stated under Pa.R.C.P. 1023.1 requiring there to be an evidentiary basis for the allegations.  This is something to certainly keep an eye on going forward.

Charles E. Haddick Jr. is a partner with Dickie McCamey & Chilcote. He welcomes feedback from readers, along with any suggestions for topics you would like to see discussed in this space. He can be reached at [email protected].

Analysis of Wisinski: Final Thoughts

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].

Wisinski and ‘Lowball’ Settlement Offers

By Charles E. Haddick Jr.
Special to the Legal

In this post, we continue our analysis of a recent bad faith ruling in Wisinski vs. American Commerce Group Inc. and American Commerce Insurance Company. Here, we will discuss the court’s finding that settlement negotiations included  “lowball” settlement offers by the insurer, and constituted bad faith.

Specifically, the court found, in light of seeing American Commerce ultimately settle for policy limits ($100,000), that two earlier offers, each less than $15,000, were “lowball” in nature and constituted bad faith on the part of the insurer. 

According to the opinion, American Commerce doubted causation in the UIM claim in dispute. It was aware that prior to the accident injuring the plaintiff’s knees, the plaintiff had previously filed a Social Security income disability claim. In addition, Wisinski’s own counsel provided a physician’s report from a doctor indicating she had an injury to her right knee prior to the December 2001 car accident.  The same doctor found the 2001 accident caused an “exacerbation of underlying arthritis.” 

Before examining whether Pennsylvania law allows for such a retrospective, results-backward analysis of settlement offers, we might first examine an assumption underlying the court’s opinion: that American Commerce had any duty to participate in settlement negotiations at all, in light of the limits demand.

Under Pennsylvania law, an insurance company does not have an obligation to participate in settlement talks where the insured has demonstrated no interest in resolution of the claim. Under Zappile vs. Amex Insurance (2007), the Superior Court held that where a plaintiff insured maintains a policy limits demand, such a position is not indicative of willingness to compromise, and thus the insurer has no obligation to enter into settlement discussions. Zappile, then, invites the conclusion that a policy limits demand by an insured signifies no more interest in compromise than a zero-dollar offer from the insurer: both represent 100 percent victories for the respective proponents.

Here, despite the plaintiff’s adherence to a policy limits demand throughout the course of the claim, American Commerce did make settlement offers, where arguably under Zappile it had no obligation to do so. And if an insurer has no obligation to make any settlement offers, how is it possible to consider those offers “lowball” or made in bad faith?

Beyond that question, we turn our attention to whether there was a reasonable basis for the initial offers the insurer made. American Commerce questioned causation in the case and viewed the claim as, if anything, a potential exacerbation of a pre-existing condition. The insurer also obtained an independent medical report that indicated the automobile accident did nothing to change the preordained course of the plaintiff’s degenerative knee arthritis.

The court nonetheless felt that because late in the claim the insurer came to the realization that the plaintiff was likely to win policy limits of $100,000, this made earlier offers of less than $15,000 “lowball”and bad faith in nature. This is a dangerous way to look at settlement offers.

The court’s analysis of the nature of the original offers can be questioned on at least two grounds. First, the quality of the offers should be objectively measured as of the time they are made and not retroactively against other offers when the case has materially developed and changed, as seen in the Middle District of Pennsylvania’s 2007 decision in Oehlmann v. Met Life Ins. Co.

Secondly, the court took great pains to analyze the initial lower offers in terms of what the insurer subjectively knew. Under Pennsylvania law, bad faith is not to be judged on a subject of standard, but rather, an objective one; any justification for an insurer’s position on a claim, whether the insurer was aware of the justification or not, is a valid defense to a Section 8371 claim, as seen in the Eastern District’s 2007 decision in Wedemeyer v. The United States Life Insurance Company In The City Of New York, et al.

Even if the subjective of standard were the correct one, the court claimed the insurer made the early low offers in bad faith because they were made at a time when it did not have the benefit of the insurer’s IME findings attacking causation. While true, the court apparently overlooked the fact that the insurer did have information at the time of the offers from the insured’s own attorney indicating prior degenerative joint disease in the plaintiff’s knees. Under either standard, therefore, it is respectfully suggested that analysis of the prior offers as “lowball” is suspect. 

Medical causation, when in question, can be an all-or-nothing proposition when decided by a panel of arbitrators. It is not necessarily unreasonable, therefore, that settlement discussions might approximate this model as well. We will continue our look at Wisinski in our next post.

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]

Analysis of Wisinski: Negligence v. Bad Faith

By Charles Haddick
Special to the Legal

In my last post, I introduced a bad faith ruling from the Western District of Pennsylvania that has received considerable attention since it was published on Jan. 4. Now, we continue our look at the Wisinski case, beginning with an in-depth analysis of the ruling.

To the extent an over-arching observation can be made, the ruling, in large part, appears to place heavy burdens and obligations on the insurer to safeguard the rights of the insured even though Pennsylvania law clearly holds that a UM/UIM proceeding is adversarial in nature, according to Condio vs. Erie, and that an insurer need not subvert it’s own rights in such a proceeding to the rights of the insured.

Moreover, even though the insured in Wisinski was represented by counsel throughout the duration of her UM claim, the court did not appear to find this highly significant and appeared to impose greater responsibility for safeguarding the insured’s rights on the insurer than Wisinski’s own lawyer.

Starting off with a change in assumption of such high magnitude -- the precise duty owed by an insurer to an insured in a UM/UIM context -- was sufficiently fundamental to then cause the remainder of the opinion to lean the way it did, contrary to existing bad faith law and highly in favor of the insured. In fairness to the ruling, we will examine each feature of the opinion individually.

The first casualty of the above assumption was the falling of another:  the long-held belief in Pennsylvania that negligence and bad faith do not describe legally equivalent conduct. Nonetheless, in Wisinski, the court may have interpreted conduct on the part of the insurer that may have been no more than negligence as satisfying the liability standard under the bad faith statute.

Ironically, Cohill correctly observed that the insured has a burden of producing clear and convincing evidence that the insurer acted intentionally or recklessly in handling of the claim, citing Employer’s Mutual Casualty Company vs. Loos. The court also observed that an insured must show that the breach of the duty of good faith must include some motive of self-interest or ill will, citing Koserowski vs. Allstate. In fact, the court appears to have correctly applied this standard when it entered summary judgment in favor of American Commerce on the bad faith claim relating to the handling of the first-party portion of the claim when Cohill wrote, “we can discern no ill will on the part of ACIC and find that ACIC did not act in bad faith with regard to this claim.”

But this same discernment appears to be lost, to some degree, when the handling of the UM/UIM claim is examined. The court found that ACIC committed bad faith by failing to advise the insured of the proper limits of coverage. The court did so despite writing, “while there is no direct evidence that ACIC intentionally did not inform Mrs. Wisinski of the correct policy limit, and insurance company is in the best position to accurately determine the correct policy limit of its own policy.”

While this may or may not be true, the next leap in logic was substantial, when the court wrote: “an insurance company that possesses the information to allow them to accurately determine the policy limits but failed to inform the insured of the correct policy limits does so either intentionally or recklessly.” (emphasis added) 

The court here appeared to overlook two fairly significant facts. First, the insured had a copy of her policy and her own lawyer. Wouldn’t that, especially in the adversarial setting of a UM/UIM claim, put the insurer in at least as good a position to make a determination what her limits were?  Second, why doesn’t the court here at least allow for the possibility of mistake or inadvertence on the part of the insurer, especially at the summary judgment stage where disagreement over the “limit” was actually whether a recognized $50,000 limit was stacked to provide an aggregate of $100,000 in coverage? To ignore such a possibility is to wrongly equate negligence and bad faith, and controlling Pennsylvania law does not permit such an equation, as we shall see in an upcoming post.

So, despite acknowledging the need for the plaintiff to produce clear and convincing evidence of bad faith, and that such evidence must include proof of ill will or improper motive, and despite acknowledging it was aware of no direct evidence of intentional misrepresentation concerning the policy limits, the Wisinski court nevertheless made an assumption at the summary judgment stage that ACIC could not have simply made a mistake, or been negligent, but ruled that because the insurer had the same information the insured and her lawyer had, it either knew or should have known the correct policy limits, and intentionally or recklessly misrepresented them to its insured.

Charles Haddick is a partner with Dickie McCamey & Chilote. 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].

Recent Bad Faith Ruling Draws Attention

By Charles Haddick
Special to the Legal

On Jan. 4, Judge Maurice Cohill of the U.S. District Court for the Western District of Pennsylvania issued a ruling in the insurance bad faith case of Wisinski vs. American Commerce Group Inc. and American Commerce Insurance Company. The court entered summary judgment in favor of the insured relative to bad faith and breach of contract claims arising out of an uninsured motorist claim.

While the court also granted summary judgment in favor of the insurer with respect to the plaintiff’s first party benefits claim, it is the portion of Cohill’s opinion that found bad faith in the handling of the UM/UIM claim that is drawing the most attention.

It is unclear whether or not American Commerce will seek an appeal of the ruling at the conclusion of the litigation.

The opinion spans 32 pages and is such a rich discussion of so many facets of bad faith claims handling that it cannot be broken down and analyzed in a single post. Over the next several blog posts, then, we will look at the Wisinski decision in some detail and analyze why some of the assumptions underlying the opinion may be a departure from existing bad faith precedent in Pennsylvania on both the state and federal levels. While it is far too early to determine whether the opinion is a brief departure from the trend to narrow the footprint cast by Section 8371, or perhaps a sign of something more, it is worth an immediate look.

The court’s discussion of the factual history of the first party and UM/UIM insurance claims alone comprises nearly half of the 32-page opinion. We will discuss specific facts as they lend themselves to the specific issues we will be examining. It is sufficient for current purposes to know that the case arises out of an auto accident Wisinski reported to ACIC on Dec. 21, 2001. The first party claim was pursued initially, and Wisinski, who was represented by counsel throughout the claim, did not place American Commerce on notice of a UM claim until Dec. 18, 2003. The parties disputed whether or not the policy between them provided for arbitration of the UM claims. ACIC originally informed Wisinski that the policy was a single $50,000 limit policy, when in reality the limit was stacked twice in the aggregate to $100,000. 

Several settlement offers were made by ACIC after learning that Wisinski, who sought compensation for knee injury, had made a prior SSI claim, and was diagnosed by her own doctor with degenerative arthritis. Settlement in principal for the policy limit of $100,000 was reached in late 2006 and an acceptable release agreement was finalized in February 2007 under which $100,000 policy limits were paid. 

A bad faith claim was subsequently filed on behalf of Wisinski. The three chief claims against American Commerce relative to handling the UIM claim concerning bad faith were the company’s failure to advise its insured of the correct policy limits; its failure to proceed to arbitration; and its initial offer of a release agreement which sought release of any and all claims, including bad faith claims. 

In our next post, we will start to tackle analysis of Cohill’s ruling.

Charles Haddick is a partner with Dickie McCamey & Chilote. 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].

Discovery of Insurance Reserve Information in Bad Faith Litigation

It is very common in bad faith litigation for the aggrieved insured to seek discovery of the reserve history in order to track the amount reserved by the defendant insurer in the underlying case.  This is presumably done in an attempt to establish that the insurer recognized the claim had a high value, but was trying to take advantage of (or “low-ball”) the insured with an offer at a substantial discount to reserves. In upcoming posts, we will discuss why such a use is a misuse, and how such a use misconstrues the statutory and legal bases for the requirement of insurance reserves under Pennsylvania law. We will also take a brief look at why requiring insurers to disclose reserves may create a dangerous disincentive on the part of insurers to adequately reserve claims, defeating the very purpose of setting aside reserves for insurance claims in the first place.

The Reserving Requirement under Pennsylvania Law

Insurers are statutorily required to set reserves upon notice of losses potentially covered by policies. The statute says nothing whatever about reserving only for those claims which are probable, or even likely. One court has written, of reserving:  "This requirement guarantees that insurance companies have the funds to pay claims as they become due.  This requirement enables the insurance department to monitor the financial condition of insurance companies to protect consumers and hopefully maintain solvency despite unliquidated pending claims." (See Executive Risk Indemnity Inc. v. Cigna Corporation, Philadelphia Court of Common Pleas, 2006).  (See also, Oak Lane Printing & Letter Service Inc. v. Atlantic Mutual Insurance Co., District Court for the Eastern District of Pennsylvania, 2007). 

Thus, we see, even from this brief review, that reserves are required by legislation, regulation and common law as a fiscal and accounting safeguard, not a proxy for measuring the merits of given insurance claims, as bad faith plaintiffs’ discovery sometimes suggests. 

Just Ask Claims Representatives, Executives and Experts

Bad faith discovery aimed at unearthing reserve information could bear the cloak of legitimacy if, in the industry, there were testimony from insurance professionals that reserving practices were undertaken with a view toward rendering an opinion toward the merits of a claim.  However, their testimony in the writers’ experience is consistent with the purpose of reserving set out in the legislation and case law: Reserving is not a barometer reflecting analysis of the merits of an insurance claim. 

As an accounting device, reserving is focused on liquidity and thus always views a claim from “worst case scenario” perspective. Claims representatives will often undertake separate analyses and make separate assessments of claims’ “current values,” “actual and factual values,” or “settlement values.”  Such other measures provide a far more accurate picture of an underlying claim’s current value based on known facts from the current claims information.

Charles Haddick
Dickie McCamey & Chilcote
http://www.dmclaw.com

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]

Superior Court: Insurer's Reasonable Reliance on UIPA Regs Cannot Support Bad Faith Claim as Matter of Law

On May 24, in Jones v. Nationwide, a panel of the Pennsylvania Superior Court unanimously affirmed preliminary objections granting a demurrer in favor of Nationwide Property and Casualty Insurance Co., dismissing a class action complaint against them, which, in part, claimed that Nationwide committed bad faith by prorating deductible reimbursements under its auto policies. The plaintiffs claimed that such a practice, though Nationwide contended it relied on regulations promulgated under the Unfair Insurance Practices Act, constituted a breach of contract, bad faith conversion and unjust enrichment, and also sought an injunction to stop the practice.

In affirming dismissal of the complaint at the trial court level, the Superior Court relied on Harnick v. State Mutual Insurance Company, the 2009 U.S. District Court for the Eastern District of Pennsylvania case, also involving the practice of prorating deductible reimbursements. The Harnick court found that the insured defendant did not commit bad faith in acting in reasonable reliance on valid state insurance regulations. The court found the reasoning in Harnick to be persuasive. The panel in Jones therefore adopted Harnick’s reasoning as sound and affirmed the trial court’s order granting the demure in favor of Nationwide.

This is not to say that an insurer cannot still be incorrect, or liable for breach of contract if enforcement or reliance on the regulations is inconsistent or violative of the insurance policy at issue. But being wrong, even being negligent, has never been sufficient evidence of bad faith in Pennsylvania, and the breach of contract and bad faith remedies in the state have always been distinct. (See, e.g., Smith v. Westfield Ins. Co., 2007) (Westfield did a thorough investigation and made a reasonable finding. That the determination may turn out to be incorrect does not mean that it had a dishonest purpose or was made with reckless disregard for the truth).

The ruling in Jones makes sense, as a sort of “pre-emption with boundaries” defense, and offers protection to insurers who act in reasonable reliance on valid state insurance regulations. Inasmuch as one of the chief inquiries in bad faith litigation is the conduct of an insurer viewed objectively, i.e., whether an insurer acts reasonably, an insurer’s practice in following regulations enacted under unfair insurance practice statutes would seem to be a good stake in solid ground, and therefore a good ground to provide protection to those insurers electing to proceed down such a path. Judged from such a perspective, Jones appears to be in agreement with Harnick, and to articulate a fair boundary line for bad faith claims.

Charles Haddick
Dickie McCamey & Chilcote
http://www.dmclaw.com

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].

Court Stays Bad Faith Claim, Picks Up Breach of Insurance Contract Claims First

On Aug. 2nd Judge Albert Masland of the Cumberland County Court of Common Pleas in ECSM Utility Contractors, Inc. v. Selective Insurance Group, Inc., et. al. granted in part the defendant’s motion to bifurcate and stay the plaintiff’s bad faith claims in a combined coverage and bad faith case. 

Judge Masland wrote:

 “First, the court agrees that resolution of plaintiff’s contract claim in defendants favor could eliminate the need for consideration of the bad faith claims. . . Second, defendants believe the contract claim is ripe for resolution via summary judgment. Thus, if defendants are correct, the entire matter may be resolved expeditiously without resort to a jury trial and onerous discovery regarding the bad faith claims. Accordingly, the court grants defendants’ motion in part and stays plaintiff’s statutory bad faith claims pending the resolution of defendants’ motions for summary judgment. However, should the court deny these motions, the stay will be lifted and plaintiff will be able to pursue its bad faith claims in anticipation of a jury trial on the contract claims, which, if successful, will be immediately followed by a non-jury trial of the bad faith claims. Finally, in light of plaintiff’s concerns regarding protracted litigation caused by this stay, the court directs defendants to file their motions for summary judgment within 30 days. . .”

I believe that  Masland has delivered in a few short lines a relatively simple mechanism for dealing with the oftentimes thorny problem of combined breach of contract and faith cases. 

Severance and stay are, it seems, simple mechanisms that are often requested in combined cases like ECSM, but are all too often denied for fear of somehow bogging down the case. Masland seems to have resolved that issue effectively by imposing upon the defendants the duty to file a dispositive motion on the coverage issue within a brief amount of time. Thus, the approach taken by Masland would also, it seems, impose upon defendant insurers seeking to avail themselves of the benefit of bifurcation and stay, the obligation not to request bifurcation and stay until such time as they are ready to seek a dispositive ruling on a breach of contract/coverage issue by way of motion such as motion for summary judgment.

Charles Haddick
Dickie McCamey & Chilcote
http://www.dmclaw.com

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].