The Legal Intelligencer Blog

Fresh Ink: Inside Today's Legal

Welcome to your Monday morning round-up of stories in today’s edition of The Legal Intelligencer. All of the links below will take you directly to today’s stories, or you can head straight over to The Legal’s homepage. (Some stories may require registration or a paid subscription.)

The top story this morning is reporter Ben Present’s preview of the state Supreme Court hearing oral arguments this week in Philadelphia. Among the cases to be heard during the two-day session beginning Tuesday are several important workers’ compensation cases and one relating to MySpace and its use for communication between a man under house arrest and gang members with whom he was instructed to avoid communication.

Below the fold on Page 1, reporter Zack Needles writes that a federal judge has ruled that the language in an underinsured motorist coverage waiver may not be altered. The judge ruled that the existence of a single additional word in an underinsured motorist coverage waiver violated the Pennsylvania Motor Vehicle Financial Responsibility Law and rendered the waiver void in an Eastern District of Pennsylvania case involving defendant Travelers Indemnity Co. of America.

In more Regional News on Page 3, Dan McCormick writes about a legal clinic, La Comunidad Hispana, that is serving Chester County’s immigrant population.

As always, our People in the News section is on Page 2, and the top stories from our sister publications across the country make up the Page 4 National News section.

In an Antitrust Law column on Page 5, Carl W. Hittinger and Patrick Castaneda write that the FTC has preserved the status quo in the long-term care pharmacy market following Omnicare Inc.’s eight-month pursuit of acquiring PharMerica Corp.

In a book review on Page 7, John J. Soroko writes about Judge Harvey Bartle III’s “Mortals With Tremendous Responsibilities” and what it says about the Eastern District’s role in the development of U.S. jurisprudence.

If you have questions or comments about any of today's stories, or our coverage as a whole, we invite you to e-mail any of the reporters directly. We hope you'll enjoy today's Legal.

Fresh Ink: Inside Today's Legal

Welcome to your Friday morning round-up of stories in today’s edition of The Legal Intelligencer. All of the links below will take you directly to today’s stories, or you can head straight over to The Legal’s homepage. (Some stories may require registration or a paid subscription.)

The top story today is the state Supreme Court ruling that uninsured drivers can sue insured drivers for economic damages. As reporter Zack Needles writes, the court ruled unanimously in favor of plaintiff Mary Corbin, an uninsured motorist who was injured in an accident and had sought to sue the other driver, who was insured, for economic damages. Justice Seamus P. McCaffery, writing for the majority, said that while the issue seemed to deal with two incongruous sections of the Motor Vehicle Financial Responsibility Law, when considered together “there is no ambiguity.”

Also above the fold on Page 1, reporter Gina Passarella writes that Cozen O’Connor has hired Joseph Dever, who most recently served as an assistant regional director of the enforcement division for the Securities and Exchange Commission in New York, as the new chairman of its securities litigation and SEC enforcement practice group.

In more Regional News on Page 3, reporter Amaris Elliott-Engel writes that Pennsylvania Chief Justice Ronald D. Castille asked Thursday that legislators find more funding for the state judiciary. He recommended an extension of a temporary fee surcharge to traffic citations in order to help cover a project $29.6 million shortfall under Gov. Tom Corbett’s proposed budget.

As always, our People in the News section is on Page 2, and the top stories from our sister publications across the country make up the Page 4 National News section.

In a Franchise Law column on Page 5, Craig R. Tractenberg writes that most franchise professionals have expressed a cautious optimism for the industry, despite economic pressures that abound.

In an Environmental Law column on Page 7, Katherine L. Vaccaro and Diana A. Silva write that uncertainty looms over the EPA’s cross-state air pollution rule.

If you have questions or comments about any of today's stories, or our coverage as a whole, we invite you to e-mail any of the reporters directly. We hope you'll enjoy today's Legal.

Fresh Ink: Inside Today's Legal

Welcome to your Tuesday morning round-up of stories in today’s edition of The Legal Intelligencer, the first edition of the new year. All of the links below will take you directly to today’s stories, or you can head straight over to The Legal’s homepage. (Some stories may require registration or a paid subscription.)

Today’s top story is a split in the state Supreme Court in an emotional distress suit from a woman whose doctor interpreted her ultrasound during pregnancy as normal but whose child was subsequently born with birth defects. The vote was split 3-3 in Toney v. Chester County Hospital and, as reporter Ben Present writes, “Without a seventh vote, the evenly divided Supreme Court let stand the opinion of a split en banc panel of the state Superior Court that one high court opinion in support of affirmance called ‘flawed.’”

On the bottom of Page 1, Michael A. Riccardi takes a look back at the past year for the state Supreme Court. It was a relatively quiet 2011, but there were a few big decisions, including the February decision in Gillard v. AIG Insurance Co., which made it clear that privilege is a “two-way street.”

Today’s Page 3 story comes from reporter Gina Passarella, who writes that a federal judge in Western Pennsylvania adopted a California test to determine if a party is owed attorney fees for a misappropriation of trade secrets claim that is made in bad faith. U.S. District Court Judge William L. Standish of the Western District of Pennsylvania said no case in the state had previously dealt with bad faith in this context.

As always, our People in the News section is on Page 2, and the top stories from our sister publications across the country make up the Page 4 National News section.

Today’s Law Firm Management column comes from Joel A. Rose, who writes about personal goal-setting and the use of personal attorney business plans.

In this week’s Business of Law column, Frank Michael D’Amore takes a look at methods to drive revenue at your firm. As he writes, “Once assessed, revenue that fits a firm's business model is what makes it go.”

As it is Tuesday, it’s also your chance to read this week’s Pennsylvania Law Weekly. The lead story for PLW, written by reporter Ben Present, involves the plaintiffs finally winning a round when it comes to discovery of Facebook pages. The ledger had been leaning in the other direction after three decisions on the matter favored the defense. The most recent decision comes from a Philadelphia judge, who denied an insurance company’s request to probe a Facebook page in an injury case because the insurer had not identified any public information on the page that would trigger discovery.

Ben Present also wrote the story you’ll find on the bottom of Page 1 in this week’s PLW, taking a look at Dan Pellegrini’s new role leading the Commonwealth Court.

There is plenty more inside this week’s PLW, including reporter Gina Passarella writing that HIPAA doesn’t bar disclosure of nonparty medical records, Samuel C. Stretton’s weekly Ethics Forum and Jeff Jubelirer’s 10 public relations trends to watch for in 2012.

If you have questions or comments about any of today's stories, or our coverage as a whole, we invite you to e-mail any of the reporters directly. We hope you'll enjoy today's Legal.

Reporter's Notebook: More on Koken & Auto Accident Law

By Amaris Elliott-Engel 
Of the Legal Staff

I wrote a story earlier this month about how motor vehicle practice has changed after the state Supreme Court overruled in 2006 an insurance regulation mandating the arbitration of all uninsured and underinsured motorist disputes before three lawyers chosen by plaintiff and defense counsel.

After talking with lawyers from both the defense and plaintiff bars, I learned that there are a couple major phenomena in post-Insurance Federation of Pennsylvania v. Koken practice: one, arbitration -- albeit just with a solo arbitrator -- remains a popular way of resolving claims made by the insured against their insurers for coverage under uninsured and underinsured (UM/UIM) motor vehicle polices; and, two, and this area of law will remain unsettled until appellate courts weigh in or procedural rules are drafted. (See my previous story here.)

In a talk Tuesday given to the Philadelphia Association for Defense Counsel, Louis E. Bricklin, a defense attorney with Bennett Bricklin & Saltzburg in Philadelphia, provided more insight on the unsettled nature of this area of law.

Bricklin said he has not seen specific statistics on how often UM/UIM breach of contract claims are brought with bad faith claims, but his firm is seeing cases with the combined causes of action about 50 percent of the time. The cost to file another count, when many cases are initiated electronically now, is just "throw[ing] in a couple more electrons," Bricklin said.

When defense attorneys are considering the removal of cases to federal court, they should be aware that the right of removal expires one year after the suit is initiated, Bricklin said. Even if opposing counsel agrees to cap the amount in controversy, the cap won't be binding during an appeal from arbitration, he said.

On the other hand, defense attorneys must be aware -- if they remove cases to federal court when they are not permitted to do so -- that they are creating the grounds for plaintiffs attorneys to file a claim for bad faith, Bricklin said.

In the wake of Ashcroft v. Iqbal, in which the U.S. Supreme Court held that a party can only survive a motion to dismiss because of sufficient factual material that supports their claim, the 3rd U.S. Circuit Court of Appeals has "zealously acted to close the courthouse door," Bricklin said.

"You need to plead facts," Bricklin said. "From the plaintiff's point of view, you have to show what information was submitted … and what the insurance company did in response."

The Superior Court in O'Hara v. First Liberty Corp. has ruled that insurers can include venue selection clauses in their insurance contracts, Bricklin said.

Venue selection clausues are important because venue will hold for insurers as long as they do business in the venue, which includes places like Philadelphia, Lackawanna and Luzerne counties that are less popular with defense attorneys, Bricklin said.

There is no question that joinder of the claims of the negligence lawsuit against the tortfeasor who caused the accident, a UM/UIM claim against a plaintiff's own insurance company, and a bad-faith claim against the UM/UIM carrier are proper because the actions have common questions of fact, Bricklin said.

But Bricklin said that it is not clear if the claims should stay joined for trial.

Some states say that while it may be prejudicial to a tortfeasor to have a jury informed about the existence of insurance because the insurer is also a named defendant, the prejudice can be cured with instruction and all modern juries know of the existence of insurance, Bricklin said.

New Jersey and other states, however, cloak the fact that there is UM/UIM coverage and have the trial judge mold the verdict in accordance with the liability coverage and the UM/UIM coverage, Bricklin said.

The latter course raises the issue of whether the UM/UIM carrier should also participate in the defense and the ethics of a UM/UIM carrier's counsel standing before the jury and indicating that they are representing the tortfeasor, even though they are representing the UM/UIM carrier whose existence is cloaked from the jury, Bricklin said.

The other problem of consolidating the claims is that plaintiffs lawyers might be able to do discovery regarding insurance adjusters' evaluations of cases, Bricklin said. There has not yet been an instance of an adjuster, sitting in the witness box, being asked what his or her view of the case is, he said.

But that is another issue that has to be tested in the post-Koken era, Bricklin said.

  Amaris Elliott-Engel is a reporter for The Legal. She can be contacted at 215-557-2354 or [email protected]. Follow her on Twitter: @AmarisTLI.

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].