No Valid Direct Claim of Bad Faith Can Be Asserted By Third Parties Against Carrier If Not Party to Insurance Contract

In the case of Jones v. Ritchie, No. 4983-Civil-2019 (C.P. Monroe Co. Sept. 2, 2019 Williamson, J.), the court dismissed common law and statutory bad faith claims against a carrier on the grounds that no contractual relationship existed between the carrier and the plaintiffs.

By way of background, the plaintiff was allegedly injured as a result of a rear-end accident allegedly caused by a defendant driver.  The vehicle operated by the defendant driver was rented by a co-defendant. That co-defendant who rented the vehicle that was being operated by the defendant driver at the time of the accident was covered under a personal automobile insurance policy issued by the carrier who filed the Preliminary Objections in this matter.   

As such, the plaintiffs were strangers to the insurance policy issued by the insurance company that they sued in this matter. 

In granting the Preliminary Objections of the insurance on the common law and statutory bad faith claims presented by the plaintiffs, the court initially cited to several cases that have held that the common law claims for bad faith on the part of insurance companies are not recognized in Pennsylvania.   As such, the common law bad faith claims asserted by the plaintiffs were denied on that additional basis.   

Relative to the plaintiff’s statutory bad faith claims, the court emphasized that under 42 Pa. C.S.A. §8371, it was required that the plaintiff pursue an action under an insurance policy and that the claims presented involve claims that the carrier had acted in bad faith “toward the insured.”   

Judge David J. Williamson
Monroe County 

Judge Williamson emphasized that the bad faith statute provides that a carrier has a duty to the person it has insured.  The court otherwise noted that “[t]here is no statutory duty for an insurance company to act in good faith as to third parties.” [other citations omitted].  

Given that the plaintiffs in this matter were not a party to the insurance company’s contract, the court found that the plaintiff had no basis upon which to bring a statutory bad faith claim against that carrier.  

As such, the insurance company was dismissed from this matter as a party defendant.  

Anyone wishing to review a copy of this decision may click this LINK.

Named Driver Exclusion Upheld to Exclude Automobile Insurance Coverage

In the case of Mid-Century Insurance v. French, No. 2:19-CV-00563-JDW (E.D. Pa. Sept. 12, 2019 Wolson, J.), the court ruled that a “named driver” exclusion that specifically listed the insureds’ son as an excluded driver under the insured's automobile insurance policy served to preclude coverage for that son in a lawsuit filed against him for a motor vehicle accident while he was driving his fiancé’s automobile. 

According to the Opinion, the carrier that covered the vehicle owned by the Defendant driver’s fiancé separately provided the Defendant driver with a defense.

The carrier in this matter, Mid-Century Insurance Company had issued an automobile insurance policy to the Defendant driver’s parents. 

That carrier filed a declaratory judgment action seeking a judicial declaration that it did not need to provide additional liability coverage for any claim arising out of the accident and asserted against the Defendant driver given that the policy had a named driver exclusion listing the son as being excluded from coverage. 

The court upheld the exclusion and issued a declaration that Mid-Century Insurance Company need not provide coverage in the underlying case presented.

Anyone wishing to review a copy of this decision may click this LINK.  The Court's companion Order can be viewed HERE.

Default Judgment Opened Where Plaintiff Used Old Form Language in Pa.R.C.P. 237.5

In the case of Pennachio v. Wal-Mart Stores East, L.P., No. 10120 of 2017, C.A. (C.P. Lawrence Co. Aug. 6, 2019 Motto, P.J.), the court struck the entry of a default judgment against the Defendant after finding that the Plaintiff’s notice of default was fatally defective because it failed to contain the specificity required by the Pennsylvania Rules of Civil Procedure.  

This matter arose out of a slip and fall incident at a Wal-Mart store.   After the Plaintiff obtained service and Wal-Mart never filed a responsive pleading, the Plaintiff sent an “Important Notice” as required by Pa. R.C.P. 237.5, notifying Wal-Mart that it had ten (10) days to take action or would suffer the entry of a default judgment.   When Wal-Mart did not take any action, the default judgment was filed by the Plaintiff.  

Wal-Mart responded with a Petition to Strike Default Judgment and asserted that the Plaintiff had failed to use the specific language required by Pa. R.C.P. 237.5.  

The court agreed with Wal-Mart that this was a fatal defect that required a default judgment to be stricken because the language that was used by the Plaintiff lacked the necessary specificity. The court noted that the Plaintiff utilized the language that was used in the old version of Rule 237.5 before it was amended back in 1994.  

Anyone wishing to review a copy of this decision may click this LINK.

Source: “Digest of Recent Opinions.” Pennsylvania Law Weekly (Sept. 3, 2019).  

Duty to Defend Supports Cross-Claim for Non-payment of Defense Legal Fees

In the case of Huffsmith v. PPL Electric Utilities Corporation, No. 11-CV-1012 (C.P. Lacka. Co. Sept. 5, 2019 Nealon, J.), the court addressed the issues surrounding a duty to defend and a duty to indemnify relative to a cross-claim asserted by one Defendant against a Co-Defendant. 

According to the Opinion, PPL Electric Utilities Corporation retained a contractor to perform tree removal services around transmission lines. 

Under the contract between the parties, the tree removal services contractor was obligated to indemnify the utility company for any personal injury or property damages claims resulting from the contractor’s work. Under the contract, the contractor also had a separate duty to defend at its own expense, with counsel acceptable to PPL, any suit or action brought against PPL based upon such claims. 

In an underlying matter, landowners filed a trespass action against the utility company and the tree removal services contractor for allegedly improperly moving seventeen (17) fully grown evergreen trees from the landowner’s property. There was a dispute in that matter as to whether or not the trees were within PPL’s lawful right-of-way. 

During the course of that litigation, PPL tendered its defense of the lawsuit to the contractor under the contract. 

However, the tree removal services contractor’s insurance company rejected PPL’s tender of its defense under an argument that the contractor’s duty to defend PPL would arise only if PPL became obligated to make a payment on the landowners’ trespass claim by virtue of a settlement or a verdict. 

As such, PPL retained its own defense counsel and, in the lawsuit, asserted a cross-claim against the contractor seeking to recover its own defense cost and counsel’s fees based upon the contractor’s breach of its contractual duty to defend. 

The case was litigated to a successful conclusion with a jury finding that the utility and the contractor had not trespassed upon the landowners’ property. 

Terrence R. Nealon
Lackawanna County

Pursuant to a Stipulation between the two (2) Defendants, PPL’s crossclaim against the contractor was then subsequently submitted to a non-jury decision before Judge Terrence R. Nealon of the Lackawanna County Court of Common Pleas under Pa. R.C.P. 1038.

In this decision, Judge Nealon held that, although the contractor’s duty to indemnify the utility was contingent upon PPL’s liability for a payment for the landowner as a result of a settlement or verdict, the contractor’s duty to defend the utility went into effect once the landowner’s filed their lawsuit against both the PPL and the contractor for property damages allegedly caused by the contractor’s tree removal activities. 

Accordingly, the court ruled that the contractor breached its contractual duty to defend PPL in this matter.  The contractor was found to be liable for compensatory damages in the amount of the reasonable and necessary counsel fees and costs incurred and paid by PPL in defending this trespass action as well as in pursuing its cross-claim to recover those costs of defense. The court found that the defense costs and fees in the amount of $148,235.18 were reasonable and necessary to defend the lawsuit, which fees included litigation of an appeal and a remand by the appellate court.

Anyone wishing to review a copy of this decision may click this LINK.

Judge Terrence R. Nealon of Lackawanna County Addresses Proper Arguments on Preliminary Objections to Joinder Complaints

In the case of Diaz-Martinez v. Maid Rite, No. 17-CV-577 (C.P. Lacka. Co. Sept. 17, 2019 Nealon, J.), Judge Terrence R. Nealon of the Lackawanna County Court of Common Pleas addressed Preliminary Objections to a joinder of Additional Defendants in a products liability action.

According to the Opinion, the Defendant manufacturers in this products liability action secured prior leave of court to file a late Joinder Complaint which joined and asserted indemnification and contribution claims against certain Additional Defendants on the grounds that those Additional Defendants made alterations to the product following the manufacturing of the product, which alterations allegedly created the alleged defect at issue.

The Additional Defendants who were joined in the matter filed Preliminary Objections to the late joinder and argued that the original Defendant had not established a reasonable justification for the delay in filing the Joinder Complaint. The Additional Defendants also asserted that they had been prejudiced by their untimely joinder.

Judge Nealon reiterated, as he has in prior decisions, that under Pa. R.C.P. 2253(b), only plaintiffs may challenge late joinders on the basis “that the joining party has not shown a reasonable justification for its delay” in seeking the joinder.

The court noted that the Plaintiffs in this case had not objected to the late joinder of the Additional Defendant. Accordingly, the court found that the issue of a reasonable justification for the delay is an irrelevant consideration in the matter.

The court went on to reject the claim of prejudice by the Additional Defendants by noting that no depositions have been scheduled to take, the parties had not conducted any joint inspection of the product at issue, no discovery deadlines have been put in place, and a trial date has not yet even been requested.

The court also noted that the Additional Defendants had not identified that any evidence was lost or destroyed prior to their joinder. Nor was there any allegation that the ability of the Additional Defendants to conduct discovery or prepare their defense had been jeopardized by the late joinder.

Consequently, the court overruled the Preliminary Objections filed by the Additional Defendants to the Joinder Complaint.

Anyone wishing to review this decision may click this LINK. 

Regular Use Exclusion in Automobile Insurance Policies Under Attack

In the case of Rush v. Erie Insurance Exchange, No. C-48-CV-2019-1979 (C.P. Northampt. Co. Oct. 1, 2019 Baratta, J.), the court denied a Motion for Judgment on the Pleadings filed by the carrier with respect to a Regular Use Exclusion issue.

According to the Opinion, a police officer Plaintiff was injured in the course and scope of his employment and recovered the liability coverage from the tortfeasor and the UIM coverage under the policy that covered the police vehicle.

The Plaintiff then sought to recover UIM benefits under his own personal Erie stacked policy. Erie Insurance denied the claim and asserted the regular use exclusion. The carrier relied upon the case of Burstein v. Prudential Property and Cas. Ins. Co., 809 A.2d 204 (Pa. 2002) and other related cases.

The Plaintiffs opposed the Motion and cited, in part, to the rationale from the case of Gallagher v. Geico, 201 A.3d 131 (Pa. 2019) in which the Pennsylvania Supreme Court invalidated the household exclusion.

In this Rush case, the trial court denied the carrier’s Motion for Judgment on the Pleadings and noted that the recent Gallagher case “creates a substantial question of law such that Erie’s right to prevail is not so clear that judgment on the pleadings would be appropriate in this matter.”  The Court more specifically noted that the Plaintiff set forth "a cognizable claim that the [carrier's] application of the regular use exclusion to deny their request for underinsured motorist coverage is in contravention of public policy."

Anyone wishing to review this decision may click this LINK.

I send thanks to Attorney Scott B. Cooper of the Harrisburg, PA law firm of Schmidt Kramer, P.C. for bringing this case to my attention.

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