Monday, February 21, 2011

Recent Bad Faith Decision out of Eastern District

In a January 31, 2011 Memorandum Opinion, in the case of Eley v. State Farm, No. 10 cv 5564 (E.D.Pa. Jan. 31, 2011, Baylson, J.), Judge Baylson of of the Federal District Court for the Eastern District of Pennsylvania granted the Defendant's 12(b)(6) Motion to Dismiss Plaintiff's bad faith claim for failure to adequately plead the elements of that cause of action in the Complaint filed in this post-Koken case.

The Plaintiffs asserted that they adequately pled a cause of action where they alleged that an accident occurred, that the Plaintiff's policy provided for UIM coverage, that the Plaintiff fully complied with the policy terms and that the carrier failed to make an offer to settle the claim.

The Plaintiffs asserted that they alleged sufficient facts to state a claim for bad faith because Defendant had no reasonable basis to deny benefits and knew or recklessly disregarded its lack of such a basis.

Judge Bayslon disagreed and noted that the Plaintiff's Complaint only contained conclusory allegations without sufficient factual support. More specifically, the court noted that the Plaintiff's insufficient pleadings consisted of the following:

18. There was no reasonable basis for the following acts and omissions of defendant:

(a) Failure to negotiate plaintiffs' [UIM] claim in good faith.

(b) Failure to properly investigate and evaluate plaintiff[s'] insurance claim.

(c) Such other acts to be shown through discovery.

19. The defendant knew or recklessly disregarded the fact that it had no reasonable basis for its above conduct in handling plaintiffs' [UIM] claim.

20. Defendant's conduct in handling plaintiffs' [UIM] claim constituted bad faith within the meaning of 42 Pa. C.S.A. § 8371.

21. Defendant acted in reckless disregard of plaintiffs' claims and rights and its conduct was willful, wanton and outrageous.

The court found such "bare-bones" allegations to be insufficient to allow the Complaint to stand. The court dismissed the bad faith allegations, without prejudice. The Plaintiff's breach of contract claim was allowed to stand.

Here's a link to the Opinion online:

I send thanks to Walter A. McClatchy, Jr. of the Philadelphia law firm of Walter A. McClatchy, Jr. & Associates for bringing this case to my attention.

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