Judge Mariani of Federal Middle District Court Addresses Bad Faith Claim in Third Pary Context

In his recent Opinion in the case of Bodnar v. Nationwide Mut. Ins. Co., No. 3:12-CV-1337, slip copy, 2013 WL 2147807 (M.D. Pa. May 16, 2013 Mariani, J.), Federal Middle District Court Judge Robert D. Mariani addressed a Motion for Summary Judgment filed by Defendant AMCO Insurance Company in a bad faith action.

The carrier sought the entry of judgment in its favor on the basis that its payment of its insured's liability policy limits of $1 million dollars plus interest to settle and resolve in full the case against its insured discharged, as a matter of law, the liability carrier's duty to act with the utmost good faith towards its insured in fulfillment of its contractual obligations under the liability policy and thereby precluded any statutory bad faith claim under 42 Pa. C.S. §8371.  

According to the Opinion, after the underlying claim by the injured party was settled by the payment of the policy limits, the insured Defendant filed suit against the liability carrier.  Count I on the Complaint alleged a bad faith claim under 42 Pa. C.S. §8371.   Count II of the Complaint asserted a breach of contract claim under the liability policy. 

According to the Opinion, the insured’s essential allegations were that the liability carrier disregarded the interests of its insured with its allegedly unjustified and unreasonable refusal to settle the action of the injured party.   In addition to claiming actual and consequential damages, the insured requested the payment of damages for severe emotional distress, anxiety, depression, and psychological harm to the insured by virtue of the carrier’s failure to settle earlier.  

In defense, the liability carrier asserted that the insured’s policy limits plus interest were paid in accordance with a settlement agreement prior to trial and, therefore, prior to any finding of any liability in the underlying lawsuit and/or any entry of any award of damages against the insured in the underlying lawsuit.  The Opinion confirms that the underlying lawsuit was discontinued after the payment of the policy limits.  

The Defendant liability carrier additionally asserted that, in the absence of the possibility of an excess verdict, there was no viable, common law bad faith claim against the carrier.   The Defendant carrier made the same argument with respect to the Plaintiff’s statutory bad faith claim under 42 Pa. C.S. §8371.  

After a detailed review of the applicable law of bad faith in this context, Judge Mariani rejected the insurance carrier’s argument that its ultimate payment of the policy limits to the underlying injured party, in and of itself, served as a complete defense entitling the liability carrier to summary judgment as a matter of law.   The Court also noted that the converse was not true either, i.e., that a carrier's delay in the settlement of the claim, standing alone, presents a cause of action for breach of contract or bad faith.  Rather, each case must be viewed and analyzed based upon the particular facts present.  

Judge Mariani ruled that there were issues presented as to whether or not the liability carrier’s payment of the limits was delayed for an inordinate and/or unreasonable amount of time during which time the insurer’s conduct had to be evaluated by a jury as to whether or not such conduct violated the carrier’s duty of good faith to fairly evaluate and resolve the claim.  

In denying the carrier’s Motion for Summary Judgment, Judge Mariani stated that he expressed no opinion as to the merits of the Plaintiff’s claims on these issues.  Rather, such issues were left for a jury to decide.  

Anyone wishing to review this detailed bad faith Opinion by Judge Mariani in the case of Bodnar v. Nationwide, may click this LINK to view it online.