Judge Conaboy of Federal Middle District Allows UIM Bad Faith Claim to Proceed to Jury

In his recent decision in the case of Strausser v. Merchant’s Insurance Group, Case No. 3:12-cv-1551 (M.D. Pa. April 7, 2014 Conaboy, J.), United States Federal Court Judge Richard P. Conaboy of the Middle District of Pennsylvania issued an Order denying a carrier’s Motion for Summary Judgment in a UIM bad faith claim after finding issues of fact.

According to the Opinion, the insured complained that the carrier had requested 33 separate authorizations and tax returns in a sporadic fashion over a period of many months.  The Plaintiff also complained that a psychologist who could not assemble the Plaintiff’s treatment records because of computer malfunction was allegedly unreasonably subjected to a lawsuit by the carrier which resulted in a further delay in arbitrating the UIM claim.   Moreover, the Plaintiff asserted that, despite an investigation that spanned over 4 ½ years, the carrier allegedly never obtained any evidence to support its position that the insured had been disabled before the subject accident.  

The carrier countered with an argument that it investigated the UIM claim and discovered red flags in a form of a prior accident history and pre-existing financial and psychological problems.   The carrier also stated that it ultimately agreed to arbitrate the UIM claim and promptly paid the award once it was rendered.  

The insurance company additionally asserted that the 43 month time period between the insured’s filing of the UIM claim and the entry of the award was allegedly largely the result of a refusal by one of the insured’s medical providers to respond to a subpoena.   

The carrier also asserted that there was a delay beyond its control in the form of personal issues for the mediator.  

Finally, the carrier described the parties’ inability to settle the matter over a disagreement over the value of the claims presented.  

In his Opinion, Judge Conaboy observed that the arbitration award that was entered was almost four (4) times the carrier’s best offer.   The Court defined the ultimate question presented in this matter as whether, at some point before the entry of the arbitrator’s award, did the carrier have enough information to comprehend that its final settlement offer was unreasonably low.  

In its Opinion, the court acknowledged that the mere negotiation of a disputed claim does not qualify as bad faith, that the existence of a substantial discrepancy between the carrier’s settlement offer and the amount that the carrier ultimately pays on a claim does not, in every circumstance, support a finding of bad faith, that it is not always bad faith for a carrier to rely upon the results of an independent medical examination, and that the mere fact that there was a substantial delay between the time the claim was filed and the time it ultimately resolved, in and of itself, does not necessarily indicate bad faith.   

The court found that reasonable jurors could differ on the issue of whether or not the carrier was unreasonable to refuse to submit the case to mediation before obtaining a psychologist’s records in the context of a case primarily involving physical injuries.

Judge Conaboy also felt that reasonable jurors could conclude that the carrier acted unreasonably in relying upon the Opinions of an IME doctor who never saw the insured Plaintiff until approximately five (5) years after the accident in question.   The court also felt that the carrier’s piecemeal request for 33 authorizations over a period of more than a year could be viewed as an effort to pressure the insured Plaintiff to accepting a settlement that bore no resemblance to the actual damages claimed.  

In concluding his opinion, Judge Conaboy stated that his denial of summary judgment should not be viewed as an indication that the court thought it was likely that the Plaintiff would prevail at trial. The court reiterated that the Plaintiff was required to demonstrate the insurance company’s alleged bad faith by the heightened standard of clear and convincing evidence and that the insurance company would have the benefit of that jury instruction at trial. 

I send thanks to the law firm of Fineman, Krekstein & Harris for publicizing this Opinion on its excellent blog known as the Pennsylvania and New Jersey Insurance Bad Faith Case Law Blog (www.pabadfaithlaw.com).

Anyone wishing to review this Strausser  case can click this LINK.