Judge Conaboy Circumscribes Proper Bad Faith Claims in UM Context

In his recent decision in the case of Cicon v. State Farm Mutual Automobile Insurance Company, No. 3:14-cv-2187 (M.D. Pa. March 4, 2015 Conaboy, J.), Federal Middle Court Judge Richard P. Conaboy, considered Defendant State Farm’s Motion to Dismiss four counts of a Post-Koken Complaint filed by the Plaintiff, including Bad Faith claims.  

More specifically, State Farm sought a dismissal of a Count of Breach of the Duty of Good Faith and Fair Dealing, a Count for Breach of Contract, a Count of Negligence, and a Count of Vicarious Liability, all asserted against the Uninsured Motorist (UM) Benefits carrier. 

According to the Opinion, this matter arose out of personal injuries allegedly sustained as a result of a motor vehicle accident involving an uninsured vehicle.   Following the accident, the Plaintiff submitted a claim for uninsured motorist benefits.  

Prior to retaining any attorney, the Plaintiff attended an independent medical examination at the request of the carrier and, thereafter, attempted to settle the claim for a period of seven (7) months.  When the settlement discussions failed to be successful, the Plaintiff retained counsel.  

Plaintiffs’ retained counsel made a demand of the $100,000.00 UM limits, and supplied State Farm with additional documentation in support of the claims presented.  Defendant, State Farm responded with a $30,000.00 offer.  

The Plaintiff proceeded to file suit alleging that the offer presented by State Farm was unreasonable and inconsistent with the documentation provided by the Plaintiff in terms of medical treatment and wage loss information.  

With respect to the Defendant’s motion for the dismissal of the Plaintiff’s allegations of a violation of a contractual duty to observe the covenant of good faith and fair dealing, the court noted that the Pennsylvania Supreme Court has held that “there is no cause of action for a breach of the implied duty of good faith and fair dealing in a case for first party insurance benefits, like this one, where an insured is suing his insurer."    See Cicon at p. 5-6 citing D’Ambrosio v. Pennsylvania National Mutual Casualty Insurance Company, 494 Pa. 501, 507-10 (1981).   As such, this claim was dismissed by the court. 

Judge Richard P. Conaboy
Federal Middle District
of Pennsylvania

Judge Conaboy allowed the Plaintiff’s Count for Breach of Contract to stand and rejected the defense argument that that Count should be dismissed as being redundant of the claims alleged Counts 1 and 2 in the Complaint for UM benefits and loss of consortium claims, respectively.   Although the court noted that it was inclined to agree that the damages recoverable under all of these claims were seemingly identical and “necessarily limited by the terms of the policy,” the court noted that the claims presented in these three counts were technically separate such that the Breach of Contract claim would be allowed to proceed.  

Judge Conaboy went on to dismiss Count 6 of the Complaint which sounded in Negligence and was based upon an allegation that the Defendant, State Farm, owed a duty of care to the Plaintiff, failed to discharge that duty, and was allegedly therefore liable in tort.  

In this regard, the court accepted the defense argument that the “gist of the action” doctrine operated to preclude the Plaintiffs’ negligence count as an improper attempt to characterize an ordinary breach of contract claim as a tort action.   The court ruled in this fashion despite recognizing the Plaintiffs’ argument that the Supreme Court of Pennsylvania have never adopted the gist of the action doctrine in an insurance coverage dispute context. 

However, Judge Conaboy felt that, after his review of the Superior Court case law, that the Pennsylvania Supreme Court would rule that the Plaintiff’s negligence count should be barred by the gist of the actions doctrine under the circumstances presented if that Court was ever faced with the issue. 

Judge Conaboy also agreed that the Plaintiffs’ allegations of vicarious liability on the part of the Defendant State Farm, based upon the alleged negligent and intentional misconduct of its adjusters, supervisors, and defense counsel, should be dismissed.  

In so ruling, the court noted that the only party in this case was the Defendant and that, as such, the party Defendant could not be vicariously liable for its own conduct.   Judge Conaboy additionally noted that vicarious liability is a creature of tort law, which caused him to reiterate his finding that the gist of the action doctrine required that this case be determined under contract law concepts and not tort law principles.

Overall, the court granted the Defendant’s Motion to Dismiss in part and denied it in part.

Judge Conaboy’s Opinion can be read as supporting an argument by a Defendant carrier that the sole cause of action in a first party case for an alleged breach of good faith is pursuant to 42 Pa. C.S. §8371.  This decision also arguably stands for the proposition that there is no common law cause of action for a breach of the duty of good faith and fair dealing, with its attendant consequential damages, in a first party case.  

 

I send thanks to the prevailing defense counsel, Attorney Lee Ullman of the Reading, Pennsylvania office of Forry Ullman, for providing me with a copy of this Opinion.

 

Anyone desiring a copy of this Opinion may contact me at dancummins@comcast.net.