Claims Reps Cannot Be Sued Under Pennsylvania's Insurance Bad Faith Statute

The excellent Pennsylvania and New Jersey Insurance Bad Faith Case Law Blog recently highlighted the case of Reto v. Liberty Mutual Insurance, No. 18-2483 (E.D. Pa. Aug. 8, 2018 Savage, J.), in which the court confirmed that a bad faith action under the bad faith statute cannot be brought against a claims representative.

In this matter, the Plaintiff brought a UIM breach of contract, loss of consortium, and bad faith action against both the claims representative and the carrier. 

The carrier argued that the claims representative was “fraudulently joined” by the Plaintiff in an effort to defeat Federal Court diversity jurisdiction. The carrier additionally asserted that bad faith actions against claims representative are not permissible. 

The Eastern District Federal Court agreed with the carrier’s position and noted that the claims asserted against the claims representative were “wholly insubstantial and frivolous.”   

The court stated that, as a matter of law, there is no basis to support a claim against the claims representative because only the carrier may be held liable under the claims presented.   The court noted that the claims representative, who was only an agent of the carrier, did not have a separate contract with the insured.

The court additionally held that a bad faith claim could not be asserted against a claims representative as the bad faith statute only applies to insurance companies.  

As such, the court held that the Plaintiff had improperly joined the claims representative in this lawsuit.  As such, the claims representative was dismissed from the case and the Plaintiff's motion to remand was denied.

Anyone wishing to review this decision may click this LINK.

I send thanks for Attorney Lee Applebaum of the Philadelphia law firm of Fineman, Krekstein & Harris, and the writer of the Pennsylvania and New Jersey Insurance Bad Faith Case Law blog, for bringing this case to my attention.