Lower But Reasonable Settlement Offers Do Not Constitute Bad Faith in UIM Claims

In the case of Rau v. Allstate Fire & Cas. Ins. Co., No. 3:16-cv-0359 (M.D. Pa. Dec. 6, 2018 Mariani, J.), Judge Robert D. Mariani ruled that a carrier's rejection of a policy limits demand, in and of itself, is not evidence of bad faith absent other evidence of unreasonable and intentional under-evaluation of the claims presented.  

This matter arose out of an alleged UIM bad faith case.   The basic allegations by the Plaintiff were that the carrier failed to provide a reasonable basis for its evaluation of the Plaintiff’s claims and that the carrier failed to negotiate in good faith.  

In its opinion, the court provided a detailed review of the discovery completed on the Plaintiff's medical history along with a review of the treatment of the Plaintiff (or lack thereof) and the medical examinations completed.  The court also analyzed the parties’ negotiations (during which the Plaintiff never wavered from a policy limits demand) and the details of a high/low arbitration that ultimately resulted in the carrier paying less than the policy limits but more than its evaluation.  

Judge Robert D. Mariani
M.D.Pa.

Based upon the record before the court, summary judgment was granted in favor of the carrier.  Judge Mariani found that the carrier came forward with sufficient evidence to establish an absence of any genuine issues of material facts as to its conduct in its dealings with the insured.  

More specifically, the court found that, in evaluating the case, the carrier relied upon expert reports and the absence of any documentation from the Plaintiff showing any surgical history for which more damages might be due.  

The court noted that, while the carrier’s settlement offers were lower than the policy limits demand submitted by the Plaintiff and the eventual arbitration award, this fact, in and of itself, does not support a finding of bad faith.   

To the contrary, the court noted that a low but reasonable evaluation does not constitute bad faith.   The evaluation by the carrier in this case was found to be reasonable based upon the carrier’s investigation and the sum it was willing to pay in setting the high/low arbitration parameters.  

Anyone wishing to review a copy of this decision may click this LINK.