Denial of Benefits Must Be Alleged to Pursue Section 8371 UIM Bad Faith Claim

In the case of Buck v. Geico, No. 18-5148 (E.D. Pa. Jan. 23, 2019 DuBois, J.), the court granted the carrier’s 12(b)(6) Motion to Dismiss the Plaintiff’s Bad Faith Claim but granted the Plaintiff leave to file an Amended Complaint.  

This case arose out of a motor vehicle accident and a UIM claim.  

In this case, the carrier disagreed with the Plaintiff’s contention as to the liability issues.   The carrier initially concluded that the collision was 100% the insured’s fault, but thereafter, after receiving some surveillance information, altered the liability assessment to agree that the Plaintiff was comparatively negligent but not in the majority.  

The carrier contended the Plaintiff’s Complaint should be dismissed for failure to state a claim upon which relief may be granted because the Plaintiff did not allege a denial of benefits under an insurance policy as required by the bad faith statute found at 42 Pa. C.S.A. §8371. 

In response, the Plaintiff presented two (2) arguments. First, the Plaintiff asserted that he did not need to allege a denial of benefits to state a cause of action for insurance bad faith under §8371.   More specifically, in addition to asserting that §8371 does not require a denial of benefits in order for a Plaintiff to state a cause of action for bad faith, the Plaintiff also contended that the carrier’s investigative practices and faulty conclusions based upon egregious investigative inaction supported a cause of action under §8371 in any event.  

As a second basis, the Plaintiff asserted that he was indeed denied benefits of purchasing an insurance policy.  More specifically, the Plaintiff asserted that, after the subject accident, the carrier significantly increased the insurance premiums on the Plaintiff’s vehicles and that, as a result, the Plaintiff was forced to seek alternative insurance from another company in an attempt to offset the increase premium. 

The court rejected both of the arguments set forth by the Plaintiff.  

The court rejected the first argument of the Plaintiff noted above.   The court stated that “the essence of a bad faith claim must be the unreasonable and intentional (or reckless) denial of benefits.”  See Op. at 4.   The court reiterated that Pennsylvania law makes clear that a claimed denial is essential to a bad faith claim.  Accordingly, the court concluded that the Plaintiff must allege a denial of benefits in order to proceed on the claim under §8371.   

In terms of the other types of alleged “benefits” that the Plaintiff asserted that he Defendant allegedly denied the Plaintiff, the court noted that none of those other concerns involved a refusal to pay proceeds under an insurance policy, which is also required to support a claim for bad faith.   

As such, the court dismissed the Plaintiff’s Complaint for failure to state a valid claim of bad faith.  As noted, however, the Plaintiff was granted the right to amend.  

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

I send thanks to Attorney Lee Applebaum of Fineman, Krekstein & Harris in Philadelphia for bringing this case to my attention.  Be sure to check out Attorney Applebaum's excellent Pennsylvnaia and New Jersey Insurance Bad Faith Case Law Blog.