Low Ball Offer Not Necessarily Bad Faith

In the case of Rosenthal v. Am. States Ins. Co., No. 1:18-cv-01755 2019 (WL 1354141 M.D. Pa. March 26, 2019 Kane, J.), the court dismissed a bad faith count in a UIM case but allowed the Plaintiff the right to file an Amended Complaint.  

Generally speaking, after reviewing general bad faith law, the court noted that failing to plead descriptions of what a carrier actually did, or why they did it, can be fatal to a bad faith claim under the Federal Rules of Civil Procedure.  

Of note, the court confirmed that an allegation that the carrier paid first party medical benefits while not paying UIM claims is not in and of itself bad faith.   The court noted that allegations of bad faith in this regard must go beyond “a mere inconsistency” in the handling of these two (2) types of claims under the policy.  

Moreover, the court also noted that an allegation of a bad faith failure to communicate requires the Plaintiff to plead actual efforts to communicate with the carrier to which the carrier failed to respond in good faith.  

Judge Kane additionally held that identifying the difference between a demand and an offer alone cannot serve as the basis for claim for bad faith, absent allegations that the carrier acted unreasonably and in bad faith by making the lower offer.   In this case, the Plaintiff was demanding $1 million dollars in settlement, which she alleged was lower than her actual damages, and asserted that the carrier only offered $107,012.00.  The court found that these allegations, in and of themselves, were insufficient to support a claim for bad faith.  

The court noted that a low but reasonable estimate would be not treated as bad faith.  Here, the insured also did not allege any facts from which a jury could plausibly conclude that the Defendant’s offer was unreasonable and not made in good faith as opposed to an offer being made as part of the ordinary course of negotiations between carriers and Plaintiffs. 
 
Anyone wishing to review a copy of this decision may click this LINK

I send thanks to 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.