Friday, January 10, 2020

Low But Reasonable Offer Does Not Amount to Bad Faith in UIM Context

In the case of Rau v. Allstate Fire & Cas. Ins. Co., No. 19-1078 (3d Cir. Nov. 27, 2019 Chagares, J., Jordan, J., Restrepo, J.), the Third Circuit Court of Appeals affirmed the entry of summary judgment in favor of the carrier on a bad faith in a case presided over by Federal Middle District Judge Robert D. Mariani at the trial court level. 

In this UIM case, the third party tortfeasor had paid $95,000.00 out of a $100,000.00 liability policy.

The UIM carrier initially made an offer of $10,000.00 to settle the UIM claim. The Plaintiff had demanded the full $200,000.00 UIM policy limits and filed suit when her demand was not met.

During the course of the matter, the carrier increased its offer to $50,000.00. 

The parties agreed to a high/low arbitration with the high parameter being the $200,000.00 policy limits and a low parameter being $10,000.00. The arbitrator found that the total claim was worth $306,345.00 and calculated the carrier’s responsibility under the UIM policy to be $160,786.78.
In its Opinion, the Third Circuit confirmed the rule of law that a “low but reasonable estimate of the insured’s losses” does not amount to per se bad faith. The court additionally noted the rule of law that alleged negligence or bad judgment on the part of a carrier will not support a bad faith claim.

Reviewing the record before it, the Third Circuit found that the trial court had properly found that, based upon the undisputed facts in the record, the carrier has a reasonable basis for contesting the insured’s UIM claim. More specifically, the record revealed that, a large portion of the Plaintiff’s evaluation of her claim was attributable to an alleged potential future surgery. 

It was also noted that an independent medical examination disputed the Plaintiff’s claim that she would need that future surgery.
The record also showed that the Plaintiff had additional health coverage that would defray the cost of the alleged need for future surgery. It was also noted in the Opinion that the carrier believed that the Plaintiff was exaggerating her symptoms during her deposition that was completed in the underlying UIM litigation.

Viewing the record as a whole, the Court of Appeals agreed that the Plaintiff could not demonstrate the absence of a reasonable basis on the part of the carrier to deny the UIM benefits. As such, Judge Mariani's entry of summary judgment for the carrier was upheld.

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 for bringing this case to my attention. Please check out Attorney Applebaum’s excellent Pennsylvania and New Jersey Insurance Bad Faith Case Law blog for continuing updates on important bad faith cases.

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