Monday, March 16, 2020

Motion to Sever and Stay Bad Faith Claim Denied by Federal Western District Court


In the case of Walls v. American Modern Select Ins. Co., No. 3:19-cv-80 (W.D. Pa. Feb. 6, 2020 Gibson, J.), the court refused to strike the carrier’s affirmative defense of fraud and also denied the carrier’s Motion to Sever and Stay the insured’s bad faith claim.

According to the Opinion, this case arose out of a homeowners’ fire loss claim.

After the carrier refused to pay on the basis that the insured made material misrepresentation when they applied for their policies, the insured filed suit. The carrier asserted affirmative defenses in terms of misrepresentations made by the insured during the application process.

Before the court was the insured’s Motion to Strike the affirmative defenses inadequately pled. Also before the court was the carrier’s Motion to Sever and Stay the insured’s bad faith claim.

The court denied the Plaintiff’s Motion to Strike the carrier’s affirmative defenses after finding that, under F.R.C.P. 8(c) affirmative defenses did not have to be thoroughly articulated. However, where, as here, fraud is pled, there are additional pleading requirements under F.R.C.P. 9(b) to plead such claims with particularity. Regardless, the court found that the affirmative defenses pled by the carrier in this matter were sufficiently stated.

As to the other Motion at issue, the court denied the carrier’s Motion to Sever and Stay the bad faith claims. In this regard, the court noted that the underlying issues in the two (2) claims overlapped in terms of the breach of contract and bad faith counts.

The court also felt that trying the claim together would not unduly prejudice the carrier. The court also noted that keeping the cases together would also promote judicial economy.

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

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

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