Friday, May 15, 2020

UIM Bad Faith Complaint Survives Motion to Dismiss

A Plaintiff in a UIM bad faith case was found to have met the federal pleading requirements to survive a Motion to Dismiss in the case of Lowndes v. Travelers Property Cas. Co. of America, No. 19-5823 (E.D. Pa. April 17, 2020 Jones, II, J.).

In this matter, the UIM Plaintiffs alleged that the injured insured suffered serious injuries requiring ongoing treatment. The third party tortfeasor’s carrier had paid $250,000.00. The insureds were seeking the full $1 million dollar UIM coverage limit from the UIM carrier.

According to the Opinion, the UIM carrier’s highest offer was $200,000.00, which offer was made nearly three (3) years after the original claim.

The insureds filed suit and asserted a breach of contract and bad faith claims.

The Complaint asserted that the Plaintiffs had cooperated with the carrier and provided information over a thirty-two (32) month period. The Plaintiffs alleged that they had provided detailed information from which the carrier could have fairly evaluated the information and made a timely and reasonable offer on the claim.

The Plaintiffs alleged that they estimated their claim to be in excess of $1 million dollars based upon the Plaintiff’s alleged unchallenged medical records, narrative reports, vocational loss, and medical prognosis reports, all of which had been provided to the Defendant carrier. The Plaintiffs alleged that the carrier had failed to timely respond or comply with the Plaintiffs’ attorney’s request for the carrier to fairly evaluate the UIM claim.

The Plaintiffs also specifically alleged in their Complaint that the carrier “did not have a reasonable basis for delaying and/or denying underinsured motorist benefits or a partial tender of such under the policy” for nearly three (3) years. In the Complaint, the Plaintiffs characterized the carrier’s refusal to pay as frivolous and unfounded and also pled that the carrier “lacked a legal and factual basis” for its evaluation of the case presented.

The carrier moved to dismiss the claim of bad faith due to the Plaintiffs’ alleged failure to adequately plead the same.

The court reiterated the rule that, while a delay may be evidence of bad Faith, standing alone, a delay does not make out an automatic case for bad faith.

The court noted that, in evaluating whether a delay might constitute bad faith, “‘[t]he primary consideration is the degree to which a Defendant insurer knew it had no basis to deny the Claimant: if delays attributable to the need to investigate further or even to simple negligence, no bad faith has occurred.’” [emphasis in Opinion].

The court, in its Opinion recognized the potential negative impact of an alleged thirty two (32) month delay between the submission of the claim by the Plaintiff and the carrier’s offer. However, the court noted that, standing alone, this delay could not prove bad faith. However, the court found that there are additional factual allegations in the Complaint to support the bad faith delay argument.

With regards to the allegations of bad faith conduct on the part of the carrier, the court pointed out that the carrier had not sought an independent medical examination or a records review within the thirty two (32) month period as part of the effort to properly evaluate the claim presented. It was also noted that the Plaintiffs had argued that the carrier’s Motion to Dismiss did not include any argument that the “delay was attributable to the need to investigate the further or even to simple negligence.”

Based upon the entire record before him, Judge Jones II of the Eastern District found that the Plaintiff had set forth a plausible bad faith claim that focused on an alleged lack of investigation and failure to communicate on the part of the carrier. The court also noted that it was wholly plausible that the carrier did not have a reasonable basis for denying the Plaintiffs’ claims based upon the information that was provided to the carrier by the Plaintiff.

The court additionally stated that, “viewing the time lapse in conjunction with the lack of an independent medical evaluation by Defendant, it is plausible that Defendant knew of, or recklessly disregarded, its lack of a reasonable basis for denying Plaintiffs’ benefits of the policy.”

In the end, the court also disagreed with the defense argument that the matter before him was merely a disagreement over a fair evaluation of the case presented. Rather, the court found that, under the standard of review which required the court to assume the truth of the Plaintiffs’ factual allegations, the allegations were found to have set out a plausible Complaint that the carrier had made an unreasonably low offer, or no offer, which potentially constituted bad faith conduct under Pennsylvania law.

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 be sure to check out Attorney Applebaum’s excellent Pennsylvania and New Jersey Insurance Bad Faith Case Law blog.   

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