Monday, May 22, 2023

Federal Court Addresses Collateral Estoppel Issues In UIM Case Where Plaintiff Secured Less Than Liability Limits At Third Party Arbitration

In the case of Holland v. Progressive Spec. Ins. Co., No. 23-0910-KSM (E.D. Pa. April 10, 2023 Marston, J.), the court granted in part and denied in part a Defendant carrier’s Motion to Dismiss portions of a Plaintiff’s bad faith claim in a UIM case.

The court denied the Motion to Dismiss the Plaintiff’s breach of contract action.

According to the Opinion, the carrier moved to dismiss the Complaint which was based upon the carrier’s denial of the Plaintiff’s UIM claim.

In this matter, the Plaintiff had previously arbitrated his claims against the tortfeasor and secured an Arbitration Award.

The Plaintiff then signed a Release in which the Plantiff released all of his claims against the tortfeasor, the tortfeasor’s insurance company and “any other person, firm, or corporation” chargeable with responsibility for the accident.

The Plaintiff had included a handwritten clause on the Release reserving his right to bring a UM/UIM claim against his own insurance carrier.

The Plaintiff had additionally sent a request to his own insurance carrier for consent to settle before he signs the Release.

The UIM carrier also noted the arbitrator had found that the Plaintiff’s damages did not exceed the tortfeasor credit and, as such, the UIM carrier denied the claim presented.  More specifically, in the third party arbitration the Plaintiff had been awarded $58,029.85 in a case where the tortfeasor had $100,000 in liability coverage.

The Plaintiff sued the UIM carrier in state court for breach of contract and bad faith. The carrier removed the action to the federal court.

In its Motion to Dismiss the carrier primarily argued that the Plaintiff’s breach of contract claim was barred by collateral estoppel. The carrier also noted that the Plaintiff failed to allege sufficient facts to support a bad faith claim.

Relative to the bad faith claim, the court found that the Plaintiff’s Complaint consisted of conclusory statements unsupported by facts. There were no details provided describing what was allegedly unfair about the UIM carrier’s settlement negotiations and the Complaint also failed to explain what alleged misrepresentation the UIM carrier may have made.

In its decision, the court noted that, relative to the bad faith claim, the UIM carrier’s argument that the other driver was not driving an underinsured motor vehicle was reasonable and was supported by the case law and the facts and circumstances of this case.

The court also found that the Plaintiff did not allege any fact to suggest that the UIM carrier denied the Plaintiff’s claim with “ill will” or under a “dishonest purpose.” It was also noted that the Plaintiff did not assert that the UIM carrier’s decision to deny coverage was made with undue delay.

Relative to the breach of contract action and the argument that the same was barred by the collateral estoppel doctrine, the federal court found that it needed additional information as to the scope of the Arbitration in order to determine if the carrier had satisfied its burden of establishing that the doctrine of collateral estoppel applied. In this regard, it was indicated that neither party to the action had submitted to the court a copy of the Arbitration Agreement, the Arbitration record, or the Arbitrator’s findings. As such, the Motion to Dismiss the breach of contract action was denied.

Anyone wishing to review a copy of this decision may click this LINK.  The Court's Order can be viewed HERE.

Source: “Digest of Recent Opinions.” Pennsylvania Law Weekly (April 27, 2023).

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