"Threadbare" Facts Found Not To Support Insurance Bad Faith Claim

In the case of Diaz v. Progressive Advanced Ins. Co., No. 5:19-CV-06052-JDW (E.D. Pa. Feb. 21, 2020 Wolson, J.), the Eastern District Federal Court dismissed a first party property damage bad faith case under a finding that the Plaintiff did not state a valid cause of action based upon a pleading of  “threadbare” facts.

The court noted that the Plaintiff basically asserted in the Complaint that he had a policy with the carrier, that his car was damaged in a vandalism event, that he had submitted a proof of loss, that he had been truthful throughout the investigation, and that the carrier denied the claim. The court noted that these allegations did not establish any plausible claim of bad faith.

The court also confirmed that there is no common law bad faith cause of action in Pennsylvania for refusing to pay benefits or as to claims handling. It is noted that the Plaintiff did not oppose this part of the Motion to Dismiss. 

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

I send thanks to fellow blogger, Attorney Lee Applebaum of the Philadelphia law offices of Fineman Krekstein & Harris, for bringing this case to my attention. Attorney Applebaum is also the creator and writer of the excellent Pennsylvania and New Jersey Insurance Bad Faith Case Law Blog which can be viewed HERE.

Standards for Diminished Value of Car Following Accident

In the case of Huchenski v. Alexander, 2019 WL 631050 (C.P. Lacka. Co. Nov. 20, 2019 Nealon, J.), the Defendant filed a Motion for Summary Judgment in negligence action by a Plaintiff seeking to recover damages for property damage to a vehicle from an automobile accident.

The defense argued that the damages for the "diminished value” of the vehicle were “speculative and could not form a basis for recovery.”

The record reflected that the vehicle sustained $5,599.75 in property damage repairs that were paid by Defendant’s insurer.

The Plaintiff secured a post-repair appraisal indicating that although the average retail value of the vehicle was $21,125.00, and that the “current actual cash value” following the completion of the repairs was only $14,750.00.

Judge Nealon noted that, in cases involved claims of diminished value to vehicles or chattel, Pennsylvania has adopted the Restatement (Second) of Torts §928 which allows for the recovery of damages representing “the difference between the value of the chattel before the harm and the value after the harm with due allowance for any difference between the original value and the value after repairs.”

The Court noted that, for almost 100 years, Pennsylvania common law has recognized the diminished value of a vehicle following repairs as an appropriate measure of damages.

Therefore, based upon the evidence contained in the record, the Court ruled that the “diminished value” claim was not premised upon “impermissible speculation.”

As such, the Defendant's Motion for Summary Judgment was denied.

Anyone wishing to review this decision may click this LINK.

Judge Conner of Middle District Grants Bifurcation and Stay of Bad Faith Claims in Property Insurance Case

In the case of McFarland v. Harford Mut. Ins. Co., No. 1:18-cv-1664 (M.D. Pa. July 25, 2019 Conner, J.), the court addressed a Motion to Sever and Stay a bad faith claim in an insurance dispute over property damage caused by the collapse of a retaining wall. 

Judge Conner initially noted in his Opinion that Motions to Sever re governed by Federal Rule of Civil Procedure 21 and that Motions to Bifurcate are governed by Federal Rule of Civil Procedure 42(b).  

The court noted that, unlike bifurcation of claims under Rule 42(b), severance under Rule 21 creates independent action resulting in separate judgments.   The court otherwise noted that severance is appropriate when the claims are “discrete and separate,” that is, each claim is capable of resolution without effect on the other.  

Judge Christopher C. Conner
M.D. Pa.

Judge Conner noted that, while Motions to Sever and Motions to Bifurcate in the federal court are found under separate rules, both are typically decided by reviewing the same factors including the similarity of issues, the type of evidentiary proof required by the claims presented, issues of judicial economy, and whether either party will be unduly prejudice by a separation of the claims presented.  

In his ­Opinion, Judge Conner reviewed a number of state and federal court decisions addressing a Motion to Sever and Stay a bad faith claim from an underlying coverage action.  

In the end, the court in McFarland ruled that the issues in this case underlying the coverage dispute was deemed to be separate and distinct from those issues implicated by the bad faith claim.   The court noted that the breach of contracting for property insurance coverage involved straightforward issues such as causation, damages, and contract interpretation.  

In contrast, the court noted that bad faith claims deal with more “elusive concepts” like motive, internal claims handling practices, and whether the carrier knowingly or recklessly disregard a lack of a reasonable basis for the denial of coverage.  

The court also reaffirmed that a bad faith claim requires a higher evidentiary showing of clear and convincing evidence.  

After also considering other factors, including the interest of judicial economy, the court ruled  that, in addition to agreeing to bifurcate the bad faith claim, the court also ruled to stay discovery on that claim.   The court noted that discovery in the bad faith claim would be stayed until the breach of contract dispute was resolved.  

Judge Conner stated that he was “cognizant that [his] determination runs counter to certain district court decisions in this circuit denying severance or bifurcation of insurance breach of contract and bad faith claims.”  

Nevertheless, the court in McFarland noted that the decision in this regard to order separate discovery and/or trials lies within each court’s broad discretion and must be determined on a case-by-case basis.  

Anyone wishing to review a copy of the Opinion in this decision may click this LINK.  The companion Order can be viewed at this LINK.

I send thanks to Attorney Peter J. Speaker of the Harrisburg, Pennsylvania office of Thomas Thomas & Hafer, LLP for bringing this case to my attention. 

Motion to Dismiss Federal Court Breach of Contract and Bad Faith Claims Regarding Fire Loss Granted

In the case of Bloxham v. Allstate Insurance Company, No. 3:19-CV-0481 (M.D. Pa. May 2, 2019 Caputo, J.), the court granted a Motion to Dismiss in a property damage fire loss breach of contract bad faith claim against the carrier, but allowed the Plaintiff the right to file an Amended Complaint.  

According to the Opinion, this case involved a central issue of whether the insureds resided at a property when a fire loss occurred.  

Given this dispute, the carrier denied coverage after concluding that the insured did not reside at the property.    The carrier also pointed to certain alleged misrepresentations that were allegedly made by the insureds in connection with the claim.  

The insureds responded with a lawsuit for breach of contract and bad faith.  

In the Complaint, the Plaintiffs asserted that the property was in fact “occupied” at the time of the fire as the Plaintiffs were completing ongoing repairs and renovations to the dwelling when the loss occurred.

Judge Caputo agreed with the defense argument that, because “Plaintiffs allege not that they resided at the property, but only that they ‘occupied’ the property at the time of the loss as a result of ‘ongoing and continuous repairs and renovations to the dwelling’… that the Plaintiffs had failed to state a breach of contract claim.”  

With regards to the bad faith claims, the court found that the Plaintiff’s allegations in this regard were conclusory in that these allegations offered no facts supporting the sweeping legal allegations of bad faith.  

As noted, the Plaintiff was granted the right to amend their Complaint by the court.

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.  Attorney Applebaum is also the writer of the excellent Pennsylvania and New Jersey Insurance Bad Faith Case Law blog.  

Entrustment Clause of Property Damage Policy Upheld To Preclude Coverage For Acts of Vandalism To Rental Property

In the case of KA Together, Inc. v. Aspen Specialty Ins. Co., No. 18-CV-142 (E.D. Pa. Jan. 24, 2019 Slomsky, J.), the court granted a Defendant carrier’s Motion for Summary Judgment on a property damage insurance claim presented by the Plaintiff for water damages.  

According to the Opinion, the Plaintiff alleged claims for breach of contract and bad faith stemming from a Defendant’s denial of an insurance claim made by the Plaintiff for losses at the Plaintiff’s property.   The Plaintiff had filed the insurance claim for water damage caused by two (2) individuals who had been residing in a third floor apartment on the property.  

The Defendant carrier filed a Motion for Summary Judgment asserting that the Plaintiff’s claims were barred by the “entrustment exclusion” of the insurance policy at issue, which expressly excluded coverage for all losses resulting from dishonest or criminal acts by person to whom the Plaintiff entrusted the property.  

The Plaintiff opposed the Motion for Summary Judgment by arguing that the entrustment exclusion did not apply because the Plaintiff never entrusted the property to the two (2) individuals responsible for causing the water damages.  

By way of further background, the property at issue was a mixed commercial residential building.   There was a rental apartment of the third floor.   The carrier insured the property with a commercial property policy which, as noted, included an “entrustment exclusion” which allowed the carrier to deny coverage for any losses resulting from dishonest or criminal acts by the insureds or anyone to whom the insured entrusted the property for any purpose.  

According to the Opinion, at some point, the person who had signed a Lease for the third floor apartment had his girlfriend move into the apartment.  Thereafter, the tenant and his girlfriend were arrested on separate criminal charges and removed from the property.   

The manager of the property was then made aware that another person claimed that he had signed a sublease for the apartment with the girlfriend.   That person was told that the Lease Agreement with the girlfriend would not be accepted by the landowner as the girlfriend had no authority to sublease the property to that person.  

After that person was asked to leave the premises, the landowner received a phone call the day after the person vacated the premises from the business that operated in the same building at the first and second floor, claiming that there is water flowing and flooding down into the office and store.   

When the manager went to the property, he found that there were three (3) sources of running water with the drains purposefully blocked in the third floor apartment.   The manager called the police and filed an incident report.   Thereafter, the insurance claim was submitted to the carrier.  

The landowner believed that the damage was covered under the policy as an act of vandalism. However, as noted above, the carrier relied upon the entrustment exclusion to deny coverage.   

The court found that the entrustment exclusion was not ambiguous and must be enforced.   The court emphasized that the entrustment exclusion broadly applies to dishonest or criminal acts by “anyone to whom [the landowner] entrust[s] the property for any purpose.”   The court ruled that, under the plain meaning of the policy, the carrier is entitled to summary judgment under the exclusion at issue.  

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

There Can Be No Bad Faith Where Policy Was Properly Cancelled

In the case of Chad & Ashley, Inc. v. White Pine Ins. Co., No. 1110-CV-2016 (C.P. Lawrence Co. Dec. 19, 2018 Cox, J.), the court granted an insurance company’s Preliminary Objections seeking the dismissal of a Plaintiff’s claims for breach of contract and bad faith in a property damage case. 

According to the Opinion, the Plaintiff brought this action against the carrier for breach of contract and bad faith due to the carrier’s alleged failure to cover a total loss of the Plaintiff’s property.  

The court confirmed that the record before it established that the carrier had sent the Plaintiff a cancellation notice which confirmed an end date of the insurance policy that was approximately two (2) weeks prior to the date of the loss.  

Plaintiff’s counsel attempted to argue that the cancellation notice could be interpreted to instead provide the Plaintiff with a fifteen (15) day notice such that the policy would still be in effect slightly beyond the date of the loss.  

The court disagreed with the Plaintiff’s reading of the cancellation notice.   The court also noted that the insurance contract itself provided only for a ten (10) day period of notice.   As such, the court granted the Defendant’s Preliminary Objections and dismissed the breach of contract claim.

Relative to the bad faith claim, the court noted that, because the insurance contract was not in effect at the time of the loss, the Plaintiff was unable to show the first element of a bad faith claim, i.e., that the insurer did not have a reasonable basis to deny benefits under the policy.   As such, the bad faith claim was dismissed as well. 

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

 

Source:  “Digest of Recent Opinions.”  Pennsylvania Law Weekly (March 12, 2019).

Federal Court Rules That Trial Judges Should Use Common Sense in Evaluating Motions To Dismiss in Bad Faith Cases

In the case of 1009 Clinton Properties, LLC v. State Farm Fire & Cas. Co., No. 18-5286, 2019 WL 1023889 (E.D. Pa. March 4, 2019 Kenney, J.), the court issued a lengthy Opinion addressing a Motion to Dismiss an insured’s bad faith claim in a property damage loss case.  

Among the allegations was that the carrier allegedly falsely represented to the Plaintiff that the loss was not entitled covered under the policy, that the carrier failed to complete a prompt and thorough investigation of the claim before asserting that the claim was not covered, and that the carrier unreasonably withheld policy benefits without a reasonable factual explanation.  

Of note is the court’s analysis indicating that, in reviewing Motions to Dismiss standards under the Federal Rules of Civil Procedure, that the trial court’s “must do away with a robotic reading of Twombly and Iqbal and instead use its common sense when addressing whether a bad faith claim can survive a Motion to Dismiss.  When the Court applies its common sense in analyzing a bad faith claim, here, it becomes apparent that Plaintiff’s bad faith claims survives Defendant’s Motion to Dismiss.”   

After reviewing the steps required in analyzing a Motion to Dismiss along with the basis elements of a bad faith claim, the court ruled that the Motion to Dismiss should be denied under the facts presented in this matter. 

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

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

Berg v. Nationwide Decision Vacated and Reargument Granted by Superior Court

In an Order handed down yesterday (May 31, 2018), the Pennsylvania Superior Court vacated its previous decision in the case of Berg v. Nationwide and granted re-argument on the issues presented. 

The Superior Court's most recent decision prior to this one erased a $21 million dollar bad faith award in favor of the Plaintiff.  Now that decision has been erased.

To review the Tort Talk entry on the decision that was vacated, click HERE

Continuing updates will be provided on this case.

$21 Million Dollar Bad Faith Award Erased by Pennsylvania Superior Court (Update: Reargument Granted and Decision Vacated on May 31, 2018)

In its decision in the case of Berg v. Nationwide Mut. Ins. Co., Inc., No. 713 MDA 2015 (Pa. Super. April 9, 2018 Ott, Stabile, J.J., and Stevens, P.J.E.) (Op. by Stabile, J.) (dissenting Op. by Stevens, P.J.E.), the Pennsylvania Superior Court vacated a $21 million dollar judgment entered by a Berks County trial court judge and remanded the case for the entry of judgment in favor of the carrier in a property damage bad faith cause of action.  

As noted in the Opinion, this case has been up and down the appellate ladder over the past two decades.  This matter arose out of a property damage claim relative to the insured’s Jeep Grand Cherokee. 

According to the Opinion, this bad faith suit initially began with the filing of a Writ of Summons back in January of 1998, over twenty (20) years ago.  

The insured's Jeep Grand Cherokee was allegedly damaged in a motor vehicle accident as a result of which there were no personal injuries.  

The Plaintiffs’ causes of action against the carrier included breach of contract, negligence, fraud, conspiracy, violations of the Unfair Trade Practices and Consumer Protection Law (UTPCPL), and insurance bad faith.  

Back in 2004, the case proceeded to a jury trial and the jury entered a verdict in favor of the Defendants on all causes of action except the catch all provision of the UTPCPL.   The jury awarded the Plaintiff $1,925.00 in damages against one Defendant and $295.00 against the carrier Defendant for the UTPCPL violation.  

Thereafter, a second phase of the trial began in the form of a bench trial on the UTPCPL treble damages and bad faith.   That bench trial was in 2007 and resulted in a directed verdict in favor of the carrier.   That result was appealed and the case went to the Supreme Court before being remanded back to the trial court for another bad faith trial.  

The second bad faith bench trial took place in approximately June of 2014 before Judge Jeffrey K. Sprecher.   Judge Sprecher issued a verdict in favor of the Plaintiffs on their bad faith claim and ordered the carrier to pay $18 million in punitive damages and $3 million dollars in attorney’s fees.  

This bench trial verdict is the subject of the appeal in the above cited latest decision in the Berg case and, as stated, resulted in the Superior Court vacating that $21 million dollar bench trial verdict and entering judgment in favor of the carrier under the standard of review applicable to non-jury cases.  

In the Pennsylvania Superior Court’s detailed 61 page Opinion, the appellate court reviewed the current status of bad faith law in Pennsylvania and affirmed that clear and convincing evidence of bad faith conduct on the part of the carrier is required to support such a claim.  

The Berg court restated the basic law that “[I]n order to recover in a bad faith action, the Plaintiff must present clear and convincing evidence (1) that the insurer did not have a reasonable basis for denying benefits under the policy and (2) that the insurer knew or recklessness disregarded its lack of a reasonable basis.”  See Berg at p. 10 [citation omitted.].  

Here, the appellate court found many of the factual findings of the trial court were not supported by the record presented.  

In Berg, the basic issue raised by the Plaintiff was that the carrier allegedly acted in bad faith by repairing the Plaintiff’s Jeep rather than declaring the Jeep a total loss and compensating Plaintiffs for its value at the time of the loss.  The insured also asserted that faulty repairs were made to the Jeep and that the carrier should have been aware of such faulty repair work. 

The appellate court found that neither the Plaintiff nor the trial court had cited any legal authority supporting the conclusion that a carrier’s duty of good faith and fair dealing requires an inspection of repairs prior to returning a vehicle to an insured.  The court noted that, even if there were such a duty recognized under Pennsylvania law, the evidence in this case did not rise above a showing of negligence, and, therefore, the evidence did not support a finding of bad faith by clear and convincing evidence.  

Relative to the trial court’s findings of bad faith, the appellate court noted that it had the authority to reverse such findings when the trial court’s “critical factual findings are either unsupported by the record or do not rise to the level of bad faith.”  See Berg at p. 38 [citations omitted] .  

The Superior Court went on, at length, to describe the trial court’s findings as being devoid of merit at times and in reliance upon facts and opinions outside of the record at other times.  

The appellate court also faulted the trial court to the extent that the trial court based its findings of bad faith upon alleged discovery violations by the carrier during the course of the litigation.    The court noted that a trial court’s findings of bad faith based upon discovery violations amounted to a clear error.  See Berg at p. 48. 

The appellate court in Berg noted that, while it is true that a finding of bad faith under §8371 may be based upon an insurer’s conduct before, during, or after litigation, the courts of Pennsylvania have refused to recognize that a carrier’s discovery practices constitute grounds for a bad faith claim under §8371, absent the use of discovery to conduct an improper investigation.   Berg at p. 48-49 [citations omitted].  

 The Superior Court in Berg explained that §8371 is designed to provide a remedy for alleged bad faith conduct by a carrier in its capacity as an insurer for breach of its fiduciary duty to an insured by virtue of the parties’ insurance policy, and not as a legal adversary in a lawsuit filed against it by an insured.  Berg at p. 49.   The court went on to note that discovery violations are  to be separately governed under the exclusive provisions of the Pennsylvania Rules of Civil Procedure.   Id.  

The appellate court also rejected the trial’s findings of bad faith on the basis of allegations that the carrier allegedly hoped to overwhelm Plaintiffs with its superior resources and that the carrier had allegedly adopted a scorched earth policy towards this litigation.  Id. at 50.    The appellate court found that there was no basis in the record to support this finding by the trial court judge.   

The appellate court also found that the trial had incorrectly found that the carrier had engaged in bad faith on the basis of evidence of the extended length of this litigation.   In this regard, the Superior Court in Berg stated that “Plaintiffs had the right to prosecute their case zealously within the bounds of the law, just as [the carrier] had the right to defend itself if it believed its personnel did not act in bad faith.  We cannot arbitrarily impose a limit on the time and resources an insurer spends in defending a bad faith action.”   Berg at p. 52.  

As stated, in the end, the Superior Court in Berg vacated the judgment of the trial court primarily because of the appellate court’s finding that the record did not support many of the trial court’s critical findings of fact.   The Superior Court in Berg felt that it had no choice but to vacate the trial court’s judgment after an exhaustive review of the record before the appellate court. 

In concluding its Opinion, the majority in Berg disagreed with the dissenting judge’s assertion that the majority was improperly substituting its own findings for those of the trial court under the applicable standard of review.   The appellate court reiterated that the “trial court engaged in a limited and highly selective analysis of the facts and drew the most malignant possible inferences from the facts it chose to consider” all of which, in the eyes of the Superior Court supported a vacation of the verdict.   Berg at p. 60.  

Anyone wishing to review the Majority Opinion in Berg may click this LINK

The Dissenting Opinion can be viewed HERE.

UPDATE:  On May 31, 2018, the Pennsylvania Superior Court granted the Plaintiff's request for reargument and vacated this decision.

Judge Munley of Federal Middle District Grants Summary Judgment in Bad Faith Claim

In his recent decision in the case of Yatsonsky v. State Farm Fire & Cas. Ins. Co., 3:15-CV-1777 (M.D. Pa. Dec. 5, 2016 Munley, J.), Judge James M. Munley granted a carrier’s Motion for Summary Judgment in a bad faith claim.

In this matter, the Plaintiff claimed that the carrier acted in bad faith by assigning an inordinate number of representatives to handle her claim.  The insured additionally asserted that the carrier refused to timely pay the full value of the Plaintiff’s loss and instead only provided a number of estimates of payments over a seven (7) month period.  

Judge Munley indicated that “it is not bad faith to conduct a thorough investigation into a questionable claim.”  The court found that the Plaintiff in this matter failed to present any evidence that the management of the claim was anything other than attempt to further investigate the water damages allegedly sustained at the Plaintiff’s home in order to determine the value of the claim.  It was additionally indicated that no expert testimony was offered by the Plaintiff pertaining to the insurer’s investigation.  

The court also rejected the Plaintiff’s argument that multiple estimates issued in the claim demonstrated bad faith on the part of the carrier.   In so ruling, the court referenced appellate law for the proposition that “subsequent estimates assign(ing) at a higher value of the claim is not ‘clear and convincing’ evidence that the insurer acted in bad faith in arriving at its initial estimate."

 

Anyone wishing to review this case online may click this LINK.

 

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

 

 

POOR DOGGY: Judge Zulick Reviews Issues in Veterinary Malpractice Case

In his recent decision in the case of Purpura v. Bartin Heights Veterinary Hospital, _____ (C.P. Monroe April 30, 2015 Zulick, J), Judge Arthur Zulick of the Monroe County Court of Common Pleas addressed several issues raised by way of Preliminary Objections against a Plaintiff’s veterinary malpractice action.  

The case involved alleged  malpractice in the treatment of the Plaintiff’s dog.   The Plaintiff alleged that the veterinarian incorrectly diagnosed the dog’s condition and subjected the dog to surgeries that caused further harm.  

The court granted the Defendant’s Preliminary Objections to the Plaintiff’s demand for punitive damages.   Judge Zulick noted that the Plaintiff’s Complaint, which alleged negligence and negligence supervision in training, contained no allegations that the Defendants’ actions were intentional, reckless, or malicious.  As such, the court sustained this objection.  

In addition to addressing other issues, the court also sustained the Defendants’ objections to the Plaintiff’s claims relative to the dog’s alleged severe physical pain as a result of the alleged malpractice.   In so ruling, Judge Zulick noted that, under Pennsylvania law, dogs were considered personal property.  

Judge Arthur Zulick
Monroe County
 

Judge Zulick also noted that Pennsylvania case law held that, under no circumstances, could there be any recovery for a loss of companionship due to an animal’s death.  

The court also noted that claims for pain and suffering of an animal were not recognized under Pennsylvania law.

Accordingly, the court struck the claims relative to the dog’s alleged severe pain.  

Judge Zulick also sustained Defendants’ objections regarding Plaintiffs’ calculation for compensatory damages.  The court found that the Complaint was not sufficiently specific enough in this regard as the Plaintiff failed to set forth the alleged fair market value of the dog at the time of injury and/or to itemize the cost of the veterinary treatment to remedy the alleged injury caused by the alleged malpractice.  

Judge Zulick noted that, under Pennsylvania law, if the cost of that treatment, including future expenses, exceeded the dog’s fair market value, the law required that the damages would be limited to the fair market value of the dog.

Anyone wishing to review a copy of this decision may contact me at dancummins@comcast.net.