Legal Updates for Coverage and Bad Faith
Edited by Allison Krupp, Esq.
Supreme Court of Pennsylvania Grants Petition for Allowance of Appeal in Bad Faith Case
Rancosky v. Washington National Ins. Co., No. 124 WAL 2016 (Pa. Aug. 30, 2016)
In a per curiam order, the Supreme Court of Pennsylvania granted the Petition for Allowance of Appeal to decide the following issue:
Whether this Court should ratify the requirements of Terletsky v. Prudential Property & Casualty Insurance Co., 649 A.2d 680 (Pa. Super. 1994), appeal denied, 659 A.2d 560 (Pa. 1995), for establishing insurer bad faith under 42 Pa. C.S. 8371, and assuming the answer to be in the affirmative, whether the Superior Court erred in holding that Terletsky factor of a “motive of self-interest or ill-will” is merely a discretionary consideration rather than a mandatory prerequisite to proving bad faith?
The Supreme Court’s decision on this issue could greatly impact statutory bad faith claims throughout this state.
Allegations in Underlying Complaint Insufficient to Trigger Coverage
ACUITY v. Knisely & Sons, Inc., No. 3:15-76 (W.D. Pa. August 9, 2016)
At issue was whether coverage (and an ensuing duty to defend) had been triggered under a CGL policy in connection with an underlying breach of contract action. The insured was a subcontractor who had performed work on a boiler, which had been installed as part of a larger construction project at a municipal authority’s wastewater treatment facility. The municipal authority sued the general contractor, which then joined the insured-subcontractor as an additional defendant. The District Court found that the holding and rationale from the Kvaerner decision, regarding what constitutes an “occurrence,” controlled its analysis, noting that the issue in the underlying action was one of poor workmanship, and that there was no averment or suggestion that the insured’s faulty workmanship caused damage to any person or property other than the boiler itself. The court concluded that the allegations raised against the insured were not allegations of an “occurrence” as defined in the CGL policy.
Lack of Handwritten Date Does Not Invalidate UIM Waiver
Lieb v. Allstate Property and Casualty Ins. Co., No. 14-4788 (3d Circ. Jan. 6, 2016) (not precedential)
The plaintiffs had waived underinsured motorist (UIM) coverage at the inception of the policy and were later rear-ended by an underinsured driver. The plaintiffs filed suit against their insurer, Allstate, to provide UIM coverage on the ground that the waiver was invalid. The plaintiffs admitted that Ed Lieb had signed the waiver form but argued that, because he did not handwrite the date, it was invalid. After signing the form, Ed Lieb faxed the form to Allstate. The faxed form received by Allstate bore a machine-written legend at the top of the page, including a timestamp. The plaintiffs argued that the Pennsylvania Motor Vehicle Financial Responsibility Law (MVFRL) requires that the first named insured personally date the form. The Third Circuit Court affirmed the decision of the District Court dismissing the case. The court considered that the MVFRL provision mandates the precise language that must appear on a waiver and states that the form “must be signed by the first named insured and dated to be valid.” Allstate argued that this provision merely requires that the form be dated and that, because the fax included the date at the top of the form, it satisfied this requirement. The court agreed with Allstate and considered that the MVFRL does not say that the form must be “signed and dated by the first named insured to be valid.” Thus, the date printed by the fax machine met the requirements of the MVFRL.
Allegation of Delay, on Its Own, Does Not Constitute Bad Faith
Shaffer v. State Farm Mutual Auto. Ins. Co., No. 15-1196 (3d Cir. March 10, 2016) (not precedential)
The plaintiffs appealed the District Court’s granting of summary judgment in favor of State Farm with respect to their bad faith claim. The plaintiffs were insured by State Farm at the time of the subject motor vehicle accident, and their policy provided for stacked underinsured motorist (UIM) coverage. The plaintiffs settled the bodily injury liability claim with the tortfeasor following the accident and subsequently sought UIM benefits from State Farm. The plaintiff had been on disability prior to the accident, and State Farm, therefore, requested access to his complete medical records. State Farm determined that only a portion of the plaintiff’s medical treatment was due to the accident and the rest was due to his preexisting conditions. State Farm offered $10,000 to settle the case, which the plaintiffs refused. The plaintiffs then filed suit for breach of contract and statutory bad faith. State Farm moved for summary judgment on the bad faith claim, which was granted by the District Court. The breach of contract claim then proceeded to trial, and the jury awarded the plaintiffs $250,000. In reviewing the District Court’s ruling on the summary judgment motion, the Third Circuit Court considered that delay between a demand for benefits and an insurer’s determination of whether to pay is relevant; however, delay on its own does not necessarily constitute bad faith. State Farm explained the alleged delay, by pointing to the plaintiff’s extensive history of relevant medical ailments prior to the accident. The court found that the fact that State Farm’s settlement offer was lower than the jury’s verdict on the breach of contract claim “would not necessarily affect the reasonableness of State Farm’s reliance on the [medical] review in making that offer.” Thus, the District Court’s decision was affirmed.
No Duty to Defend Or Indemnify in Shooting Incident
Erie Insurance Exchange v. Moore, No. CR 2014 4931 (Washington Cnty. C.C.P. May 31, 2016)
In this declaratory judgment action, Erie sought a declaration that it does not have a duty to defend or indemnify Tracy Moore, Harold McCutcheon, III and the Estate of Harold McCutcheon, Jr. under a homeowners policy with respect to an underlying personal injury suit filed by Richard Carly that arose from a shooting. McCutcheon had killed his ex-wife, shot her boyfriend and then committed suicide. The boyfriend filed a personal injury action against the administrators of McCutcheon’s estate. McCutcheon’s insurer, Erie Insurance, filed a declaratory judgment action regarding whether there was coverage for the underlying personal injury suit. Erie cited to the portions of the policy excluding payments to others for bodily injury or personal injury “expected or intended by anyone we protect.” The boyfriend argued that Erie could not prove that McCutcheon intended to cause injury to him or that he acted knowing that such injury was substantially certain to result from his actions. He further argued that the gun accidentally discharged, and, therefore, the event is an occurrence under the policy. The court disagreed and found that the shooting could not be considered an accident under the policy and that McCutcheon’s state of mind was not dispositive. Thus, Erie did not owe a duty to defend or indemnify in the underlying suit.
Plaintiff’s Conclusory Averment That Insurer’s Settlement Offer Was Unreasonably Low Insufficient to Constitute Bad Faith
Gowton v. State Farm Fire and Casualty Co., No. 15-1164 (W.D. Pa. June 29, 2016)
This case arises from a fire loss to the plaintiff’s home and his subsequent breach of contract and bad faith suit against his insurer, State Farm. The plaintiff submitted an estimate of $293,911 for the replacement cost of the destroyed structure: $15,000 for damage to the home’s foundation; $90,000 in personal property loss; $11,443 for debris removal; and $9,536 for damage to trees and plants. Based on its own damages assessment, State Farm paid $112,694. The plaintiff filed suit, and State Farm filed a motion to dismiss. With respect to the breach of contract claim, the court granted the motion to dismiss on the basis that the policy’s one-year suit limitation clause applied and precluded the breach of contract claim. With respect to the bad faith claim, the court considered that the sole allegation against State Farm was that its conduct in refusing to pay the additional amounts due under the policy constituted bad faith. The court also considered that an insurer’s allegedly low but reasonable estimate of loss does not evidence bad faith. The plaintiff’s conclusory averment that State Farm’s offer was unreasonably low was insufficient to state a claim for bad faith. Thus, the bad faith claim was also dismissed; however, the plaintiff was permitted to amend his complaint with respect to the bad faith claim.
The material in this law alert has been prepared for our readers by Marshall Dennehey Warner Coleman & Goggin. It is solely intended to provide information on recent legal developments, and is not intended to provide legal advice for a specific situation or to create an attorney-client relationship. We welcome the opportunity to provide such legal assistance as you require on this and other subjects. To be removed from our list of subscribers who receive these complimentary Coverage and Bad Faith updates, please contact alkrupp@mdwcg.com. If however you continue to receive the alerts in error, please send a note to alkrupp@mdwcg.com.
ATTORNEY ADVERTISING pursuant to New York RPC 7.1
© 2016 Marshall Dennehey Warner Coleman & Goggin. All Rights Reserved.