Case Bulletin – Federal District Court Addresses Improper Allegations in Insurance Bad Faith Case in Recent Decision
On January 27, 2017, the United States District Court for the Middle District of Pennsylvania held that references of fiduciary duties owed to an insured by an insurance company must be stricken from plaintiff’s Complaint alleging claims of bad faith. In Meyers v. Protective Insurance Company, the Plaintiff husband was injured in a hit-and-run vehicle accident. Two years later, the Plaintiffs had not identified the driver and provided the Defendant insurance company with a demand package alerting the Defendant of their intent to bring an uninsured motorist claim. Three months passed, and the Defendant responded to the demand with an offer to settle the claim. The Plaintiffs refused the settlement offer stating that the offer was too low and negotiations continued.
Meanwhile, the Defendant retained the services of an attorney to represent its interest. The attorney requested additional time to review the claim and requested that the Plaintiff husband undergo medical evaluations. The Plaintiffs subsequently filed a complaint alleging breach of contract, common law bad faith, statutory bad faith, and loss of consortium. Amongst the many allegations included in the complaint, the Plaintiffs alleged that the Defendant failed to timely pay and review their uninsured motorist claim, the Defendant failed to communicate with Plaintiffs about the status of the claim, and the Defendant failed to fulfill its fiduciary duty to the insured. In response to the Complaint, the Defendant moved to dismiss all claims of “fiduciary duty” and all claims of bad faith from the complaint.
The complaint stated that the Defendant “acted in a “fiduciary capacity,” “owed Plaintiffs a fiduciary duty,” and “failed to fulfill its fiduciary responsibility.” However, the Complaint did not state a count for “breach of fiduciary duty.” It only stated causes of action for breach of contract and bad faith. The court reasoned that, under Pennsylvania law, it is well established that an insurer does not owe an insured a fiduciary duty in the context of uninsured/underinsured motorist benefits. As a result, the court found that the claims of fiduciary duties were not only unnecessary for the Plaintiffs to pursue their rights, but also were an incorrect reflection of the law, which only allows the Plaintiffs to bring a claim for breach of duty of good faith and fair dealing. Therefore, the court held that all references to fiduciary duty in a complaint alleging breach of contract and bad faith were superfluous and confusing. The court ordered that they be stricken from the Complaint.
Additionally, the Defendant asserted that the Plaintiffs’ causes of action that state that the Defendant failed to comply with the duties of good faith and fair dealings should be dismissed for failing to state a claim. In their complaint, the Plaintiffs argued that the Defendant failed to communicate and ignored communications regarding their claim, failed to objectively and fairly evaluate the Plaintiffs claim, and offered settlements that were facially unreasonable. The court analyzed each of these claims and found that the Defendant’s actions did not constitute bad faith.
First, the court found that although the Defendant did not immediately respond to the Plaintiffs’ communication, lack of an immediate response is consistent with reality—not bad faith. The court ultimately could not find precedent that an insurance claim investigation lasting three and a half months constituted an unreasonable delay. Next, the court found that there was no evidence that the Defendant failed to objectively and fairly evaluate the Plaintiffs’ claims or that the settlement offer was inadequate to the point to constitute bad faith. It held, “negotiating by offering a figure at the low end of the settlement range does not constitute bad faith, particularly when the valuation of the injures and damages of a claim is difficult.” Additionally, the court stated that the Plaintiffs’ own opinions about the value of his claim is not an objective measure of it. As a result, the insurance company may investigate the claim, including requiring independent medical evaluations, to learn more knowledge of vague aspects of the Plaintiffs claim to better protect its interests. The court ultimately found that the Plaintiffs’ claims of bad faith were mere legal conclusions, which were unsupported by facts throughout the Plaintiffs’ complaint. As a result, it dismissed all claims of bad faith from the Plaintiffs’ complaint.