Lori Miller Wins Summary Judgment in Bad Faith Case Despite Allegations of Improper Claims Handling, Misstatement of UIM Limits, and Technical Regulatory Violations

Plaintiff filed a combined UIM/Bad Faith case alleging the UIM claim representative intentionally misstated the UIM coverage, delayed processing the claim, insisted on a sworn statement under oath despite the fact that a deposition had been taken in the third party action, sought medical records that were already provided by plaintiff’s counsel and failed to comply with insurance regulations regarding periodic status updates to the insured.

The court first noted that insurers in UIM cases need to deal with the underlying tortfeasor claim, which in this case dragged on for a number of years. The insured did not place the insurer on notice of the UIM claim until nearly 5 years after the accident. The parties then engaged in an ongoing process to attempt to resolve the dispute after the UIM claim was filed. Importantly, although the claim representative originally misstated the amount of coverage, this was an understandable mistake and was corrected, resulting in only a short delay.

Additionally, there was nothing improper about seeking a sworn statement in light of the circumstances. For example, the medical information was incomplete and inconsistent. The court did not accept plaintiff’s argument that a sworn statement was unnecessary because the insured had already been deposed in the underlying claim. Although the court found that both parties engaged in missteps in exchanging medical information, the insurer was justified in seeking further medical information after having received deficient records.

The insured had originally demanded over double the UIM policy limits to settle, then agreed to settle for the policy limits, and finally agreed to settle for less than the policy limits. This was a factor in the UIM claim representative’s ability to evaluate the claim.

Plaintiff’s final argument involved alleged violations of Pennsylvania’s Unfair Claims Settlement Practices Act and the Unfair Insurance Practices Act, specifically concerning the regulatory requirement to provide 45 day updates on the status of insurance claims. The court recognized that a “violation of these insurance rules can be considered when examining a bad faith claim under §8371.” But the court also stated, “it is also clear beyond peradventure that a violation of the UIPA or the UCSP is not a per se violation of the bad faith standard.” Applying these principles, the court concluded: “This case aptly illustrates why technical violations of these state insurance regulations cannot be equated with bad faith. The record before us amply reveals active, extensive and on-going communications …. Our review of the substance of these multiple communications … reveals that even when the communications are viewed in a light most favorable to [the insured], these communications do not support a claim of bad faith shown by clear and convincing evidence.”

The court granted summary judgment stating “while both parties indulged in occasional missteps in the process of reviewing and litigating this claim, the essentially uncontested evidence does not meet the demanding, precise and exacting legal standards prescribed under Pennsylvania law for a bad faith insurance processing claim.” The court observed “it is not bad faith for an insurance company to ‘conduct a thorough investigation into a questionable claim.’” Insurers can be successful in defending against bad faith claims by showing that there were “red flags” warranting further investigation. Thus, “the mere passage of time does not define bad faith. Rather, an inference of bad faith only arises when time passes as part of a pattern of knowing or reckless delay in processing a meritorious insurance claim.” The court dismissed all bad faith counts against the insurer.

Please feel free to contact Lori Miller if you would like to learn more about the case or would like a copy of the opinion.