The Middle District of Pennsylvania recently ruled that an insurer did not act in bad faith in denying a claim to a woman who was injured while attempting to stop a robbery. In Brenda G. Smerdon and Rene L. Spaulding v. Geico Casualty Company, the Court granted in part and denied in part Geico’s Motion for Summary Judgment against the claims brought against it by Brenda G. Smerdon (“Smerdon”).

The lawsuit arose out of a robbery at Wal-Mart in Mansfield, Tioga County, Pennsylvania on April 30, 2016. The robber demanded cash from an employee and later fled the store towards his car, which was left running in the parking lot. Smerdon, along with five or six other individuals, chased the robber out of the Wal-Mart and into the parking lot in order to thwart the robbery. As the other individuals attempted to restrain the robber, Smerdon climbed into the passenger side of the car in order to retrieve the keys from the ignition. However, the robber was able to enter his vehicle and drive away, causing Smerdon to be run over by the vehicle’s rear tires in the process. Smerdon suffered serious injuries including a traumatic brain injury, skull fracture, right knee injuries, right thigh injuries, right ankle injuries, and left shoulder injuries.

At the time of the incident, Smerdon was insured by an auto insurance policy with Geico that contained an uninsured motorist amendment. Under this amendment, Geico is required to pay damages that Smerdon would be “legally entitled to recover” from the operator of an uninsured motor vehicle. However, when Smerdon made her claim, Geico determined that it was not required to indemnify her under the uninsured motorist policy which stated that she is not legally entitled to recover damages because she voluntarily assumed the risk of her injuries.

As a result of Geico’s denial, Smerdon filed this lawsuit claiming bad faith and breach of contract on the part of the insurer. In response, Geico raised an assumption of the risk defense. Thereafter, both parties filed cross-motions for partial summary judgment.

As to the assumption of the risk defense, Geico argued that Smerdon voluntarily assumed the risk of her injury and was, therefore, not entitled to a recovery. In Pennsylvania, an assumption of the risk defense requires that a party was subjectively aware of a specific risk, voluntarily accepted it, and later acted in spite of that risk, suffering the harm contemplated by that very risk. The Court focused on the requirement of knowledge of a specific risk, rather than a party who is only generally aware that a contemplated action had accompanying risk. In so doing, the Court determined that a reasonable jury could not find that Geico met that burden and dismissed its assumption of the risk defense. Instead, the Court stated that “[t]o the extent Geico questions the reasonableness of Ms. Smerdon’s actions, that is an inquiry resolved through comparative negligence principles, not assumption of the risk.”

Next, the Court turned to the issue of whether Geico acted in bad faith upon denying Smerdon’s claim based on the assumption of the risk defense. Under Pennsylvania law, a plaintiff is required to “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 know of or recklessly disregarded its lack of a reasonable basis.” Ultimately, the Court determined that Geico had a reasonable basis to question coverage as assumption of the risk is a valid defense in Pennsylvania. Additionally, the Court went on to state that the presence or absence of bad faith did not turn on the legal correctness of the basis for an insurer’s denial of an insured’s claim. Put simply, bad legal judgment did not amount to bad faith and the Court denied Smerdon’s claim.

Thanks to Zhanna Dubinsky for her contribution to this post. Please email Vito A. Pinto by email with any questions.