On September 11, 2016, Anita Das, a newly enrolled student at the University of Pennsylvania who had only recently moved into a new temporary apartment for the school year, was riding her bicycle in Philadelphia when she was struck by another motorist on the road.  Unfortunately, she suffered catastrophic injuries.  Although Ms. Das settled with the driver, the settlement was insufficient to cover the total loss she suffered in the accident.   Accordingly, Ms. Das turned to her parents’ automobile insurance policy, which contained underinsured motorist coverage and benefits for “resident relatives.”  After disclaiming UIM coverage to Ms. Das, Amica Mutual Insurance Company (“Amica”) commenced a Declaratory Judgment Action against Ms. Das and her parents (“Das”) in the United States District Court for the Eastern District of Pennsylvania.  Subsequently, Das filed an answer, which included counterclaims against Amica for three causes of action: (1) Ms. Das is entitled to UIM benefits as an insured “resident relative” under the Amica insurance policy; (2) breach of contract; and (3) Amica withheld benefits under the Amica insurance policy in bad faith.  Das also sough relief for punitive damages pursuant to Pennsylvania’s bad faith statute, 42 Pa. C.S. § 8371.

In response, Amica filed a motion to dismiss the bad faith claim for failure to allege sufficient factual allegations and the damages claim for failure to state a claim upon which relief can be granted.  Ultimately, for reasons addressed below, the Court granted Amica’s motion to dismiss for failure to state a claim and ordered Das to file a second amended counterclaim for bad faith and punitive damages (and held that if Das elected not to proceed, such claims would be dismissed with prejudice).

To support its decision, the Court in Amita Mut. Ins. Co.v. Anita Das, et al., applied long-standing principles of federal civil procedure in conjunction with the elements under Pennsylvania’s bad faith statute, which entitles insureds to recover punitive damages, interest, attorney’s fees, and court costs if the insurer is found to act in bad faith when investigating a claim.  In doing so, the Court determined that Das failed to allege any specific facts meeting the threshold to overcome a motion to dismiss.  First, the Court noted that Das simply recited the elements of a bad faith claim, instead of asserting “fact specific” allegations regarding Amica’s conduct in handling and evaluating Ms. Das’ claims for UIM benefits.  In this regard, Das’ failure to assert any factual averments relating to howAmica lacked a reasonable basis in its interpretation, administration, investigation, or delay of UIM benefits to Ms. Das or describing “who, what, where, when and how the alleged bad faith conduct occurred” was detrimental to Das defeating Amica’s motion.  Second, the Court emphasized that, since an insurer’s delay in settling a claim is a relevant factor in determining whether bad faith occurred, Das failure to detail any dates was also harmful.

This decision exposes a significant barrier for bringing bad faith claims in federal court under Pennsylvania substantive law.  It also illuminates a mechanism for insurers to combat such claims early in litigation.   Yet (and possibly most significant) it reminds us of the detail required when asserting claims, crossclaims, and counterclaims in federal court.

Thanks to Lauren Berenbaum for her contribution to this post. Please email Vito A. Pinto with any questions.