The Middle District of Pennsylvania recently dismissed a bad faith claim which lacked adequate factual support that an insurance company acted unreasonably in valuing an underinsured motorist claim. In Clarke v. Liberty Mutual Insurance Company and LM General Insurance Company, the Court granted an insurer’s Motion to Dismiss and dismissed the matter without prejudice once it found that the plaintiffs’ complaint did not state a plausible bad faith claim.
The lawsuit arose when the plaintiff, Angela Clarke, was injured in a motor vehicle accident with an underinsured motorist. Angela Clarke and her husband (“Plaintiffs”) settled their claim with the underinsured motorist for the policy limits of $15,000.00 and later sought out additional benefits from Liberty Mutual Insurance Company and LM General Insurance Company (“Defendants”). The Defendants refused to provide the additional benefits because they believed that the Plaintiffs’ claim was not worth more than the amount they already received from the initial settlement. As such, the Plaintiffs alleged that the Defendants breached the terms of their insurance agreement and acted in bad faith in violation of Pennsylvania law, 42 Pa. C.S.A. § 8371.
In response, Defendants moved to dismiss the bad faith claim, arguing that the Plaintiffs’ claims were devoid of any well-pled factual allegations of bad faith and that the complaint only pled a disagreement as to the value of their claim. In siding with the Defendants, the Court determined that the Plaintiffs failed to plead adequate factual mater to support the allegation that Defendants did not act reasonably in valuing the underinsured motorist claim. The Defendants Motion to Dismiss was granted without prejudice and the Plaintiffs were able a further amended complaint to set forth sufficient facts to state a plausible bad faith insurance claim.
In reaching its conclusion, the Court reviewed the standard for recovery in a bad faith action which requires a plaintiff 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 knew of or recklessly disregarded its lack of a reasonable basis.” Rancosky v. Washington Nat’l Ins. Co., 170 A.3d 364, 365 (Pa. 2017). In deciding whether an insurer has a reasonable basis for denying benefits, a court examines the factors the insurer considered in evaluating the claim. The Court explained that “[b]ad faith claims are fact specific and dependent on the conduct of the insurer vis á vis the insured.” The Court noted that, in this case, the Plaintiffs’ claim was simply that that the Defendants acted in bad faith without providing any factual support to establish that claim. Rather, the Court explained, the Plaintiffs would need to provide details as to how the Defendants allegedly acted unreasonably in valuing the claim. The Court also emphasized that, as a general matter, an insurer’s failure to immediately accede to a demand for the policy limit cannot, without more, amount to bad faith. Thus, the Court did not find that the Defendants violated § 8371 and granted their Motion to Dismiss.
Thanks to Zhanna Dubinsky for her contribution to this post. Please email Vito A. Pinto with any questions.