Pennsylvania Reaffirms Standard in Bad Faith Claims

Unfair Insurance Practices Act (“UIPA”), 40 P.S. § 1171.2, was enacted to define and prohibit practices in Pennsylvania that constitute unfair or deceptive acts for the insurance business.  Formerly, Pennsylvania courts looked to UIPA terms for guidance on determining whether an insurer acted in bad faith because Pennsylvania’s bad faith statute, 42 Pa.C.S. § 8371, failed to provide a standard.

In 1994, the court in Terletsky v. Prudential Property & Casualty Co established the test for determining bad faith in Pennsylvania.  Under Terletsky, “an insured seeking to establish bad faith must prove: (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 in denying the claim.” Therefore, bad faith in Pennsylvania is measured by the Terletsky standard.

In Moore v. State Farm Fire Casualty Co., the plaintiff alleged that a violation of the UIPA was evidence of insurer bad faith.  The insurer moved to dismiss the bad faith claim based on a violation of the UIPA.  The court, held that a violation of the UIPA is neither per se evidence of bad faith, nor was the plaintiff prevented from using the violation as evidence of bad faith.

The court clarified that the question relevant to a bad faith determination is “whether the particular conduct (that may or may not violate the UIPA) is relevant to show that the insurer lacked a good faith basis for denying benefits or recklessly disregarded that fact.”

The takeaway is that analyzing a bad faith claim, a violation of the UIPA can be evidence of bad faith, but does not automatically constitute bad faith.

Thanks to Coleen Hill for her contribution to this post.

Contracts 101 Lesson of the Day – “Sign the Contract”

In Bair v. Manor Care et al., 2015 WL 178258, Ms. Bair, Executrix of her mother’s estate, commenced a wrongful death and survival action against Manor Care, a nursing home, alleging that neglect and abuse of her mother at the facility lead to her death.

Manor Care sought to have the case referred to arbitration pursuant to the terms of an arbitration agreement executed by Ms. Bair. The Superior Court found that no such agreement to arbitrate existed, as there was nothing to demonstrate mutual assent between the parties.

The arbitration agreement form, supplied by Manor Care, contained language that expressly required the signatures of both parties. Ms. Bair signed on the line indicated for the “Patient’s Legal Representative,” but both the signature lines for the “Center” and the date were conspicuously blank. Moreover, the arbitration brochure, which the arbitration agreement specified was part of the agreement and thereto attached, was not actually attached.

Despite arguments that, “lack of signature by the facility representative does not render the agreement unenforceable,” the Court maintained that the signature of one party is insufficient to bind both parties, when a signature for each of the parties is expressly required. Further, the Court found that not only was the signature missing but so too were other essential elements of the contract.

Lesson of the day: If you have an agreement that you intend to bind another party, make sure you sign it yourself.  Thanks to Tiffany Davis for her contribution to this post.

Need to Show “Justifiable Reliance” in UTPCPL Case Defeats Class Action

Before a class action lawsuit can be pursued in Pennsylvania, plaintiffs must obtain an order from the court certifying the suit as a class action lawsuit.  In assessing whether to certify, the court must determine whether a class action lawsuit is a fair and efficient method for dealing with the controversy. A recent decision from the Superior Court of Pennsylvania demonstrates that this determination can hinge on the difference between common questions of fact and law and those questions specific to each individual plaintiff.

Connie Kern was rushed to the Lehigh Valley Hospital ER after suffering injuries at an amusement part. Pursuant to the hospital’s policy, Kern signed an authorization for treatment upon arriving at the hospital. However, according to Kern, based on the payment guarantee paragraph of the authorization for treatment document, Kern was not informed of the price he would pay for services versus the price charged to patients with private or government insurance. Kern alleged that the hospital concealed that uninsured patients, like himself, would be billed according to a “Chargemaster” list, which cannot be obtained by patients.

After being released from the hospital, Kern received a $14,626.53 bill from Lehigh Valley Hospital. Kern neglected to pay his bill. Instead, Kern filed an original complaint against the hospital alleging, inter alia, violations of the Pennsylvania Unfair Trade Practices and Consumer Protection Law (UTPCPL).  Kern then moved for class action certification for other similarly situated patients. After hearing extensive arguments from Kern and the Lehigh Valley Hospital, the trial court denied the motion for class certification. The court held that Kern failed to establish that his claims presented questions of law or fact common to the class. Instead, the court determined that the prevailing issue in the case would be each class member’s individual justifiable reliance on the hospital’s representations.

On appeal, the Superior Court affirmed the trial court  – Kern failed to demonstrate that “he and all prospective class members justifiably relied on [the hospitals]’s alleged violations of the UTPCPL and, as a result of those alleged violations, suffered an ascertainable loss.” As such, Kern’s individual reliance was the major issue in the case, and denial of class certification was proper.

Moving forward, plaintiffs and potential members of class actions suits need to carefully consider all of the elements they need to successfully prove in order to assert their cause of action. If the elements of their claim require proof individualized to each potential plaintiff, a class action suit will probably be out of reach.  Thanks to Erica Woebse for her contribution to this post.  Please email Brian Gibbons with any questions.

PA Court Upholds “Just Plain Wrong” Auto Decision

The Pennsylvania Superior Court upheld a key decision regarding limited tort auto policies, despite referring to that same decision as “just plain wrong.” In Varner-Mort v. Kapfhammer, the plaintiff, Donna Varner-Mort was in a car accident on May 6, 2009 and waited until June 27, 2011 to file a complaint against defendant, Bridget Kapfhammer. Varner-Mort’s auto insurance policy was for limited tort, meaning that Varner-Mort could not recover for the non-economic damages such as pain and suffering without establishing a “serious injury.”

According to Pennsylvania law, a serious injury is “a personal injury resulting in death, serious impairment of body function or permanent serious disfigurement.” 75 Pa.C.S. § 1702. In Varner-Mort’s pleadings, she alleged that she did not realize her injury qualified as a serious injury until she had her first MRI on August 13, 2009, a date within the statute of limitations. Kapfhammer brought a motion for summary judgment, which the trial court granted, saying that Varner-Mort was on notice of the injury.

Ultimately, the Superior Court overturned the trial court’s decision, ruling that the precedent from Walls v. Scheckler must be followed despite being “just plain wrong.” 700 A.2d 532, 533. In Walls, the plaintiff held a limited tort policy and at the time of her car accident, appeared to have only minor bruises on her face and jaw. Only later did the plaintiff lose the normal use of her jaw. The Walls court ruled that the statute of limitations in this instance began to toll at the time she realized the severity of her jaw injury. The Superior Court upheld this precedent, overturning the motion for summary judgment.

Thanks to Thalia Staikos for her contribution to this post.  Please write to Mike Bono for more information.

Icy Injuries

In Heichel v. Smith, the plaintiff claimed she slipped on ice and fell on the defendant’s parking lot resulting in various injuries.  Following discovery, the defendant moved for summary judgment arguing that the plaintiff had failed to establish that her fall had been caused by icy conditions in the defendant’s parking lot.  The defendant argued that the plaintiff had only produced evidence of the parking lot’s general slippery conditions.  However, the plaintiff failed to produce evidence that ice had accumulated in the specific area in which she fell.  In fact, the plaintiff’s expert report only discussed the general slippery conditions of the parking lot and not the conditions of the area which the plaintiff allegedly fell.  Further, there was no testimony or evidence giving rise to the inference that the slippery conditions in the parking lot had even been caused by the defendant’s negligence.

In response, the plaintiff countered that summary judgment was not appropriate, as the court had failed to properly apply the hills and ridges doctrine.  Under this doctrine, in order for a plaintiff to recover, the plaintiff must show that the ridges or elevations, and not just generally slippery conditions, were the cause the plaintiff’s fall.  The plaintiff contended that there had been sufficient evidence to establish that the defendant’s actions had created a dangerous man-made condition that substantially increased the plaintiff’s risk of injury.

The court disagreed.  Applying basic negligence standards, the court reasoned that there was a lack of evidence showing that the plaintiff’s fall was caused by conditions in the parking lot.  Further, the court noted that, under Pennsylvania law, a party cannot be held liable for general slippery conditions.  In order for liability to attach, a plaintiff would need to adduce evidence demonstrating a party’s negligence.  In this instant matter, summary judgment was properly granted, as there was no evidence to support a finding that the defendant’s negligence caused the plaintiff’s fall.

Thus, this case demonstrates, evidence of general slippery / poor weather conditions, on the day of an accident, will often times be insufficient for a plaintiff to prevail in a slip and fall. Moreover, a lack of evidence regarding the conditions in the specific area which a plaintiff alleges to have fallen may provide a viable basis for a summary judgment motion.

Thanks to Colleen Hayes for her contribution to this post.




Causing a Stink for the Jury: Does Animal Waste Fall Under an Insurance Policy’s Domestic Animal Exclusion?

A Lawrence County Judge has ruled that a jury should make determinations about whether feces and urine, causing nearly $60,000 in damage to a rental property, fall under an insurance policy’s domestic animal exclusion.

David and Marcia Fleeger, held an “all risk” insurance policy from USAA specifically excluding damage caused by a domestic animal. Plaintiffs rented a New Castle, PA property to renters who had a large Doberman Pinscher. Upon the renters’ departure in 2010, plaintiffs discovered urine and feces on the floors, wall, stairs, and heating ducts, causing damages amounting to more than $59,000.

Plaintiffs made a claim for damage caused by animals under their policy; however, USAA contended that the damage was not covered. The plaintiffs later changed their claim to include damage due to vandalism. Upon the USAA’s challenge to the claims, plaintiffs sued, alleging breach of contract, bad faith, and Unfair Trade Practices and Consumer Protection law violations. USAA argued that the insurance policy was void because the plaintiffs had altered and misrepresented their initial claims, and noted that on several occasions Fleeger told the carrier that he believed the dog was confined in the residence while the renters were at work and that the renters knew the damage was happening. A representative for the carrier also testified that the lease between plaintiffs and the renters did not allow a dog in the residence.

The Fleegers argued that questions existed as to the origin of the waste and whether allowing the dog to intentionally cause waste in the property constituted vandalism. Plaintiffs further alleged that based on the doctrine of spoliation, the defendants had a duty to test the waste in order to determine its origin and failed to show that the damage fit the domestic animal exclusion.

The judge ruled that questions of fact existed not only as to the origin of the waste and the renter’s intentions, but also whether the Fleegers misrepresented material facts in the case. Because the court was not presented with any proof to conclusively determine that a dog caused the damage, and there is conflicting evidence concerning whether the plaintiffs misrepresented a material fact, the judge determined that the decision should ultimately be left up to the jury.

Thanks to Chelsea Rendelman for her contribution to this post.

PA Products Liability Law Still Unsettled

As we have previously reported, in Tincher v. Omega Flex, Inc., the Pennsylvania Supreme Court recently overruled the overbearing Azzarello standard that imposed absolute strict liability on manufacturers regardless of reasonableness and foreseeability while affirming the Second Restatement’s place in Pennsylvania common law. By overruling Azzarello and its progeny, the Tincher decision created a void in Pennsylvania product liability case law that will only be filled by the cases to come.

In Cancelleri v. Ford Motor Co., the Lackawanna County Court of Common Pleas is the first trial level court to apply the Tincher decision. The underlying matter was a crashworthiness case that resulted in a $5.9 million verdict for Cancelleri. The jury found that an airbag was defectively designed and did not deploy in Cancelleri’s crash. Ford filed a post-trial motion requesting a judgment notwithstanding the verdict, or in the alternative, a new trial and argued that the court erred by giving jury instructions that included language from the recently overruled Azzarello and precluded industry standards evidence from the Third Restatement.

Judge Gibbons held that the jury instructions were based on design defect standards from Gaudio, a case which has not been overruled, and not Azzarello. Accordingly, Ford was not prejudiced by the instructions. With respect to Ford’s argument that Tincher implies it is wrong to exclude evidence of industry standards found in the Third Restatement, Judge Gibbons held that Tincher declined to adopt the Third Restatement, and accordingly, it is proper to utilize the Second Restatement for industry standards evidence.

Ford already has plans to appeal the decision. While Tincher certainly scaled back the strict liability imposed on manufacturers, it also created a great deal of ambiguity with respect to the proper standards courts are to utilize on a case-by-case basis. If the Ford appeal makes its way all the way up to the Pennsylvania Supreme Court, the Second Restatement v. Third Restatement issue could be revisited.

Thanks to Eric Clendening for his contribution.

For more information, contact Denise Fontana Ricci at


“Gist of Action” No Bar to Tort Action Against Insurer (PA)

The Pennsylvania Supreme Court recently examined the “gist of the action” doctrine in the case captioned Bruno v. Erie Ins. Co.  The “gist of the action” doctrine is used by Pennsylvania courts to differentiate between contract and tort actions, which essentially prohibits a party from bringing a tort action that is actually a breach of contract claim.  In this case, the Supreme Court had to consider the issue of whether a negligence claim brought against an insurer by its insureds was barred by the “gist of the action” doctrine.

In 2007, the Brunos purchased a homeowner’s insurance policy from Erie Insurance Company.  The policy required Erie to pay the Brunos up to $5,000 for property damage caused by mold.  Shortly after purchasing the policy, the Brunos began renovating their basement.  During the renovations, they discovered black mold behind the walls.  The Brunos contacted Erie, and Erie sent an adjustor and an engineer to investigate the mold.  Upon investigation, the adjustor and engineer told the Brunos that the black mold was “harmless” and to continue with the renovation.

By January 2008, the entire Bruno family began experiencing respiratory ailments.  Subsequently, the Brunos decided to have the black mold tested on their own.  The testing revealed that the mold was “toxic in nature and hazardous to human health.”  After learning of the results, the Brunos demanded that Erie pay the $5,000 under the policy, and payment was made in April 2008.  However, when Angela Bruno was diagnosed with throat and esophageal cancers attributed to exposure to black mold, the Brunos filed a complaint against Erie in August 2010 alleging negligence.

Erie filed preliminary objections on the basis of a demurrer, arguing that the Brunos’ negligence claims against Erie were barred by the “gist of the action” doctrine.  The crux of Erie’s argument was that an insurer does not owe a duty of care to its insureds in investigating and handling insurance claims; therefore, there can be no breach of a duty in tort.  Moreover, Erie asserted that the duties it owed to the Brunos arose out of the contract itself, thus, the proper cause of action is one for breach of contract.  The Brunos contended that their cause of action was not based on Erie’s breach of its contractual duties since the policy did not require Erie to determine the mold’s toxicity or to give advice regarding the continuation of renovations.  However, once Erie undertook to do so, the Brunos contend it did so negligently.   Thus, the action was predicated on the statements made by Erie’s adjustor and engineer about the harmlessness of the mold.  The trial court sustained Erie’s preliminary objections, and Superior Court affirmed, dismissing the Brunos’ negligence claims.

The Supreme Court, however, reversed and remanded the case.  To begin, the Supreme Court noted that “merely because a cause of action between two parties to a contract is based on the action of the defendant undertaken while performing his contractual duties, this fact, alone, does not automatically characterize the action as one for breach of contract.”  Rather, the proper inquiry is the nature of the duty.  Accordingly, actions that arise directly from contractual duty are contract causes of action and a breach of a “contracting party’s separate collateral duty to perform a contractual obligation with skill and diligence” are tort causes of action.

Upon application of the “gist of the action” doctrine to the facts of the present case, the Pennsylvania Supreme Court found that while Erie had contractual obligations to investigate for mold and to pay for property damage caused by the mold, the complaint does not allege that Erie failed to meet these obligations.  Conversely, the Brunos allege that while Erie was in the process of fulfilling these contractual obligations, Erie acted in a negligent manner.  Accordingly, the Supreme Court found that the  complaint alleges Erie breached a social duty, not a contractual duty, and, thus, the “gist of the action” doctrine did not bar the Brunos’ claims for negligence.

Thanks to Erin Connolly for her contribution.

For more information, contact Denise Fontana Ricci at


Pennsylvania Examines the Bounds of the Medical Treatment Hearsay Exception


When Officer Robert Barth was dispatched to the Brookhaven Swim Club on November 12, 2012, he found a man lying face down in a gravel parking lot. Officer Barth asked the surrounding crowd for information on the man (later identified as Joshua Anthony Belknap) and began to check vital signs. Two members of the crowd, who later identified themselves as Belknap’s friends, stated that they believed Belknap had overdosed on heroin. Officer Barth administered a sternum rub to Belknap’s chest as a means of resuscitation. When that failed, Officer Barth proceeded to look for identification in Belknap’s pockets. Officer Barth found a needle with an orange cap in Belknap’s right pocket. Belknap was subsequently arrested and charged with one count of possession of drug paraphernalia.

At trial, the prosecution used Officer Barth’s testimony to convict Belknap. Although Belknap’s counsel objected to Officer Barth’s testimony as hearsay (meaning an out-of-court statement offered in evidence to prove the truth of the matter asserted), the trial court judge overruled the objection. The trial court concluded that Officer Barth’s testimony was admissible under the medical treatment exception to the hearsay rule (Pa.R.E. 803(4)). This exception permits the admission of an out-of-court statement made for the purpose of obtaining medical treatment.

On appeal, Belknap argued that the medical treatment exception is limited to out-of-court statements made to physicians and nurses. He argued that the statements made to Officer Barth “had little impact on the course of action he took when he arrived on location.” Appellant’s Brief, 16.

However, the Superior Court of Pennsylvania disagreed. The court ruled that Officer Barth’s testimony fell squarely within the bounds of the exception. First, the statements determined how Office Barth would proceed with his resuscitation attempts. Officer Barth was a veteran police officer and was trained in the practice of resuscitating victims, including victims suffering from drug overdoses. The statements of Belknap’s friends were made for the sole purpose of obtaining medical treatment or diagnosis, as it required by the Pennsylvania Rules of Evidence.

Similarly, the statements were intrinsically reliable. The medical treatment exception to the hearsay rule is based in the fact that a declarant will be motivated to tell the truth when he knows his statements are being used for the purposes of medical diagnosis and treatment. In this case, Belknap’s friends were likely eager to provide Officer Barth with the information necessary to facilitate proper resuscitation protocol.

The court noted that nothing in the medical treatment exception language limited the exception to statements made to licensed medical professions, such as physicians or nurses. In fact, the court interpreted the exception broadly, stating that the exception also encompassed statements about causation.

Although the medical treatment hearsay exception is well-established in Pennsylvania case law, this recent opinion delineates its boundaries. Now, we know that the exception applies to: (1) statements made to parties other than physicians and nurses; and (2) statements made by a person other than the patient, himself.  Thanks to Erica Woebse for her contribution to this post, and please email Brian Gibbons with any questions.

PA Court Takes a Narrow View of Household Exclusion in Theft Case

Insurance practitioners know that courts often interpret the phrase “household members” in a way to find coverage for a party, particularly in an Uninsured Motorist context, but a Pennsylvania court recently took a narrow view in order to avoid the application of an exclusion.

In Ripley v. Brethren Mutual Ins. Co., a case venued in the Eastern District of Pennsylvania, Michael Ripley, along with two acquaintances, stole antiques with a value greater than $50,000 from his grandparents’ home while Ripley was living with them. Ripley’s grandparents filed a claim with their insurance company, Brethren Mutual Insurance Company who investigated the claim and learned that the Ripley had stolen the antiques. They subsequently denied coverage on the basis of the household exception, since the antiques were stolen by a member of the household.

Plaintiff brought suit, and the parties cross-moved for summary judgment. Plaintiffs demonstrated in their motion that Ripley paid for his room in the house with his own money, did not have access to all parts of the house and was not permitted to use his grandparents’ car. He also ate his own food separately from his grandparents. Finally, he was not permitted to bring visitors to the residence. Brethren Mutual failed to provide any information to contradict the plaintiffs’ assertions. and the court found that the policy exclusion did not apply.

Thanks to Thalia Staikos for her contribution to this post and please write to Mike Bono for more information.