Incorrect but Not Unreasonable: Defeating Bad Faith in Pennsylvania

When a court finds insurance policy language to be ambiguous, it may deny an insurer’s motion for summary judgment, or find in favor of coverage.  Does that mean that the insurer who got it wrong acted in “bad faith”?  Apparently not.

In Gray v. Allstate Indemnity Co., the insurer denied coverage to an insured for a fire loss claim caused by vandalism and moved for summary judgment on both the insured’s breach of contract and bad faith claims.  The policy in question excluded coverage if the property had been vacant or unoccupied for a certain period of time prior to the vandalism causing the fire damage.  Holding that the terms “vacant” and “unoccupied” were ambiguous and facts surrounding these conditions in the case were disputed, the court denied summary judgment on the breach of contract claim.

With regard to the bad faith claim, the insured argued that the insurer purposely drafted an ambiguous contract so that the ambiguous language could be used to deny future coverage. The court rejected this argument because both the insurer’s factual basis for denying coverage and interpretation of the policy were determined to be reasonable.

While the court ruled against the insurer’s interpretation of the terms for the breach of contract claim, the way the insurer construed the terms was still a reasonable view. Thus, the court held that “[b]ad faith cannot be found where the insurer’s conduct is in accordance with a reasonable but incorrect interpretation of the insurance policy.” As such, summary judgment was granted to the insurer as to the bad faith claim.

Based on this case, it would appear that a reasonable basis for denial of coverage in Pennsylvania is sufficient to defeat a bad faith claim.

Thanks to Coleen Hill for her contribution to this post.

 

“I Did Not Inhale” – Failed Drug Test Ruled Inadmissible Despite Lying about Marijuana Use

Pennsylvania Rule of Evidence 401 provides that evidence is only admissible at trial if it has the tendency to make a fact more or less probable than it would be without the evidence, and the fact is of consequence to the action at hand. Pennsylvania Rule of Evidence 403 provides that a court may still exclude relevant evidence if its probative value is outweighed by the danger of unfair prejudice. The interplay between these two rules often determines whether a court will grant a party’s motion in limine prior to trial to exclude seemingly relevant evidence.

In Detrick v. Burrus, a case in the Court of Common Pleas of Lackawanna County, the plaintiff and defendant were involved a motor vehicle accident on August 10, 2009. Seven months later on March 10, 2010, plaintiff had an initial visit with Dr. Karazim-Horchos who asked about use of marijuana and other drugs in connection with his consideration of medication to prescribe. The plaintiff denied any such use.  On July 27, 2010, Dr. Karazim-Horchos ordered a drug test which had positive results for marijuana, opiates, and benzodiazepine. At plaintiff’s deposition on August 17, 2011, she again denied the use of marijuana following her accident.

The plaintiff sought a motion in limine to preclude evidence of the positive urine drug test, citing Pennsylvania Rules of Evidence 401 and 403. The defendant countered that the evidence was relevant and could be used to impeach her credibility since she twice lied about marijuana use as a form of treatment following the accident. Further, the defendant noted that her own medical provider had ordered a drug test because of serious concern that may be Detrick self-medicating with marijuana to treat her injuries.

The court granted plaintiff’s motion in limine to preclude evidence of the failed drug test. First, the court relied on the fact that a witness may not be impeached on a “collateral” matter if the evidence does not have an independent basis for being admissible. Here, the failed drug test has no independent basis for admissibility absent the proposed impeachment. Second, the court held that the failed drug test’s probative value was outweighed by the danger of unfair prejudice, and therefore, excluded under Rule 403. The failed drug test occurred more than 11 months after the accident. Overall, the court believed that the plaintiff’s use of drugs did not directly bear on her character for truthfulness.

Thanks to Eric Clendening for his contribution.

For more information, contact Denise Fontana Ricci at dricci@wcmlaw.com.

 

Plain Language of Policy Trumps Reasonable Expectation Doctrine (PA)

On September 16, 2011, Tanesha Carter was injured when Marvin Edmonds crashed into the car Carter was driving.  Marvin Edmonds’ motor vehicle insurance policy was insufficient to cover Carter’s damages, and so Carter elected to use underinsured motorist (UIM) coverage from an automobile insurance policy with Peerless Indemnity Insurance Company.

However, as discovery began, it became clear that Carter did not own the vehicle involved in the accident but rather, was a passenger in a third party’s vehicle at the time of the accident. In addition, the Peerless policy under which Carter sought UIM coverage did not belong to Carter. Instead, it belonged to Carter’s mother and her mother’s husband.

In light of this new information, Peerless filed a motion for summary judgment. Although Peerless admitted that Carter was a listed as a “driver” on her mother’s policy, Peerless argued that the policy only provided coverage to resident family members. Peerless asserted that Carter could not prove she lived with her mother at the time of the accident. As such, Peerless concluded that Carter was not entitled to UIM coverage.

Carter countered by arguing that she was protected by the reasonable belief doctrine. She reasonably believed that coverage would be extended to her as a listed driver on the policy and, therefore, she would be entitled to coverage.  However, the trial court concluded the reasonable expectation doctrine did not apply because Carter could not prove she constituted an “insured” as the term was utilized in the clear and unambiguous language of the policy.

On appeal, the Superior Court agreed with the trial court, finding that “[a]n insured may not complain that his or her reasonable expectations were frustrated by policy provisions and limitations which are clear and unambiguous.” See Pempkowski v. State Farm Mut. Auto Ins. Co., 678 A.2d 398, 401 (Pa. Super. 1996).  As such, the Court affirmed the trial court’s ruling.

In sum, in interpreting insurance contracts and predicting the outcome of insurance litigation, we rely heavily on the idea that insurance contracts are contracts of adhesion and as such, any ambiguities must comport with the insured’s reasonable expectations of coverage. However, this case is an important reminder that summary judgment is still appropriate – even with an insurance contract – when the language in an insurance policy is clear and unambiguous.  Thanks to Erica Woebse for her contribution to this post.  Please email Brian Gibbons with any questions.

Despite Concession of Liability, Plaintiff Awarded Five Bucks in Auto Case (PA)

Patricia Ricciuti alleged she was injured in an auto accident caused when defendant Stephen Pohlman crossed into her lane and struck the passenger side of Ricciuti’s vehicle.  When emergency personnel arrived on scene, Ricciuti reported pain in her neck and left side but had no visible injuries. She was subsequently taken to Allegheny General Hospital, where she underwent a battery of tests, including a neuropsychological exam. Following her discharge, Ricciuti claimed that she suffered from headaches and dizziness, as well as pain in her neck, back, and side. She treated with a chiropractor, neurologist and neurosurgeon and took over the counter pain medication.

She filed suit, and the case proceeded to trial on damages only as the defense conceded liability based on the clear facts of fault.  At trial, Ricciuti’s medical expert, neurologist Stephen Shymansky, testified that Ricciuti suffered a mild concussion in the accident. Notwithstanding this diagnosis, the jury returned a verdict of $0.

The trial court found that the verdict was “improper and incomplete” and ordered the jury to award a dollar amount for each item delineated on the verdict slip. In line with the court’s order, the jury awarded $1 for each past pain and suffering, future pain and suffering, loss of enjoyment of life, embarrassment and humiliations, and loss of consortium, for a grand total of $5.

Appellants requested a new trial on the grounds that the verdict was against the weight of the evidence as the verdict did not reflect the injuries and pain suffered. The trial court denied their motion and the Pennsylvania Superior Court affirmed. Relying on precedent, Judge Christine L. Donohue stated that “Our law provides that not every pain suffered is compensable and “[g]enerally, the determination of whether the pain is severe enough to be compensable is to be left to the jury.” Moreover, the court explained that the trial court’s decision to deny the Appellant’s motion must be upheld as long as there is any support in the record for its decision.

Here, Judge Donohue stated that the trial court concluded that the evidence of Ricciuti’s injuries were subjective because Ricciuti’s medical tests were negative. The Superior Court agreed and concluded that the “complained of injuries are supported only by Ms. Ricciuti’s subjective complaints.” Judge Donohue further noted that Ricciuti’s own medical expert testified that his diagnosis of a concussion was based solely on Ricciuti’s reports.

Thanks to Sheri Flannery for her contribution to this post and please write to Mike Bono for more information.

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.