Bad Faith News
Superior Ct. decides two important bad faith cases
05-08-00
By Craig Giangiulio
The Pennsylvania Superior Court on April 12 decided two important class-action cases that
negatively impact plaintiffs in bad faith claims. In Booze v. Allstate Insurance Co.,
a three-judge panel ruled that a limited tort plaintiff, injured in an auto accident, is
not entitled to full tort recovery from her auto insurance carrier for a violation of �
1705 of the Pennsylvania Motor Vehicle Financial Responsibility Law (PMVFRL). In the
second case of Williams v. Nationwide Insurance Co., another three-judge panel
ruled that an insurance company’s failure to make partial payment on alleged
“undisputed amounts” of uninsured or underinsured motorist claims is not bad
faith because plaintiffs failed to establish that the insurers wrongfully withheld the
“undisputed amounts.” Copies of both opinions are available to PaTLA members by
contacting Craig Giangiulio of the Philadelphia office at 215-546-6451 ([email protected]).
The Superior Court’s decision in Booze
confirms the rule established in Donnelly v. Bauer, 553 Pa. 596, 720 A.2d 447
(1998), that there is no full tort remedy for violations of � 1705 of the PMVFRL. In
writing the opinion for the three-judge panel, Judge Phyllis Beck stated: “In holding
that there is no remedy for violations of � 1705 our Supreme Court noted that there
should not be any remedy.” Judge Beck, who was joined by Judges James R. Cavanaugh
and Vincent A. Cirillo, went on to write: “If the Donnelly court had envisioned a
remedy for � 1705 violations they would not have used broad and sweeping language to
preclude any remedy.”
The appellant, Carolyn Booze, and members of her proposed class, purchased automobile
insurance. The appellants were given a form describing the tort coverage alternatives
available, but were not given a cost comparison form showing the price difference between
full and limited tort coverage—a violation of � 1705 of the PMVFRL. Appellants then
filed suit alleging violations of Pennsylvania’s Bad Faith Statute, the catch-all
provisions of the Pennsylvania Unfair Trade Practices and Consumer Protection Law (UTPCPL)
and the Pennsylvania Unfair Insurance Practices Act (UIPA). On June 18, 1999, the trial
court sustained appellees’ preliminary objections and dismissed appellants’
complaint without prejudice. The appeal to the Superior Court followed.
In their complaint, the appellants admitted that they have no remedy under the PMVFRL, but argued that the sale of auto insurance without cost comparisons between full and limited tort coverage is misleading and thus a violation of the UTPCPL, UIPA, and the Bad Faith Statute. But the Superior Court panel said that none of the counts contained in the complaint stated a valid cause of action.
In Williams, the insureds filed a class-action suit asserting that various insurance carriers breached both a contractual duty and a duty of good faith and fair dealing by failing to tender promptly to their insureds’ alleged “undisputed amounts” in UM or UIM benefits. Judge Justin Johnson wrote the opinion for the panel. President Judge Stephen J. McEwen filed a concurring statement. In the opinion, Johnson characterized the undisputed amounts as reserve amounts set aside by the insurance companies after investigating the plaintiffs’ claims. According to Johnson, in some cases, the insurers made settlement offers that the insureds rejected. “The insureds referred to these valuations, reserve amounts or settlement amounts, as the ‘undisputed amounts’ they were entitled to collect promptly and unconditionally from their insurers” However, the insureds and their respective insurance companies disagreed on the total valuation of the claims, according to Johnson. The parties then submitted the claims to arbitration pursuant to the terms of the automobile insurance policies.
Pending arbitration, the insureds demanded payment of the “undisputed amounts.” The insureds then filed suit citing the insurers’ ‘nondelegable contractual and separate common law duties of good faith to pay amounts of policyholder claims which defendants have assessed as their minimum liability.’ The insureds further claimed that the insurers’ rejection was a breach of contract and constituted bad faith.
On July 29, 1999, a Philadelphia Common Pleas Court judge granted the insurers’ preliminary objections and dismissed the claims with prejudice, finding the class failed to state a cause of action. The appeal to the Superior Court followed.
In its ruling, the Superior Court said that with regard to the insureds’ breach of contract and bad faith claims, the insureds “neither pled sufficient material facts nor cited to pertinent contractual language that would establish a duty on the insurers promptly to pay ‘undisputed amounts’ of UM or UIM benefits, to which the insureds were legally entitled to, prior to an arbitration decision setting the total amount of the claim where this amount is disagreed upon by the insured and insurer.”
The court also said that it “cannot conclude that settlement offers or reserves set aside for insureds’ claims equate to ‘undisputed amounts’ of benefits due under the policies.” The court went on to say that the amount of reserves set aside by the insurer pursuant to claims filed by an insured cannot be construed as ‘undisputed amounts.’ “Reserves are merely amounts set aside by insurers to cover potential future liabilities.”