Insurers’ Actions as Legal Adversary Cannot Be the Basis for Bad Faith Claims

In Gordon v. LM General Insurance Company, 2:23-cv-00479-MAK, 2023 WL 2975869 (E.D. Pa. April 17, 2023), the plaintiffs had originally filed a lawsuit against LM General Insurance Company, asserting a cause of action for breach of contract arising from their claim for underinsured motorist benefits and a cause of action for statutory bad faith. LM General filed a motion to dismiss the bad faith count, alleging that the Gordons had not pled sufficient facts to support their bad faith cause of action and, thus, had failed to state a claim upon which relief can be granted. The Eastern District Court agreed and dismissed the Gordons’ bad faith count while granting them leave to file an amended complaint and attempt to reassert a bad faith claim with sufficient facts. The Gordons chose not to file that amended complaint, and the litigation proceeded as to the breach of contract/UIM claim only. A jury trial was held, and the jury returned a verdict significantly above not only the offers extended by LM General, but above UIM policy limits as well.

The Gordons filed another lawsuit against LM General, purporting to reassert their bad faith claim in light of the jury verdict on the underlying litigation. LM General filed a motion to dismiss which the Eastern District Court granted, with prejudice. The court granted the motion on two bases. First, res judicata barred the Gordons from reasserting the bad faith count, as the dismissal without prejudice of their bad faith claim in the underlying litigation became a final order when they opted not to amend their complaint within the timeframe given to them by the court. The court further determined that, even if res judicata did not bar the bad faith litigation, the Gordons continued to allege only boilerplate legal conclusions without factual averments of bad faith on the part of LM General. The court also noted that the Gordons asserted that LM General acted in bad faith during its litigation of the underlying claim for breach of contract/UIM benefits. The court reiterated that an insurer’s actions as a legal adversary cannot be the basis for bad faith claims. Rather, the proper redress for an insurer’s actions as a legal adversary are found in the Federal Rules of Civil Procedure.
 

_{Legal Update for Insurance Services, April 25, 2023, has been prepared for our readers by Marshall Dennehey. It is solely intended to provide information on recent legal developments and is not intended to provide legal advice for a specific situation or to create an attorney-client relationship. We welcome the opportunity to provide such legal assistance as you require on this and other subjects. If you receive the alerts in error, please send a note to tamontemuro@mdwcg.com. 
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