Legal Updates for Coverage and Bad Faith

Edited by Allison L. Krupp, Esq.

Court Finds Home Renovations Were Not "Sudden" or "Accidental" and Grants Insurer's Motion for Summary Judgment.   

Wehrenberg v. Metropolitan Property and Cas. Ins. Co., 2:14-cv-01477 (W.D. Pa., Jan. 10, 2017)

This case arises from a claim submitted by the plaintiff under his homeowners insurance policy with Metropolitan Property and Cas. Ins. Co. (MetLife). The home was subject to a mortgage and was being leased by the plaintiff to Alphonso Hyman.  Per the lease agreement, Hyman was to pay his monthly rent directly to the mortgage company and had the option to purchase the home. At some point, Hyman stopped making monthly payments, and foreclosure proceedings began. During the course of the foreclosure, the plaintiff visited the home and learned that it had been gutted by Hyman. Hyman was a contractor and told the plaintiff that the home had structural damage he was repairing.  The plaintiff allowed Hyman to continue to work on the property. When Hyman later missed another rental payment, the plaintiff again visited the home and learned that it was still in the same disassembled condition and that other floors had likewise been gutted.  The plaintiff made a claim under his MetLife policy, asserting that the home had been vandalized. He claimed that MetLife told him that the claim was not covered. Eventually, the plaintiff lost his house to foreclosure and sued MetLife for breach of contract and statutory bad faith. MetLife argued that the plaintiff could not establish that the claimed loss was covered as "sudden and accidental direct physical loss or damage" under the policy; that, even if the loss was covered, the plaintiff's failure to immediately notify MetLife of the damage prejudiced MetLife; and that the damages were explicitly excluded from coverage under the policy. The court agreed that no reasonable jury could conclude that the loss was "sudden" since the damage to the home occurred over such a lengthy period of time. However, even had the loss been deemed "sudden," it still was not covered because the loss was not "accidental" since Hyman intentionally deconstructed the property and the plaintiff knowingly instructed Hyman to restore the home after discovering the initial damage. The court also found that the damage fell within a number of policy exclusions, including "repair," "construction," "renovation" and "remodeling." Thus, the court granted MetLife's motion for summary judgment on the breach of contract claim. Finally, the court also granted MetLife's motion with respect to the bad faith claim because the claim was based, in part, on the denial of coverage. Because MetLife had correctly assessed the issue of coverage, there was no bad faith. To the extent that the plaintiff argued that MetLife had failed to adequately investigate his claim, the court determined that the plaintiff had failed to produce evidence in support of this argument.   

Insurer Obtains Summary Judgment in Bad Faith Case Where Alleged Delay Was not Attributable to Insurer.

Walter v. Travelers Personal Ins. Co., 2016 U.S. Dist. LEXIS 164012 (M.D. Pa. Nov. 29, 2016)

This case arose from a pedestrian-motor vehicle accident that occurred in 2008 and dealt with Travelers’ handling of the plaintiff’s underinsured motorist (UIM) claim following that accident. The plaintiff was run over by a rollback truck that was being repossessed on behalf of the owner. The various participants in and witnesses to the accident provided conflicting versions of events regarding how the accident occurred. In one version, the plaintiff climbed onto the running board of the rollback truck, fell to the ground, and was run over by the rollback. As a result, the issue of liability went to arbitration. The arbitrators found that the plaintiff was 33 1/3% causally negligent for his injuries, and the UIM claim later settled. The plaintiff then pursued his statutory bad faith claim, contending primarily that Travelers had delayed its investigation of the UIM claim without a reasonable basis and had unreasonably refused to pay him UIM benefits. At the close of discovery, Travelers filed a motion for summary judgment, which was granted by the court. The court found that the undisputed factual record amply supported Travelers’ defense that “certain ‘red flags’ existed that justified it undertaking a thorough investigation into the cause of the action, the extent of the plaintiff’s injuries, and Travelers’ potential liability for the plaintiff’s claim.” The court found that the delay, if any, stemmed from the underlying criminal investigation and delays attributable to the plaintiff. The court also found that the plaintiff’s Rule 56(d) declaration was nothing more than a belated motion to compel discovery and that the plaintiff had not offered anything of substance in response to the dispositive motion. As a result, Travelers’ motion for summary judgment was granted in its entirety, and the case was dismiss.

Without Good Cause, Only One IME Allowed Under Pennsylvania Rule of Civil Procedure 4010.

Christian v. Weis Markets, Inc., No. 2015 cv 4288 (Lackawanna Cnty. C.C.P. Dec. 8, 2016)

In this case, the court considered whether the defendant had shown good cause under Pennsylvania Rule of Civil Procedure 4010 in requiring the plaintiff to attend two separate independent medical examinations (IME). The court considered that Rule 4010 allows the court to order a party “to submit to a physical or mental examination.” While the court found that Rule 4010 does not specifically permit or prohibit more than one examination, the court determined that the defendant bears a heightened burden of demonstrating good cause for multiple examinations. The court specifically focused on the fact that the Rule discusses “a” physical or mental exam, and held that, absent unusual circumstances, the court may only require a party to submit to a single exam. Examples of unusual circumstances provided by the court include where there has been a long lapse of time since the initial examination was performed, where the plaintiff has sustained a new injury since the initial examination occurred, and where the plaintiff concealed an injury at the time of the first examination. The court reasoned that the plaintiff’s right to privacy should not be unduly invaded. The court also considered that the defendant was seeking two consecutive IMEs by two separate orthopedists, which were located 126 miles from the plaintiff’s residence. The court stated that “[a]n injured plaintiff is not a piñata to be poked and prodded until the candy comes out.” Thus, the court held that the defendant had failed to show good cause and was only permitted one IME.    

Defendant’s Motion in Limine Denied in Hit-and-run Pedestrian Dispute. 

Rodkey v. Progressive Direct Ins. Co., No. 3:16-cv-454 (M.D. Pa. Dec. 8, 2016)

This case arises from a hit-and-run pedestrian-motor vehicle accident. The court was considering two separate motions in limine. The first was the defendant’s motion to preclude evidence of the plaintiff’s insurance policy premiums and of the uninsured motorist benefits available under the policy. The defendant argued that the evidence was not relevant and unfairly prejudicial. The court denied the motion and considered that the essential terms of the insurance contract included the premium the plaintiff had paid to receive coverage and the extent of that coverage. The court reasoned that the jury had to know the essential terms of the contract, including the consideration exchanged. The court also rejected the defendant’s unfairly prejudicial argument. The defendant argued that if the jury knows about the premiums, they may be confused and believe that they must award a certain amount of damages to the plaintiff or may be influenced to award the policy limits. The court found that any potential prejudice could be cured through a proper jury instruction. The defendant’s second motion in limine was to preclude evidence of the plaintiff’s unpaid excess medical bills. The defendant argued that the Pennsylvania Motor Vehicle Financial Responsibility Law precludes double collection of insurance benefits in certain instances. The court denied this motion as well and considered that, under the collateral source doctrine, a tort victim may recover more than once for the same injury as long as the recoveries come from different sources. The plaintiff argued that the medical bills were out-of-pocket expenses for co-pays and deductibles that  were part of the coverage agreement between the plaintiff and her health insurance carriers. Thus, the defendant’s motion in limine was denied.