MURPHY v. PROGRESSIVE
MEMORANDUM AND/OR OPINION. SIGNED BY HONORABLE STEWART DALZELL ON 4/18/2016. 4/18/2016 ENTERED AND COPIES E-MAILED.(sg, )
IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF PENNSYLVANIA
UNITED FINANCIAL CASUALTY
April 18, 2016
We consider here defendant United Financial Casualty Company's (“United”) motion for
summary judgment. 1
William Murphy ("Murphy") brings this action against United asserting a claim for bad
faith.2 This matter arose from a dispute between the parties over the valuation of Murphy’s
underinsured motorist (“UIM”) benefits claim. Murphy was injured in a car accident in 2011, at
which time he was insured by United. He avers that United’s refusal to settle his UIM claim
amounts to bad faith under Pennsylvania law.
We have diversity jurisdiction pursuant to 28 U.S.C. § 1332.
There are three other motions pending in this matter -- plaintiff's motion to compel and
his motion for leave to file a sur-reply and defendant's motion to strike, and we rule on them in
our Order attached to this Memorandum as follows: First, we will deny Murphy’s motion to
compel as the parties have conducted substantial discovery and there are no outstanding
discovery issues that preclude the Court’s disposition of the motion for summary judgment.
Second, we will grant Murphy’s motion for leave to file a sur-reply, even though doing so is
against our usual practice and, arguably, inconsistent with Fed. R. Civ. P. 56(e). But we find that
Murphy’s attempt to rectify his deficient response to United’s motion through his sur-reply fails
nonetheless. Finally, we will grant United’s motion to strike several exhibits from the docket.
Murphy’s complaint also alleged breach of contract, but the parties settled that claim.
For the reasons set forth below, we will grant United’s motion for summary judgment
and enter judgment in favor of United and against Murphy.
Parties may move for summary judgment pursuant to Fed. R. Civ. P. 56(a) on any claim
or defense in the case, and the “court shall grant summary judgment if the movant shows that
there is no genuine dispute as to any material fact and the movant is entitled to judgment as a
matter of law.” Id.
A party moving for summary judgment bears the initial burden of informing the district
court of the basis for its argument that there is no genuine issue of material fact by “identifying
those portions of the pleadings, depositions, answers to interrogatories, and admissions on file,
together with the affidavits, if any, which it believes demonstrate the absence of a genuine issue
of material fact.” Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986) (internal quotations
omitted). If the moving party meets this initial burden, Fed. R. Civ. P. 56 then obliges the nonmoving party to show, via submissions beyond the pleadings, that there are genuine factual
issues for trial. Id. at 324.
There is a genuine issue of material fact only when there is sufficient evidence such that a
reasonable juror could find for the party opposing the motion. Anderson v. Liberty Lobby, Inc.,
477 U.S. 242, 251-52 (1986) (explaining further that a mere scintilla of evidence will not
suffice). Material facts are those that would affect the outcome of the case under the governing
law. Id. at 248. We may not make credibility determinations or weigh the evidence, and we
must draw all reasonable inferences in favor of the non-moving party. Reeves v. Sanderson
Plumbing Prods., Inc., 530 U.S. 133, 150 (2000); Amour v. County of Beaver, PA, 271 F.3d 417,
420 (3d Cir. 2001). Our function is to determine whether there is a genuine issue for trial, and
we may not prevent a case from reaching a jury simply because we favor one of several
reasonable views of the evidence. Abraham v. Raso, 183 F.3d 279, 287 (3d Cir. 1999) (citing
Anderson, 477 U.S. at 249).
We will recite the facts as evidenced by the record in the light most favorable to Murphy,
the non-moving party.
Factual And Procedural History
United insured Murphy’s Ford F-150 pursuant to United Policy No. 05900793-4. See
Def.’s Statement of Facts at Ex. B. Murphy’s policy provided for $300,000 in UIM coverage.
Id. at ¶ 3. On October 25, 2011, Murphy was driving his truck when he was seriously injured in
a motor vehicle accident. Id. and Pl.’s Resp. Opp. at 2. Murphy’s injuries included an L3-4 disc
bulge, left shoulder impingement, bursitis, tendinitis and rotator cuff impingement, and a
bilateral L4-L5 radiculopathy and nerve root traction injury. Id. Murphy had surgery on his left
shoulder to treat these injuries. Id.
Murphy submitted his claim for UIM benefits on May 18, 2012, and four days later his
counsel notified United's claims adjuster that Murphy had settled his bodily injury claim against
the tortfeasor for $15,000. Id. Murphy then authorized the adjuster to review the medical
records in his first-party claim in order to expedite the evaluation of his UIM claim. Id. at 3.
The adjuster spent much of the next two years reviewing Murphy’s medical records, including
records from before the crash, and the adjuster concluded that some of Murphy’s medical
conditions were pre-existing. Id. at 4. The parties did not discuss potential settlement during
2012 or 2013 as Murphy’s medical treatment was ongoing. Def.’s Statement of Facts at ¶ 31.
On June 20, 2014, Murphy’s counsel requested that United make a settlement offer or
advise why an offer would not be extended. Pl.’s Resp. Opp. at 3. On June 30, 2014, United
responded that it wanted to review the results of Murphy’s upcoming independent medical exam
(“IME”) before making an offer. Id. Murphy was originally scheduled to undergo an IME on
August 7, 2014, but he did not attend this appointment. Def.’s Statement of Facts at ¶ 37. He
did attend the rescheduled IME on November 11, 2014. Id. at ¶ 38. United reviewed the IME
report, and on January 19, 2015 United’s claims adjuster estimated Murphy’s UIM claim to be
worth between $83,000 and $101,000. Id. at ¶¶ 51-53 and Pl.’s Resp. Opp. at 5. That same day,
the claims adjuster requested settlement authority to settle Murphy’s claim for up to $101,000,
Pl.’s Resp. Opp. At 5, and the next day a United supervisor authorized the claims adjuster's
request. Id. at 6.
United opened settlement negotiations on February 16, 2015 with an offer of $83,000.
Id. On March 13, 2015, Murphy responded with a demand for $250,000. Id. United countered
with an offer of $87,000 on April 3, 2015, to which Murphy replied with a demand for $190,000.
Id. When replying to United’s second offer on April 9, 2015, Murphy’s counsel requested that
United tender the maximum settlement authority. Id. On April 22, 2015, Murphy’s counsel
pressured United’s claims adjuster to offer the amount of her full settlement authority, to which
the adjuster advised, “I HAVE FULL AUTHORITY TO RESOLVE MR. MURPHY’S UIM
CLAIM FOR 87,000.” Id. Murphy then sued United in state court and United removed here.
As stated, United moves for summary judgment on Murphy’s bad faith claim brought
pursuant to 42 Pa.C.S.A. § 8371. Pennsylvania law defines bad faith as “a frivolous or
unfounded refusal to pay, lack of investigation into the facts, or a failure to communicate with
the insured.” Frog, Switch & Mfg. Co. v. Travelers Inc. Co., 193 F.3d 742, 751 (3d Cir. 1999).
To recover under a bad faith claim, a plaintiff must show that the defendant (1) did not have a
reasonable basis for denying benefits under the policy, and (2) knew or recklessly disregarded its
lack of a reasonable basis for denying the claim. Keefe v. Prudential Property and Cas. Ins. Co.,
203 F.3d 218, 225 (3d Cir. 2000) (quoting Terletsky v. Prudential Property and Cas. Ins. Co.,
649 A.2d 680, 688 (Pa. Super. Ct. 1997)). A plaintiff must prove bad faith by clear and
convincing evidence. Id. (citing Cowden v. Aetna Cas. & Sur. Co., 134 A.2d 223, 229 (Pa.
Murphy first asserts that his bad faith claim is sustained by United’s unreasonable delay
in processing his claim, but we disagree. To be sure, an insurance company’s unreasonable
delay can be considered a bad faith insurance practice under Pennsylvania law. Thomer v.
Allstate Ins. Co., 790 F. Supp. 2d 360, 370 (E.D. Pa. 2011) (citing Ania v. Allstate Ins. Co., 161
F. Supp. 2d 424, 430 (E.D. Pa. 2001)). But, “a long period of delay between demand and
settlement does not, on its own, necessarily constitute bad faith.” Id. (quoting Kosierowski v.
Allstate Ins. Co., 51 F. Supp. 2d 583, 588–89 (E.D. Pa.1999), aff’d, 234 F. 3d 1265 (3d Cir.
2000)). In order for an insured to succeed on a bad faith claim based on an unreasonable delay,
he must show that “the delay is attributable to the defendant, that the defendant had no
reasonable basis for the actions it undertook which resulted in the delay, and that the defendant
knew or recklessly disregarded the fact that it had no reasonable basis to deny payment.” Id.
(quoting Wiedinmyer v. Harleysville Mut. Ins. Co., No. 94–19450, 1999 WL 1324202 at *215
(Pa.Com.Pl. Aug. 5, 1999)). If the delay is attributable to a need for further investigation or even
simple negligence, there is no bad faith. Kosierowski, 51 F. Supp. 2d at 589.
In Thomer, Judge Kelly found that a forty-two month delay between an insured making a
claim and the insurer settling the claim did not constitute bad faith. There, the insurer requested
additional medical records and scheduled an IME in order to properly evaluate the insured’s
claim. Id. at 371-72. Moreover, the insured resisted the insurer’s attempts to obtain an IME,
further delaying the resolution of her claim. Id. at 372.
Here, we are presented with cognate circumstances. United received notice of Murphy’s
UIM claim in May of 2012. Over the next two years, United’s claims adjuster continued to
obtain and review medical records regarding Murphy’s ongoing medical treatment. This was
especially important given that the claims adjuster reasonably believed that some of Murphy’s
medical complaints arose from pre-existing conditions. Murphy did not attend an IME
scheduled for August 7, 2014. He later attended an IME in November of 2014, and the IME
report was made available to the claim adjuster in December of 2014. United then made Murphy
a settlement offer on February 6, 2015.
These facts do not evidence an unreasonable delay constituting bad faith. United took
steps to thoroughly investigate Murphy’s claim, and these steps were reasonable given the
peculiar circumstances Murphy’s medical conditions presented. Moreover, Murphy’s failure to
attend an IME scheduled in August of 2014 contributed to United's delay in making a settlement
offer. We therefore hold that a reasonable jury could not find that the delay between Murphy's
filing of his claim and United’s initial settlement offer establishes bad faith.
Murphy also avers that United acted in bad faith when it offered him what he
characterizes as a series of unreasonable settlement offers, but we again find no evidence of bad
faith. Pennsylvania courts generally have not considered low, but reasonable, settlement offers
from insurers to rise to the level of bad faith. See Brown v. Progressive Ins. Co., 860 A.2d 493,
501 (Pa. Super. Ct. 2004) (citing Terletsky v. Prudential Property and Cas. Ins. Co., 649 A.2d
680, 688 (Pa. Super. Ct. 1994)). While some federal courts have held that “low-ball offers which
bear no reasonable relationship to an insured’s actual losses can constitute bad faith…” Barry v.
Ohio Cas. Group, No. 04-188, 2007 WL 128878, at*8 (W.D. Pa. Jan. 12, 2007), others have
found that an insurer may not act in bad faith even when it offers a settlement amount at the
lower end of the estimated settlement range. See Thomer, 790 F. Supp. 2d at 375-76 (citing
Kosierowski, 51 F. Supp. 2d at 592).
In Barry, the insurer first offered the insured $6,000 to settle a claim -- an amount that
was below the estimated value for the UIM claim, which ranged from $7,910.00 to $12,350.
2007 WL 128878, at*2. Within two weeks, the insurer increased this offer to $25,000 -- thereby
quadrupling the initial offer to the insured -- despite having received no new information
regarding the insured’s medical condition. Judge Gibson found that a reasonable jury could rely
on these facts in order to sustain a bad faith claim. The insurer in Thomer also made an offer
below the estimated value of the insured's claim, offering $30,000 to settle a claim valued
between $35,000 and $45,000. 790 F. Supp. 2d at 376. There, in contrast to Barry, Judge Kelly
found that an initial offer of $5,000 less than the lowest range of the claim’s estimated amount
did not amount to bad faith. Id.
This case more closely resembles Thomer than Barry, and in fact the insurer here made a
more reasonable offer, when compared to the estimated value of Murphy's claim, than did the
insurer in Thomer. United’s initial offer to Murphy, presented after a thorough and reasonable
investigation, was $83,000. This was at the bottom of the range for the claim’s estimated value,
which was $83,000 to $101,000, but it was within the range nonetheless. We cannot conclude
that a reasonable jury could rely on this information to find in favor of Murphy on his bad faith
Murphy argues that United’s actions were made in bad faith because the claims adjuster
refused to offer the full amount of her settlement authority, in this case $101,000. He further
avers that the claims adjuster attempted to mislead him as to what the full value of her settlement
authority was when she wrote in an email to Murphy’s counsel that “I HAVE FULL
AUTHORITY TO RESOLVE MR. MURPHY’S UIM CLAIM FOR 87,000.” We reject both of
these assertions. First, Murphy cites, and we have found, no authority to support his position that
a claims adjuster is obligated to offer the full amount of her settlement authority. This rule, if it
existed, would be absurd on its face and would foreclose any flexibility during negotiations
between insurers and those making claims.
Second, we do not read the claims adjuster’s email to represent that her offer of $87,000
is the maximum value of her settlement authority. She did, in fact, have full authority to offer
$87,000, much like she had full authority to offer anywhere between $83,000 and $101,000. The
fact that Murphy’s counsel chose to interpret this statement as United stating that $87,000 was
the maximum authorized amount does not make it true. Moreover, even if the claims adjuster
intended this email to convey that she had no authority to increase her offer, $87,000 was still a
reasonable offer. And Murphy, who originally demanded $250,000, and later $190,000, to settle,
has provided no evidence that he would have actually accepted an offer of $101,000 in April of
2015. United’s hardline negotiating position, which it later softened, is not evidence that a
reasonable jury could use to sustain Murphy’s bad faith claim.
There is no evidence that United lacked a basis for denying Murphy’s claim, especially
when Murphy demanded $250,000, later lowered to $190,000, for a claim which United
estimated to have had a value of between $83,000 and $101,000. Further, there is no evidence
that United knew or recklessly disregarded its lack of reasonable basis for denying Murphy’s
claim. Murphy has failed to satisfy either prong of Pennsylvania’s bad faith test, when he
needed to prove both, and we will therefore grant United’s motion.
Murphy’s bad faith claim has no merit, as both his unreasonable delay and unreasonable
settlement offer theories fail upon close inspection. We will therefore grant United’s motion for
summary judgment, enter judgment in favor of United and against William Murphy, and close
BY THE COURT:
_/s/ Stewart Dalzell, J.
Stewart Dalzell, J.
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