MITTMAN v. NATIONWIDE AFFINITY INSURANCE COMPANY
MEMORANDUM. SIGNED BY HONORABLE GERALD J. PAPPERT ON 4/10/2017. 4/10/2017 ENTERED AND COPIES E-MAILED.(amas)
IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF PENNSYLVANIA
JEREMY Z. MITTMAN, individually and
as parent and natural guardian of JACOB
MITTMAN, a minor,
NATIONWIDE AFFINITY INSURANCE
April 10, 2017
Plaintiff Jeremy Mittman sued Nationwide Affinity Insurance Company on
August 26, 2016, alleging breach of contract and bad faith. On October 30, 2016,
Nationwide filed a motion to dismiss Mittman’s bad faith claim. (ECF No. 6.) The
Court grants the motion for the reasons below.
Mittman alleges that on February 22, 2015, his car was rear-ended by someone
who then fled the scene. (Pls.’ Compl., at ¶¶ 8, 10–11, ECF No. 1.) As a result,
Mittman contends that both he and his minor son sustained significant physical
injuries. (Id. ¶¶ 12–18.) Mittman’s Nationwide insurance policy provides, among other
things, coverage for losses sustained in accidents caused by the negligent operation of a
vehicle by third persons, when that vehicle is uninsured or underinsured at the time of
the accident.(Id. ¶¶ 7, 19.)
Mittman’s Complaint does not allege facts regarding when Mittman submitted a
claim to Nationwide, the investigation Nationwide performed, when Nationwide denied
his claim or the basis on which it purported to do so. Mittman nonetheless contends
that Nationwide acted in bad faith by, inter alia, failing to pay for covered losses, failing
to objectively, fairly and adequately investigate and evaluate his claim, engaging in
dilatory claims handling, acting unreasonably and unfairly in response to his claim,
failing to effectuate an equitable settlement once its liability became reasonably clear
and compelling him to litigate this claim to recover payments due under the policy.
(ECF No. 1, at 7–8.)
To survive a motion to dismiss under Rule 12(b)(6), a plaintiff must plead factual
allegations sufficient “to raise a right to relief above the speculative level . . . on the
assumption that all the allegations in the complaint are true (even if doubtful in fact).”
Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). The “mere possibility of
misconduct” is not enough. Ashcroft v. Iqbal, 556 U.S. 662, 679 (2009). The court must
construe the complaint in the light most favorable to the plaintiff. See Connelly v. Lane
Constr. Corp., 809 F.3d 780, 790 (3d Cir. 2016) (citations omitted). However, a court
need not accept as true inferences drawn by the plaintiff that are unsupported by facts.
See Cal. Pub. Emps.’ Ret. Sys. v. Chubb Corp., 394 F.3d 126, 143 (3d Cir. 2004).
“While a complaint attacked by a Rule 12(b)(6) motion to dismiss does not need
detailed factual allegations, a plaintiff’s obligation to provide the ‘grounds’ of his
‘entitlement to relief’ requires more than labels and conclusions, and a formulaic
recitation of the elements of a cause of action will not do.” Bell, 550 U.S. at 555
(citations and alterations omitted); see Iqbal, 556 U.S. at 678 (2009) (“Threadbare
recitals of the elements of a cause of action, supported by mere conclusory statements,
do not suffice.”). A court should “consider only the allegations in the complaint, exhibits
attached to the complaint, matters of public record, and documents that form the basis
of a claim.” Lum v. Bank of Am., 361 F.3d 217, 221 n.3 (3d Cir. 2004). Whether a
complaint states a plausible claim for relief is a context-specific task that “requires the
reviewing court to draw on its judicial experience and common sense.” Iqbal, 556 U.S.
at 679 (citations omitted).
Under Twombly and Iqbal, a court reviewing the sufficiency of a complaint must
take three steps. See Connelly, 809 F.3d at 787. First, it must “tak[e] note of the
elements [the] plaintiff must plead to state a claim.” Id. (quoting Iqbal, 556 U.S. at
675). Second, it should identify allegations that, “because they are no more than
conclusions, are not entitled to the assumption of truth.” Id. (quoting Iqbal, 556 U.S. at
679). Finally, “[w]hen there are well-pleaded factual allegations, [the] court should
assume their veracity and then determine whether they plausibly give rise to an
entitlement to relief.” Id. (quoting Iqbal, 556 U.S. at 679).
As an initial matter, it is unclear whether Mittman’s bad faith claim is premised
on an alleged violation of the Pennsylvania bad faith statute, 42 Pa. Cons. Stat. § 8371,
or on an alleged breach of the common law duty of good faith and fair dealing. Mittman
contends that “[t]he actions of Defendant, Nationwide, in the handling of Plaintiff’s
uninsured motorist claims constitute bad faith, as defined under 42 Pa. C.S.A. Section
8371.” (ECF No. 1, at 7.) He later asserts, however, that Nationwide owes both a
“contractual and statutory obligation to investigate, evaluate and negotiate Plaintiff’s
underinsured motorist claim in good faith and to arrive at a prompt, fair and equitable
settlement.” (Id. at 8.) Finally, in his reply to Nationwide’s motion, Mittman states
that “Pennsylvania law clearly recognizes the cause of action alleged in Count III” since
Nationwide’s “contractual obligation under the insurance contract to act in good faith in
protecting the interests of the insured” is “wholly independent from the statutory bad
faith action, 42 Pa. C.S.A. 8371.” (ECF No. 7.) It is therefore unclear whether Mittman
is attempting to bring a single statutory claim based in tort law, a single common law
contract claim or two claims of bad faith (one of each kind).
“The only tort remedy against insurers for bad faith available under
Pennsylvania law is the statutory remedy provided in [42 Pa. C.S.A. § 8371].” Emp.’s
Mut. Cas. Co. v. Loos, 476 F. Supp. 2d 478, 489 n.8 (W.D. Pa. 2007) (citing Birth Center
v. St. Paul Cos., Inc., 787 A.2d 376, 390 (Pa. 2001)). The statute states:
In an action arising under an insurance policy, if the court finds that the
insurer has acted in bad faith toward the insured, the court may take all
of the following actions:
(1) Award interest on the amount of the claim from the date the
claim was made by the insured in an amount equal to the prime
rate of interest plus 3%.
(2) Award punitive damages against the insurer.
(3) Assess court costs and attorney fees against the insurer.
42 PA. C.S.A. § 8371.
“Bad faith” is not defined in the statute, though courts have held that a Section
8371 claim contains two elements: (1) the insurer lacked a reasonable basis for denying
benefits under the applicable policy; and (2) the insurer knew or recklessly disregarded
the lack of a reasonable basis for refusing the claim. Loos, 476 F. Supp. 2d at 490
(citing Terletsky v. Prudential Prop., 649 A.2d 680, 688 (Pa. Super. 1994)); see also
Horowitz v. Fed. Kemper Life Assur. Co., 57 F.3d 300, 307–08 (3d Cir. 1995) (citing
D’Ambrosio v. Pa. Nat’l Mut. Cas. Ins. Co., 431 A.2d 966, 971 (Pa. 1981)). Various other
actions by an insurer can constitute bad faith, such as “lack of investigation into the
facts[ ] or a failure to communicate with the insured.” Hamm v. Allstate Prop. & Cas.
Ins. Co., 908 F. Supp. 2d 656, 668–69 (W.D. Pa. 2012); Corch Const. Co. v. Assurance
Co. of Am., No 1250-C, 2003 WL 23473924 (Pa. Commw. Ct. 2003) (Bad faith may occur
“when an insurance company makes an inadequate investigation or fails to perform
adequate legal research concerning a coverage issue.”); see also Frog, Switch & Mfg.
Co., Inc. v. Travelers Ins. Co., 193 F.3d 742, 751 n.9 (3d Cir. 1999).
The plaintiff-insured must show that the insurer acted in bad faith based on
some motive of self-interest or ill will. Terletsky, 649 A.2d at 688. In so doing, the
plaintiff need not show that the insurer’s conduct was fraudulent, but mere negligence
or bad judgment is insufficient to make out a claim for bad faith. Id. Moreover, an
insured must demonstrate statutory bad faith by clear and convincing evidence. Loos,
476 F. Supp. 2d at 491 (citing Terletsky, 649 A.2d at 688). “The ‘clear and convincing’
standard requires that the plaintiff show ‘that the evidence is so clear, direct, weighty
and convincing as to enable a clear conviction, without hesitation, about whether . . .
the defendants acted in bad faith.” J.C. Penney Life Ins. Co. v. Pilosi, 393 F.3d 356, 367
(3d Cir. 2004).
Pennsylvania law also permits a plaintiff to “bring a cause of action for breach of
the contractual duty of good faith and fair dealing in the insurance context, permitting
an insured to recover compensatory damages for an insurer’s failure to act in good
faith.” Simmons v. Nationwide Mut. Fire Ins. Co., 788 F. Supp. 2d 404, 408 (W.D. Pa.
2011) (citing Benevento v. Life USA Holding, Inc., 61 F. Supp. 2d 407, 425 (E.D. Pa.
1999); Gray v. Nationwide Mut. Ins. Co., 422 Pa. 500, 223 A.2d 8, 11 (Pa. 1966)). “The
duty of good faith has been defined as [h]onesty in fact in the conduct or transaction
concerned.” Heritage Surveyors & Engineers, Inc. v. Nat’l Penn Bank, 801 A.2d 1248,
1253 (Pa. Super. Ct. 2002) (quoting Creeger Brick and Building Supply, Inc. v. MidState Bank and Trust Co., 560 A.2d 151, 153 (Pa. Super. Ct. 1989)).
Pennsylvania law, however, does not recognize a separate breach of contractual
duty of good faith and fair dealing where that claim is subsumed by a separately pled
breach of contract claim. Ross v. Metro. Life Ins. Co., 411 F. Supp. 2d 571, 583–84
(W.D. Pa. 2006) (dismissing a breach of fiduciary duty claim as redundant of the
plaintiff’s breach of contract claim); LSI Title Agency, Inc. v. Evaluation Servs., Inc.,
951 A.2d 384, 391 (Pa. Super. Ct. 2008), appeal denied, 960 A.2d 841 (Pa. 2008); Somers
v. Somers, 613 A.2d 1211, 1215 (Pa. Super. Ct. 1992). Applying Pennsylvania law,
several courts have held that where the plaintiff alleges that the defendant breached its
duty of good faith and fair dealing by denying first party benefits under an insurance
policy, the claim is subsumed by the plaintiff’s breach of contract claim premised on the
same conduct. See, e.g., Meyer v. Cuna Mut. Group, No. 03-602, 2007 WL 2907276 at
*15 (W.D. Pa. Sept. 28, 2007) (holding that where the conduct forming the basis of the
plaintiff’s breach of duty of good faith and fair dealing claim is the same conduct
forming the basis for the breach of contract claim, the claims merge and there is no
separate cause of action for breach of duty of good faith and fair dealing); see also
Ingersoll–Rand Equip. Corp. v. Transp. Ins. Co., 963 F. Supp. 452, 453–54 (M.D. Pa.
1997); Garvey v. Nat’l Grange Mut. Ins. Co., No. 95–0019, 1995 WL 115416, at *4 (E.D.
Pa. Mar. 16, 1995); Greater N.Y. Ins. Co. v. N. Ins. Co., 872 F. Supp. 1403, 1409 (E.D.
Pa. 1995), aff’d, 85 F.3d 1088 (3d Cir. 1996) (stating “[t]he Pennsylvania Supreme
Court treats the breach of contractual duty of good faith and breach of fiduciary duty
synonymously in the context of insurance cases”) (citation omitted).
Regardless of whether Mittman bases his claim on statutory tort law or common
law contract law, the facts in his Complaint are insufficient to survive Nationwide’s
motion to dismiss. Mittman pleads facts regarding the occurrence of the accident, (Pls.’
Compl., ¶¶ 8–11), the resulting injuries to him and his son, (id. ¶¶ 12–18), and the
policy’s provision of uninsured/underinsured motorist benefits, (id. ¶¶ 7, 19). He then
contends that Nationwide acted in bad faith by failing to conduct an adequate and fair
investigation, engaging in dilatory claims handling and refusing to pay for losses once
its liability became reasonably clear. He does not, however, allege any specific facts in
support of these general contentions. (Id. ¶¶ 36–40.) These are precisely the type of
“threadbare recitals of the elements of a [bad faith] cause of action, supported by mere
conclusory statements” held insufficient in Iqbal, 556 U.S. at 678. See also Smith v.
State Farm Mut. Auto. Ins. Co., 506 F. App’x 133, 136 (3d Cir. 2012) (affirming
dismissal of bad faith claim and finding the following allegations to be conclusory: the
defendant “breach[ed] covenants of good faith and fair dealing,” “engag[ed] in unfair
settlement negotiations,” “intentionally misrepresent[ed] coverage in the policy,”
“misrepresent[ed] facts and its evaluation of Plaintiff’s claim,” “fail[ed] to properly
investigate [her UIM claim],” and “fail[ed] to timely respond to inquiries and
correspondence”); Yohn v. Nationwide Ins. Co., No. 1:13-CV-024, 2013 WL 2470963, at
*5 (M.D. Pa. June 7, 2013) (holding that plaintiff failed to support conclusory
statements with factual allegations where he alleged that: the defendant used abusive
tactics to settle the claim without specifying what the tactics were; the defendant failed
to thoroughly investigate his claim without specifying what procedures it followed or
how they were deficient; the defendant caused unreasonable delay without setting forth
the dates of any actions; and the defendant failed to timely respond to inquiries without
setting forth any facts about those inquiries or the defendant’s responses); see also, e.g.,
Allen v. State Farm Mut. Auto. Ins. Co., No. 14-7367, 2015 WL 1072968, at *3 n.2 (E.D.
Pa. Mar. 12, 2015); Sypeck v. State Farm Mut. Auto. Ins. Co., No. 3:12-324, 2012 WL
2239730 at *3 (M.D. Pa. June 15, 2012); Muth v. State Farm Fire & Cas. Co., No. 1:101487, 2010 WL 3805386, at *2 (M.D. Pa. Sept. 22, 2010).
Plaintiffs must “describe who, what, where, when, and how the alleged bad faith
conduct occurred.” Mattia v. Allstate Ins. Co., No. 14-2099, 2014 WL 2880302, at *4
(E.D. Pa. June 24, 2014) (citing Miracle Temple Christian Acad. v. Church Mut. Ins.
Co., No. 12–995, 2012 WL 1286751, at *4 (E.D. Pa. Apr. 16, 2002)). Because Mittman
failed to do so, dismissal of Count III is warranted.1
Even if Mittman seeks to base his bad faith claim on the common law obligation of good faith
and fair dealing, he must proffer additional facts regarding the specific actions Nationwide took in
violation of this obligation since, to the extent such a claim was based solely on Nationwide’s refusal
to pay, it would be subsumed by his breach of contract claim. See supra subsection III.B.ii.
Rule 15(a) declares that leave to amend “shall be freely given when justice so
requires.” Fed. R. Civ. P. 15(a). Absent a reason why leave to amend should not be
granted, a party should be given the opportunity to have a claim decided upon the
merits. Clark v. State Farm Ins. Co., No. 89-0977, 1989 WL 153921, at *1 (E.D. Pa.
Dec. 15, 1989). The Court grants Mittman thirty days to file an amended complaint
that identifies the claim he wishes to bring and contains sufficient factual allegations to
An appropriate order follows.
BY THE COURT:
/s/ Gerald J. Pappert
GERALD J. PAPPERT, J.
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