Shaffer et al v. State Farm Mutual Automobile Insurance Company

Filing 60

MEMORANDUM re Dfts' MOTION for Summary Judgment 29 (Order to follow as separate docket entry) Signed by Honorable Sylvia H. Rambo on 10/20/14. (ma)

IN THE UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF PENNSYLVANIA
BARRY SHAFFER and
KIMBERLY SHAFFER,
Plaintiffs
v.
STATE FARM MUTUAL
AUTOMOBILE INSURANCE CO.,
Defendant

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Civil Action No. 1:13-cv-01837

The Honorable Sylvia H. Rambo

MEMORANDUM
In this civil action, Plaintiffs have sued Defendant, their insurance
carrier, asserting breach of contract (Count I) and bad faith (Count II) claims arising
out of Defendant’s handling of Plaintiffs’ underinsured motorist claim. (See Doc 1.)
Presently before the court is Defendant’s motion for partial summary judgment,
wherein it seeks judgment on Plaintiffs’ bad faith claim. (Doc. 29.) For the
following reasons, Defendant’s motion will be granted.
I.

Background
A.

Facts

The instant claim arises from a request by Plaintiff Barry Shaffer
(“Plaintiff”) for underinsured motorist (“UIM”) benefits against his insurance carrier,
Defendant State Farm Mutual Automobile Insurance Company (“Defendant”),
stemming from a motor vehicle accident that occurred on September 5, 2008. (Doc.
31, ¶ 4.) Plaintiff is a 45-year-old veteran who served during the 1980s and 1990s
and has a history of physical ailments, which are documented by extensive medical

records dating back to nearly a decade before the collision underlying this action
occurred. (See Doc. 32, pp. 17, 22–27 of 33.)
At the time of the collision, Plaintiff and his wife, Kimberly Shaffer
(collectively “Plaintiffs”), were insured by Defendant under an automobile insurance
policy—number 23 2135 C15 38F—that provided for, inter alia, medical payments
coverage and $100,000.00 UIM coverage. (See Doc. 31, ¶ 5.) The policy provided
“stacked” UIM coverage, yielding total UIM coverage of $200,000.00. (Id.) The
UIM policy provided coverage as follows:
[Defendant] will pay compensatory damages for bodily
injury an insured is legally entitled to recover from the
owner or driver of an underinsured motor vehicle. The
bodily injury must be: (1) sustained by an insured; and (2)
caused by an accident that involves the ownership,
maintenance, or use of an underinsured motor vehicle.
[Defendant] will pay only if the full amount of all available
limits of all bodily injury liability bonds, policies, and selfinsurance plans that apply to the insured’s bodily injury
have been used up by payment of judgments or settlements,
or have been offered to the insured in writing.
(Doc. 38, p. 28 of 48.) The policy also provided that:
The insured and [Defendant] must agree to the answers to
the following two questions: (1) [whether] the insured [is]
legally entitled to recover compensatory damages from the
owner or driver of the underinsured motor vehicle [and] (2)
if the insured and [Defendant] agree that the answer to [the
foregoing question] is yes, then what . . . the [proper]
amount of . . . compensatory damages [is] that the insured
is legally entitled to recover from the owner or driver of the
underinsured motor vehicle.
(Id.)
On September 5, 2008, Plaintiff was involved in a two-car collision in
Dauphin County, Pennsylvania, in which the other driver, Tina Kresge, was
primarily at fault. (See Doc. 31, ¶ 4.) Plaintiff reported the incident to Defendant on
2

September 6, 2008. (Id. at ¶ 6.) On September 8, 2008, Lynda Holl (“Holl”), a
medical payments claim representative, spoke with Plaintiff regarding the collision
and his injuries and treatment. (Id. at ¶ 6.) The collision was head-on and caused
Defendant to declare that Plaintiff’s vehicle, a 2003 Toyota Sienna, was a total loss,
for which Defendant issued payment to the lienholder to completely discharge the
loan. (Id. at ¶ 9.) Plaintiff also communicated to Holl that he had an extensive
medical history due to his prior military service, which caused the claim to be
flagged for review to determine if the medical treatment he was receiving was related
to the motor vehicle accident. (See Doc. 30-1, p. 15 of 74.)
Over the next several months, Defendant wrote numerous letters to
Plaintiff regarding the claim. For example, on September 8, 2008, Defendant
acknowledged Plaintiff’s claim for medical benefits and forwarded an application for
benefits and an authorization for release of information, which Defendant requested
that Plaintiff return with Plaintiff’s medical bills. (Id. at p. 23 of 74.) On October
21, 2008, Holl informed Plaintiff that Defendant still had not received any medical
bills. (Id. at p. 30 of 74.) On November 4, 2008, Plaintiffs’ counsel advised
Defendant that he had been retained to represent Plaintiffs and requested that
Defendant forward to Plaintiff several documents related to the handling of
Plaintiff’s first-party claim for medical benefits. (Id. at p. 32 of 74.) The following
day, Holl sent Plaintiffs’ counsel a letter acknowledging the representation and
informing Plaintiffs’ counsel that Defendant had received neither an application for
benefits nor any medical bills on Plaintiff’s behalf. (Id. at 37 of 74.) Additionally,
Holl forwarded to Plaintiff another application for benefits and an authorization for

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release of information. (Id.) On November 10, 2008, Holl provided Plaintiff with a
certificate of coverage for Plaintiff. (Id. at p. 39 of 74; Doc. 31, ¶ 14.)
On November 19, 2008, Plaintiff submitted a completed application for
benefits and requested that Defendant place the enclosed bills in line for payment.
(Doc. 31, ¶ 15; Doc. 30-1, p. 41 of 74; Doc. 35, ¶ 15.1) The application for benefits
set forth Plaintiff’s injuries as follows:
Cervical spine sprain/strain, distended eye lenses and
vision has been effected requiring glasses, severe light
sensitivity, bruising around eyes & on knees, impact to
knees. Lots of neck & back pain. Much worse than
condition prior to accident.
(Doc. 39, p. 5 of 51.) The application for benefits further set forth that Plaintiff had
received medical care after the motor vehicle accident for his injuries and that he
anticipated further medical bills. (Id. at p. 6 of 51.)
On January 8, 2009, Plaintiff requested from Holl a first-party payment
summary showing the bills that had been paid for Plaintiff. (Id. at p. 43 of 74.) Holl
responded that Defendant had not received any of Plaintiff’s medical bills, to which
Plaintiff responded that he had been receiving treatment from the Lebanon Veterans
Affairs Medical Center. (See id. at p. 45 of 74; Doc. 38, p. 21 of 50.) On March 4,
2009, Holl sent Plaintiffs’ counsel a letter expressing that Defendant intended to stay
up-to-date on Plaintiff’s treatment and forwarded to Plaintiff another authorization,
which Plaintiff signed and returned. (See Doc. 30-1, p. 47 of 74; Doc. 38, p. 10 of
58.)

In his answer to the statement of facts, Plaintiff states that “[t]he bills submitted with the
application were for treatment to Barry Shaffer’s eyes.” (Doc. 35, ¶ 15.)
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Over the next three months, Plaintiffs’ counsel wrote several letters to
Defendant’s subrogation unit. (Doc. 30-1 at p. 49, 51 of 74.) These letters inquired
about the status of Defendant’s subrogation claim and the results of an intercompany
arbitration that took place on May 5, 2009. (Id.) Plaintiff was informed that the
arbitration panel did not award damages to either side. (Id. at p. 53 of 74.) On
August 31, 2009, Holl again sent Plaintiffs’ counsel a letter expressing that
Defendant intended to stay up-to-date on Plaintiff’s treatment and forwarded to
Plaintiff another authorization, which Plaintiff signed and returned. (Id. at p. 55 of
74.)
On September 10, 2009, Plaintiffs’ counsel wrote a letter to Holl
advising her that Plaintiff may require back surgery. (Id. at p. 57 of 74.) To this
point, Plaintiff had only required conservative medical treatment and had not
expressed an intention to initiate a UIM claim. (See id. at pp. 14–21 of 74.) On
April 30, 2010, Plaintiffs’ counsel informed Defendant that Plaintiff had undergone
surgery. (Id. at p. 61 of 74.) Plaintiffs’ counsel further informed Defendant that a
copy of the bill for the surgery would be sent to Defendant and requested that
Plaintiff be advised if his medical coverage was close to being exhausted. (Id. at p.
55 of 74.) On May 5, 2010, Plaintiffs’ counsel and Holl discussed the remaining
medical coverage and, for the first time, expressly discussed a potential UIM claim.
(Id. at p. 16 of 74.) Holl forwarded a copy of Plaintiff’s payment log to Plaintiffs’
counsel two days later. (Id. at p. 63 of 74.) On June 4, 2010, Plaintiffs’ counsel
stated that he would inform Defendant if a UIM claim became necessary. (Id. at p.
17 of 74.) After several months of silence, Defendant closed Plaintiff’s medical
payments file on December 10, 2010, noting that the date on Plaintiff’s last treatment
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bill was September 13, 2010 and that medical records indicated that Plaintiff’s back
surgery had been successful. (Id. at p. 18 of 74.)
On April 6, 2011, Plaintiffs’ counsel requested that an underinsured
motorist adjuster be assigned to his claim. (Id. at p. 67 of 74.) Almost a week later,
Plaintiffs’ counsel informed Defendant that Kresge possessed $100,000.00 in
liability coverage and that a settlement between Plaintiffs and Kresge could
potentially occur. (Id. at p. 69 of 74.) Plaintiffs’ counsel requested Defendant’s
consent to settle. (Id.) On April 13, 2011, Holl referred Plaintiff’s claims file to
Defendant’s UIM department. (Id. at pp. 18–19 of 74.) UIM claims representative
Scott Whiteside (“Whiteside”) was assigned to the claim. (Id.)
Immediately after being assigned to the claim, Whiteside called
Plaintiffs’ counsel to discuss Plaintiff’s claim and initiated a search to determine
Plaintiff’s prior injuries and Kresge’s assets. (See id. at p. 71 of 74.) Whiteside was
informed of a possible settlement between Plaintiffs and Kresge, to which Defendant
would be entitled $100,000.00 due to its subrogation rights. (Id.) Whiteside
requested authorization to review Plaintiff’s first-party medical file, but Plaintiffs’
counsel failed to grant such authorization.2 (See id. at p. 73 of 74.) On April 25,
2011, Whiteside provided Plaintiffs with consent to settle with Kresge and waived its
subrogation rights. (Id. at p. 36 of 65.) Subsequently, Plaintiffs settled their claim
with Kresge for $72,500.00. (See id.)

On or about April of 2011, Defendant changed its policies to require that an insured’s
consent be obtained before a UIM adjuster could access information within a medical payments file.
(See Doc. 30-2, p. 9 of 65.) Defendant, however, failed to inform Plaintiffs of this change in policy.
(See id.)
2

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Over the next several months, Whiteside and Plaintiffs’ counsel
remained in close contact. On May 31, 2011, Whiteside sent a letter to Plaintiffs’
counsel concerning the status of Plaintiff’s injuries, requesting Plaintiff’s medical
records, and again asking for authorization to review Plaintiff’s first party medical
file, to which Plaintiffs’ counsel again did not respond. (See id. at p. 38 of 65.)
After Whiteside sent a similar letter to Plaintiffs’ counsel on July 21, 2011,
Plaintiffs’ counsel granted Whiteside verbal permission to review Plaintiff’s first
party medical file. (See id. at p. 40 of 65.) On September 14, 2011, Plaintiffs’
counsel provided Whiteside with over 800 pages of documentation, including
medical records both predating and postdating the motor vehicle accident and
photographs of Plaintiff’s injuries, to which Whiteside requested more
documentation regarding Plaintiff’s vision, including a vocational report and records
to confirm that any vision problem was causally related to the accident. (Id. at p. 48
of 65.) On November 7, 2011, Plaintiffs’ counsel forwarded to Whiteside additional
medical records and indicated that further documentation was being gathered. (Id. at
p. 50 of 65.) On January 27, 2012, after receiving another letter from Whiteside
requesting more documentation, Plaintiffs’ counsel provided Defendant with a
vocational report. (See id. at pp. 54, 57 of 65.) Plaintiffs’ counsel also opined to
Whiteside that the value of Plaintiff’s claim exceeded $200,000.00 and requested
that Defendant tender $100,000.00, the amount of one of the policy limits. (Id. at p.
57 of 65.)
Following the receipt of the vocational report, Defendant hired Kevin
Rauch (“Rauch”) to assist with Plaintiff’s claim. (Doc. 30-3, p. 19 of 48.) On
February 24, 2012, Rauch informed Plaintiffs’ counsel that he represented Defendant
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and requested that a demand letter be sent when available. (Id.) On March 16, 2012,
Plaintiffs’ counsel sent Rauch a demand for $250,000.00. (Id. at pp. 21–22 of 48.)
On April 12, 2012, Rauch expressed a desire to obtain Plaintiff’s statement under
oath. (See id. at p. 24 of 48.) Additionally, Rauch sent to Plaintiffs’ counsel
authorizations to obtain records from five medical facilities, which Plaintiffs’
counsel forwarded to Plaintiff despite his contention that the records had previously
been provided to Defendant. (See id. at pp. 24, 26 of 48.) On June 5, 2012,
Plaintiffs’ counsel sent all of the signed authorizations to Rauch, and, two days later,
sent more pre- and post- accident medical records. (See id. at pp. 32, 34 of 48.) The
authorizations were sent to Litigation Solutions, a professional record procurement
company, to obtain Plaintiff’s medical records. (Id. at p. 36 of 48.) Over the next
several weeks, copies of all medical records obtained through the authorizations were
sent to Plaintiffs’ counsel. (Id. at pp. 40–44 of 48.) On June 12, 2012, Plaintiff gave
his statement under oath and signed an additional medical authorization. (See id. at p.
38 of 48.)
On September 14, 2012, Plaintiffs’ counsel informed Rauch that
Plaintiffs were becoming frustrated at the delay in settling their claim. (Id. at p. 46
of 48.) Plaintiffs’ counsel further informed Rauch that Plaintiffs were withdrawing
their previous settlement demand, indicating that Plaintiff had additional injuries that
he wished to be considered in his claim. (Id.) On November 5, 2012, Plaintiffs’
counsel informed Rauch that Plaintiff, who had received more authorizations,
objected to signing the ones that allowed Defendant access to medical records
regarding HIV/AIDS status, drug and alcohol treatment, and psychiatric and
psychological treatment. (Id. at p. 48 of 48.) After amended authorizations were
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sent, the authorizations were signed and returned to Rauch, which were in turn
forwarded to Litigation Solutions. (See id. at pp. 4–12 of 33.) After Plaintiffs’
counsel requested Defendant’s position regarding settlement, Rauch stated that the
Defendant continued to evaluate Plaintiff’s claim with a view toward providing an
offer of settlement. (See id. at pp. 6, 8 of 33.) On April 8, 2013, more medical
records received from Plaintiff’s signed authorizations were sent to Plaintiffs’
counsel. (Id. at p. 14 of 33.)
On April 29, 2013, Dr. Craig Fultz (“Fultz”), an orthopedic surgeon
retained by Defendant, issued a report following a review of Plaintiff’s medical
records. (Id. at p. 16 of 33.) In his report, Fultz opined that only four of Plaintiff’s
medical diagnoses could be attributed to the motor vehicle accident. (Id. at p. 29 of
33.) These diagnoses consisted of: (1) neck pain; (2) chronic low back pain; (3)
chronic bilateral knee pain; and (4) vision difficulty. (Id. at pp. 28–29 of 33.) Fultz
further opined that Plaintiff’s chronic low back pain, which existed prior to the
accident, was not materially or substantially changed by the accident and would have
inevitably led to the back surgery that Plaintiff underwent. (Id. at p. 29 of 33.) Fultz
also opined that Plaintiff’s bilateral knee pain was not materially or substantially
changed by the accident. (Id.) On May 20, 2013, Rauch forwarded this report to
Plaintiffs’ counsel. (Id. at p. 33 of 33.)
After Defendant procured Plaintiff’s extensive medical records,
obtained Plaintiff’s statement under oath, and arranged for Fultz to review Plaintiff’s
medical records, Defendant completed its evaluation of Plaintiff’s claim. (See Doc.
30-1, p. 21 of 74.) On May 20, 2013, Defendant set a reserve range of Plaintiff’s
claim of $0 to $40,000.00. (Id.) Subsequently, Defendant offered Plaintiffs a
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$10,000.00 settlement offer, which Plaintiffs rejected. (Doc. 41, p. 50 of 50.) On
May 20, 2014, Stuart J. Setcavage (“Setcavage”) issued a report for Plaintiff opining
that Defendant’s delay in investigating and evaluating Plaintiff’s UIM claim failed to
conform to industry standards, violated the Pennsylvania Unfair Insurance Practices
Act, 40 Pa.C.S.A. §§ 1171.1 et seq., and demonstrated a reckless disregard for the
rights and interests of its insured. (Doc. 39, p. 11 of 51.)
B.

Procedural History

This case was originally filed in the Dauphin County Court of Common
Pleas on May 31, 2013, but was removed to this court by Defendant on July 3, 2013,
based on diversity of citizenship. (Doc. 1.) On July 31, 2014, Defendant filed the
instant motion for partial summary judgment (Doc. 29), a supporting brief (Doc. 30),
and a statement of material facts (Doc. 31). The motion seeks judgment in favor of
Defendant on Plaintiff’s bad faith claim. Plaintiffs filed an answer to the motion
(Doc. 34), a brief in opposition (Doc. 36), an answer to the statement of material
facts (Doc. 35), and a counter-statement of material facts (Doc. 37). Defendant filed
a reply brief (Doc. 45) and an answer to the counter-statement of material facts (Doc.
46) on September 8, 2014. Thus, Defendant’s motion for partial summary judgment
is ripe for disposition.
II.

Legal Standard
Federal Rule of Civil Procedure 56 provides that summary judgment is

appropriate when no genuine issue exists as to any material fact and when the
moving party is entitled to judgment as a matter of law. See Fed. R. Civ. P. 56(a). A
fact is “material” if “proof of its existence or nonexistence would affect the outcome
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of the lawsuit under the law applicable to the case.” Burke v. Transam Trucking,
Inc., 605 F. Supp. 2d 647, 650 (M.D. Pa. 2009). An issue of material fact is genuine
if “the evidence is such that a reasonable jury might return a verdict for the nonmoving party.” Id.
When considering a motion for summary judgment, a court must look
beyond the pleadings and into the factual record. Celotex Corp. v. Catrett, 477 U.S.
317, 324 (1986). The nonmoving party may not merely restate allegations made in
the pleadings or rely upon factually unsupported legal conclusions. See id. at
323–24. Instead, the nonmoving party must support each essential element of its
claim with specific evidence from the record. Id. at 317. All factual doubts and
reasonable inferences are to be resolved in favor of the nonmoving party. Id.
The moving party has the initial burden of proving that no genuine issue
of material fact exists. See Celotex Corp. v. Catrett, 477 U.S. 317, 323 (U.S. 1986).
Once this burden is met, the burden shifts to the nonmoving party to produce
evidence proving the existence of every essential element to its case. Id. The
nonmoving party must then “go beyond the pleadings by way of affidavits,
depositions . . . or the like in order to demonstrate specific material facts which give
rise to a genuine issue.” Id. at 324. In considering a motion for summary judgment,
the court is not to engage in credibility determinations or the weighing of evidence.
Burke, 605 F. Supp. 2d at 650. Instead, when the credibility of witnesses is at issue
or when conflicting evidence must be weighed, a trial is needed. Id.

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III.

Discussion
Plaintiffs assert their claim for bad faith pursuant to 42 Pa.C.S.A. §

8371, which provides a statutory remedy for an insurer’s bad faith conduct. Section
8371 provides:
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 (1990).3
Bad faith claims “are fact specific and depend on the conduct of the
insurer vis à vis the insured.” Condio v. Erie Ins. Exch., 899 A.2d 1136, 1143 (Pa.
Super. Ct. 2006) (internal citations omitted). Generally, to prevail on a bad faith
claim, “the plaintiff must show that the defendant did not have a reasonable basis for
denying benefits under the policy and that [the] defendant knew or recklessly
disregarded its lack of reasonable basis in denying the claim.” Terletsky v.
Prudential Prop. & Cas. Ins. Co., 649 A.2d 680, 688 (Pa. Super. Ct. 1994) (citations
omitted); see also Keefe v. Prudential Prop. & Cas. Ins. Co., 203 F. 3d 218, 225 (3d
Cir. 2005) (adopting the definition of bad faith as set forth in Terletsky). A course of
action pursuant to Section 8371 is not limited to an insurer’s bad faith in denying a

The Pennsylvania Superior Court has noted that Pennsylvania’s bad faith statute extends
to the handling of UIM claims. Condio v. Erie Ins. Exch., 899 A.2d 1136, 1142 (Pa. Super. Ct. 2006)
(citing Brown v. Progressive Ins. Co., 860 A.2d 493, 497 (Pa. Super. Ct. 2004)).
3

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claim. Rather, a plaintiff may also successfully assert an action for an insurer’s bad
faith in investigating a claim, O’Donnell v. Allstate Ins. Co., 734 A.2d 901, 906 (Pa.
Super. Ct. 1999), such as a failure to conduct a reasonable investigation based upon
available information, Giangreco v. U.S. Life Ins. Co., 168 F. Supp. 2d 417, 423
(E.D. Pa. 2001), and failure to communicate with the claimant. Romano v.
Nationwide Mut. Fire Ins. Co., 646 A.2d 1228, 1232 (Pa. Super. Ct. 1994) (citing 3
Appleman, Ins. Law & Practice § 1612 (1967 & Supp. 1991)); see also Johnson v.
Progressive Ins. Co., 987 A.2d 781, 784 (Pa. Super. Ct. 2009). Additionally, even
when a claim is eventually paid, “[d]elay is a relevant factor in determining whether
bad faith . . . occurred.” Kosierowski v. Allstate Ins. Co., 51 F. Supp. 2d 583, 588
(E.D. Pa. 1999) (citing Klinger v. State Farm Mut. Auto Ins. Co., 115 F.3d 230, 234
(3d Cir. 1997)).
To constitute bad faith, it is not necessary that the insurer’s conduct be
fraudulent; however, “mere negligence or bad judgment is not bad faith.” Terletsky,
649 A.2d at 688. Instead, the plaintiff must show that the insurer breached its duty
of good faith “through some motive of self-interest or ill-will.” Id. Significantly,
there is a heightened burden of proof in bad faith claims, such that a plaintiff must
demonstrate by “clear and convincing evidence” that an insurer acted in bad faith.
Id. at 688. The standard “requires a showing by the plaintiff[] that the evidence is so
clear, direct, weighty[,] and convincing as to enable a clear conviction, without
hesitation, about whether or not the defendant[] acted in bad faith.” Bostick v. ITT
Hartford Grp., Inc., 56 F. Supp. 2d 580, 587 (E.D. Pa. 1999) (citations omitted).
Thus, to defeat a bad faith claim, an insurer need only show that it acted reasonably.
For instance:
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The insurance company need not show that the process
used to reach its conclusion was flawless or that its
investigatory methods eliminated possibilities at odds with
its conclusions. Rather, an insurance company simply
must show that it conducted a review or investigation
sufficiently thorough to yield a reasonable foundation for
its action.
Mann v. UNUM Life Ins. Co. of Am., No. 02-1346, 2003 WL 22917545, *7 (E.D. Pa.
Nov, 23, 2003). Likewise, in bad faith claims involving “a long period of time
between demand and settlement,” the delay “does not, on its own, necessarily
constitute bad faith.” Kosierowski, 51 F.Supp. 2d at 588. Rather, a court should
look “to the degree to which a defendant insurer knew that [it] had no reason to deny
the [claim]; if [the] delay is attributable to the need to investigate further or even
simple negligence, no bad faith has occurred.” Id. at 588–89.
Applying these legal principles to the present case, Plaintiffs’ bad faith
claim must be dismissed. Although Defendant is not denying payment of Plaintiff’s
UIM claim, Plaintiffs contend that Defendant’s delay in investigating and evaluating
the UIM claim constitutes bad faith. Even when the evidence is viewed in the light
most favorable to Plaintiffs, however, it is clear that Plaintiffs have failed to meet
their burden of proving by clear and convincing evidence that Defendant acted in bad
faith.
Plaintiffs fail to show that any delay in Defendant’s investigation and
evaluation of Plaintiff’s UIM claim was motivated by self-interest or ill-will.
Defendant did not know of a possible UIM claim until May 5, 2010, when Plaintiffs’
counsel expressly discussed a potential UIM claim, but, at that time, Plaintiff did not
definitively know whether such a claim would be necessary. On December 10, 2010,
Defendant reviewed Plaintiff’s medical payments file and noted that the date on
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Plaintiff’s last treatment bill was September 13, 2010, and that medicals records
following Plaintiff’s back surgery showed that the surgery had been successful,
decreasing the likelihood of further medical care being required. Because Defendant
reasonably believed that a UIM claim would no longer be necessary, Defendant
closed Plaintiff’s file. It was not until April 6, 2011, that Plaintiffs’ counsel
requested that a UIM adjuster be assigned.4 After a UIM adjuster was assigned,
Defendant spent approximately two years collecting Plaintiff’s medical records,5
obtaining Plaintiff’s statement under oath, arranging for a review of Plaintiff’s
medical records by an orthopedic surgeon, and completing its evaluation of
Plaintiff’s UIM claim. Although two years may be a long period of time, a long
period of time does not, on its own, constitute bad faith, and Plaintiffs fail to present
evidence suggesting obfuscation, dishonesty, or malice.
Plaintiffs contend that Defendant acted in bad faith when it “questioned
the causal relationship of [Plaintiff’s] injuries to the motor vehicle accident” because
Defendant had not questioned causality in Plaintiff’s first party medical claim. (Doc.
36, p. 7 of 23.) However, Plaintiffs admit that a “payment of first party benefits does
not, in and of itself, constitute an admission of causation” and that an insurer may
deny UIM benefits after issuing payment of first party benefits. See Pantelis v. Erie

Plaintiff contends that Defendant should have been aware of a potential UIM claim from
September 6, 2009, the date when Plaintiff reported to Defendant that he had been involved in a motor
vehicle accident. (Doc. 36, pp. 6–7 of 23.) However, Defendant had no way of realistically knowing
until April 6, 2011, that Plaintiff would indeed require UIM benefits. Prior to that time, Plaintiff himself
was not even aware that UIM benefits would be necessary.
4

Medical records were especially important in this case because of Plaintiff’s extensive
history of medical ailments that predated the motor vehicle accident. Therefore, Plaintiff’s medical
condition both pre- and post- accident needed to be established to identify what ailments were caused by
the accident.
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Ins. Exch., 890 A.2d 1063, 1068 (Pa. Super. Ct. 2006) (holding that “an insurer’s
payment of first party benefits does not, without more, constitute a binding
admission of causation”); Thomer v. Allstate Ins. Co., 790 F. Supp. 2d 360, 373
(E.D. Pa. 2011) (adopting the holding of the Pantelis court). Therefore, Defendant
was entitled to investigate in the UIM claim whether Plaintiff’s injuries were caused
by the motor vehicle accident even though Defendant had issued payment on
Plaintiff’s first party medical claim. Likewise, Defendant was entitled to investigate
in the UIM claim whether Plaintiff was liable in any way for the motor vehicle
accident even though Defendant had already issued payment on Plaintiff’s first party
medical claim. See Glover v. State Farm Mut. Auto. Ins. Co., 950 A.2d 335, 337 (Pa.
Super. Ct. 2008) (noting that “payment of first party benefits . . . is not an admission
of liability”). Thus, Plaintiffs have not proved that any delay in investigating and
evaluating Plaintiff’s UIM claim was for a purpose other than the need for further
investigation.
Furthermore, Defendant has proved that it acted reasonably under the
circumstances. While its investigatory process may not be flawless, Defendant has
proved that it conducted an investigation sufficiently thorough to yield a reasonable
foundation for its action. If it had not collected Plaintiff’s medical records, obtained
Plaintiff’s statement under oath, or arranged for a review of Plaintiff’s medical
records by an orthopedic surgeon, all of which took time to complete, Defendant
would not have had the information it needed to conduct a thorough evaluation of
Plaintiff’s claim. No evidence exists that Defendant did not conduct its investigation
in a reasonable manner, even if Defendant did not move as quickly as Plaintiffs
would have liked or anticipate the possibility of a UIM claim even before Plaintiffs’
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counsel notified of the claim. Plaintiffs have thus failed to meet their burden of
proving by evidence so clear, direct, weighty, and convincing as to enable a clear
conviction, without hesitation, that Defendant acted in bad faith. The court will grant
judgment to Defendant on Plaintiffs’ bad faith claim.
IV.

Conclusion
For the foregoing reasons, Defendant’s motion for partial summary

judgment on Count II of the complaint will be granted. An appropriate order will be
issued.
s/Sylvia H. Rambo
United States District Judge
Dated: October 20, 2014.

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