Ridolfi v. State Farm Mutual Automobile Insurance Company
Filing
50
MEMORANDUM OPINION re 41 First MOTION for Partial Summary Judgment filed by State Farm Mutual Automobile Insurance Company. Signed by Magistrate Judge Martin C. Carlson on April 10, 2017. (kjn)
IN THE UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF PENNSYLVANIA
TRACEY RIDOLFI,
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:
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:
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Plaintiff
v.
STATE FARM MUTUAL
AUTOMOBILE INSURANCE
COMPANY,
Defendant
Civil No. 1:15-CV-859
(Magistrate Judge Carlson)
MEMORANDUM OPINION
I.
Introduction
This is an insurance dispute between Tracey Ridolfi and her insurer, State
Farm Mutual Automobile Insurance Company, relating to claims concerning State
Farm’s alleged refusal to provide underinsured motorist (UIM) coverage to Ridolfi.
Currently Ridolfi’s second amended complaint, (Doc. 21), the operative pleading in
this action, brings two claims against State Farm: First, Ridolfi alleges that State
Farm’s conduct constitutes a breach of this insurance contract. In addition, Ridolfi
contends that State Farm violated Pennsylvania’s bad faith statute, 42 Pa. Cons. Stat.
Ann. § 8371, by: (1) misstating the scope of its coverage; (2) insisting upon a
sworn statement from its insured; (3) unreasonably delaying its investigation of this
claim and requiring the production of multiple sets of medical records; and (4)
1
failing to keep Ridolfi fully informed in writing on the progress of her claim.
Ridolfi’s bad-faith claim is now being challenged by State Farm’s pending
motion for partial summary judgment. (Doc. 41) In support of this motion State
Farm argues that it promptly began adjusting this UIM claim upon receipt of the
claim in September of 2013. State Farm also argues that any initial misstatement of
the policy limits for this claim was a product of an innocent mistake, a mistake
compounded by the fact that the amount of UIM insurance coverage requested and
paid for by the Ridolfis was significantly lower than the actual coverage reflected on
the policy issued by State Farm. State Farm also notes that it promptly corrected
this error in a fashion that avoided any potential prejudice to Ridolfi. As for State
Farm’s requests for a sworn statement from Ridolfi and medical records, State Farm
contends that these requests were permitted by the policy, and these requests for
medical records were required due to discrepancies in the records produced by the
plaintiff.
Furthermore, State Farm also observes that Ridolfi resolved her
underlying claim against the original tortfeasor for less than the tortfeasor policy
limits, yet another factor which cautioned in favor of careful review of this specific
UIM claim.
Upon consideration of the parties’ briefs and the evidence submitted by the
parties, the Court finds insufficient evidence to support Ridolfi’s bad-faith claim,
2
and concludes that State Farm is entitled to summary judgment on this claim.
Therefore, for the reasons set forth below, the motion for partial summary judgment
will be granted.
II.
Statement of Facts and of the Case1
The chain of events which led to this lawsuit began on October 26, 2008 when
Tracey Ridolfi was involved in an automobile accident with a tortfeasor who was
insured by Liberty Mutual Insurance Company. Following this collision, Ridolfi
filed a claim with the tortfeasor’s insurance carrier, Liberty Mutual, and notified her
own insurance carrier, State Farm, of this accident. Following notification of this
accident, Ridolfi’s counsel exchanged correspondence with State Farm seeking
information regarding medical bills paid out by State Farm on Ridolfi’s behalf in
January of 2009, but there is no record of Ridolfi making any specific demand upon
State Farm for payment of UIM benefits prior to August 2013.
Instead, the initial focus of Ridolfi’s efforts to obtain compensation for her
injuries appears to have been with the tortfeasor and the tortfeasor’s insurance
carrier, Liberty Mutual. As part of this effort, on October 20, 2010, Ridolfi filed a
lawsuit against the original tortfeasor, alleging that she was injured as a result of the
1 This statement of facts is taken from the competing submissions of the parties, to
the extent that these submissions are corroborated by undisputed evidence.
3
tortfeasor’s negligence. After nearly four years of litigation, on September 15,
2014 Ridolfi settled this claim against Liberty Mutual, compromising the claim in
return for the payment of $85,000, a sum which was less than the full amount of the
tortfeasor’s policy limits with Liberty Mutual, $100,000. State Farm consented in
this settlement and waived any subrogation rights it might have as part of the
settlement of this lawsuit.
The first clear notice State Farm received of Ridolfi’s intent to also bring a
UIM coverage claim against her own insurer came on August 28, 2013, when
Ridolfi’s counsel wrote to State Farm. In this August 28, 2013, correspondence
Ridolfi’s counsel “put [State Farm] on notice that this case may involve a UM/UIM
potential claim.”
In this August 2013 correspondence, Ridolfi’s counsel also
sought policy limits and coverage information from State Farm. Three weeks later,
later on September 20, 2013, State Farm’s claims adjuster responded to this notice
by providing Ridolfi’s attorney a letter which, stated that the UIM coverage under
Ridolfi’s policy was $50,000/$100,000 with stacking coverage. In this September
20 letter State Farm also invited Ridolfi’s counsel to advise the insurer if he
disagreed with this policy limits report. In fact, this policy limits description was
erroneous but the error was, in part, a product of confusion which stemmed from
inconsistencies between the coverage sought by the Ridolfis, and the coverage
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actually conferred upon them by States Farm. The coverage limits described in
State Farm’s September 20, 2013, letter accurately described the policy limits
requested in the Ridolfis’ 2004 insurance application. However, in fact, the policy
issued to the plaintiff and her spouse conferred UIM coverage to them beyond the
coverage which they requested. The actual amount of this coverage was $100,000
per person and $300,000 per accident.
On November 5, 2013, Ridolfi’s attorney notified State Farm of this
discrepancy in a letter which conveyed a $700,000 demand upon State Farm, and
threatened the filing of a statutory bad faith claim against this insurance company. 2
Having received this November 5, 2013, correspondence, State Farm promptly
responded, declining Ridolfi’s $700,000 settlement demand but reforming and
clarifying the scope of its coverage and confirming UIM policy coverage of
$100,000 per person and $300,000 per accident on each of two vehicles.3
2 In April of 2014 Ridolfi subsequently amended this settlement demand to a
demand for the full amount of State Farm’s UIM coverage, $200,000. This
amended settlement demand, however, was cast in terms which were simply not
conducive to further discussion, since Ridolfi’s counsel informed State Farm that
this policy limits demand was non-negotiable. Ridolfi’s lawyer’s letter then gave
State Farm 15 days in which to surrender its policy limits or face bad faith claims.
3 Ridolfi’s second amended complaint also originally alleged on-going bad faith by
State Farm in the misrepresentation of these policy limits, claiming that State Farm,
through its counsel, later repeated the false assertion that the policy limits were
$50,000/$100,000 in May 2014 correspondence to the plaintiff’s attorney. Ridolfi
5
As the parties strived to clarify these policy limitations, they also began
exchanging requests for information regarding the nature and extent of Ridolfi’s
medical care and treatment.
State Farm’s efforts to fully document Ridolfi’s
injuries and medical expenses were both understandable and prudent given the
various demands which had been tendered to this insurer by counsel, demands which
initially sought $700,000 and then later included what was described as a
non-negotiable demand for State Farm’s UIM insurance policy limits.
These
efforts to secure medical records were marked by some delays and confusion;
however, those delays and confusion were not attributable exclusively to State Farm.
Rather, they reflected a confluence of events, including some misunderstanding and
mistakes on the plaintiff’s part. Initially, on November 5, 2013, plaintiff’s counsel
reported that he was sending all of Ridolfi’s medical records to State Farm. After
State Farm was unable to confirm receipt of these records, the claims adjuster wrote
to counsel requesting documentation of Ridolfi’s medical specials on November 22,
2013.
apparently is no longer pursuing this particular claim of bad faith, which is
demonstrably incorrect and apparently rests upon a misreading of this May 2014
letter, which described the insurance coverage that the original tortfeasor had
originally had through Liberty Mutual, and did not purport to describe State Farm’s
UIM policy limits. Since this assertion of bad faith by the plaintiff had no basis in
fact and has been abandoned by the plaintiff, we will not discuss this discredited
allegation further.
6
When these medical records were not forthcoming, State Farm’s claims
adjuster followed up on January 3, 2014, once again requesting these medical
records. The claims adjuster then reached out to Ridolfi’s counsel on January 7,
2014 and explained that State Farm had only received a single April 2012 medical
report relating to the plaintiff. At this juncture, Ridolfi’s counsel forwarded, and
State Farm, received medical records from fifteen health care providers.
These records, however, were incomplete in several particulars. First, the
medical files did not include any records detailing Ridolfi’s physical condition prior
to the October 2008 accident. Second, the temporal scope of the records was
limited in another respect in that the disclosed records did not include any treatment
records relating to medical care received by Ridolfi after March of 2012. Finally,
the medical records did not include any records pertaining to prior accidents
involving Ridolfi. This oversight was understandable, since Ridolfi’s counsel had
previously been unaware of any prior accidents.
Throughout March and April of 2014 State Farm and Ridolfi’s counsel
continued to exchange correspondence regarding State Farm’s request for medical
records. While the parties communicated with one another it is apparent that they
did not fully understand one another. State Farm avers that it was seeking to obtain
specific additional and supplemental material, and its correspondence seeks medical
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records, but does not identify specifically what further records were being sought.
Ridolfi’s counsel, in turn, simply repeated that he has provided the medical records,
without appreciating that State Farm was seeking documents beyond those produced
in January of 2014.
The need for further medical records became more apparent as this matter
progressed. In April 2014 State Farm retained counsel to assist in the resolution of
this claim. As part of this claims resolution effort, counsel scheduled a sworn
statement under oath from Ridolfi on June 19, 2014. While Ridolfi alleges that this
act by State Farm evidenced its bad faith, the scheduling of this statement under oath
was a procedure that was specifically authorized under Ridolfi’s policy with State
Farm, and was an appropriate measure given the scope of her insurance claim
demands made here.4 In the course of the statement under oath, Ridolfi testified to
Ridolfi also suggests that taking this sworn statement was improper because State
Farm had been invited in February of 2012 to attend a deposition of the plaintiff
conducted in connection with her lawsuit against the original tortfeasor. While
State Farm denies that it was invited to this deposition, even if it had been invited to
attend this deposition in a case in which it was not a party, for the reasons discussed
below, we conclude that the failure to attend this deposition does not evidence bad
faith. First, given State Farm’s status as a non-party, it is doubtful that this
company could have participated in the deposition in any meaningful fashion.
Second, the deposition took place some 16 months prior to the first notice by Ridolfi
that she intended to bring a UIM claim against State Farm. This insurers’ lack of
prescience and inability to predict the future does not equate to bad faith. Third,
even if State Farm had attended this deposition in February of 2012, by 2014 it
would still have been justified in requiring a statement under oath from Ridolfi, who
4
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matters which renewed State Farm’s interest in obtaining further medical records.
Specifically, Ridolfi testified that she had received medical treatment after March of
2012, the last date upon which plaintiff’s counsel had produced medical records. In
addition, Ridolfi acknowledged that she had suffered injuries from a prior motor
vehicle accident.
Given these disclosures by Ridolfi, State Farm pursued additional efforts to
secure further medical records, including several attempts to subpoena these
records. These efforts were marked by some missteps and miscommunication
between the parties, but ultimately resulted in the receipt of some additional,
previously undisclosed medical records, information that was relevant to State
Farm’s evaluation of Ridolfi’s $700,000 claim and settlement demand.
State Farm also sought employment records from Ridolfi as part of its
evaluation of this claim.
While Ridolfi has alleged that these requests were
irrelevant to her UIM claim, it appears that plaintiff’s counsel had suggested on
several occasions that Ridolfi’s future employability was uncertain, and had
indicated that Ridolfi might be making a claim for loss of future earnings, assertions
which made an assessment of Ridolfi’s employment history relevant to any claims
evaluation.
was demanding a policy limits payment from her insurer, in order to document the
scope and extent of her injuries and treatment since 2012.
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As the parties engaged in these efforts, Ridolfi continued to litigate a claim
against the tortfeasor’s insurance carrier, Liberty Mutual. That underlying claim
was not resolved until September 15, 2014, when Ridolfi settled this claim against
Liberty Mutual, compromising the claim in return for the payment of $85,000, a sum
which was less than the full amount of the tortfeasor’s policy limits with Liberty
Mutual, $100,000.
It is against this factual background that Ridolfi brought this statutory bad
faith claim in state court in April of 2015 pursuant to 42 Pa. Cons. Stat. Ann. § 8371,
alleging that State Farm engaged in bad faith by, inter alia, (1) misstating the scope
of its coverage; (2) insisting upon a sworn statement from its insured; (3)
unreasonably delaying its investigation of this claim and requiring the production of
multiple sets of medical records; and (4) failing to keep Ridolfi fully informed in
writing on the progress of her claim.
State Farm removed this case to federal court, (Doc. 1),5 and at the close of
5 Once Ridolfi sued State Farm, State Farm attempted to secure medical records by
subpoena from various third party care givers. There were some false starts in this
effort. Subpoenas were sought in state court even through this matter had been
removed to federal court, and the initial federal court subpoenas that were later
issued did not fully comply with Rule 45. While these discovery missteps
occurred, they were promptly corrected by State Farm when it was notified by
plaintiff’s counsel of his objections. Therefore, we do not equate these actions with
bad faith. On this score, we note that we follow a path travelled by many other
courts which have rebuffed: “attempts to prop up [an] insurance-based bad faith
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discovery has filed a motion for partial summary judgment, which seeks summary
judgment on this statutory bad faith claim. (Doc. 41.) This motion is fully briefed by
the parties and is, therefore, ripe for resolution.
For the reasons set forth below, this motion will be granted, and Ridolfi’s bad
faith claim will be dismissed.
III.
Discussion
A.
Summary Judgment Standard of Review
Rule 56(a) of the Federal Rules of Civil Procedure provides as follows:
A party may move for summary judgment, identifying
each claim or defense – or the part of each claim or
defense – on which summary judgment is sought. 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.
The court should state on the record the reasons for
granting or denying the motion.
Fed. R. Civ. P. 56(a). For purposes of Rule 56, a fact is material if proof of its
existence or nonexistence might affect the outcome of the suit under the applicable
substantive law. Haybarger v. Laurence Cnty. Adult Prob. & Parole, 667 F.3d 408,
claim under 42 Pa. Cons.Stat. § 8371 by claiming that [the insurer] engaged in bad
faith during the discovery stage of the instant litigation. However, Pennsylvania
courts have held that § 8371 ‘clearly does not contemplate actions for bad faith
based upon allegation of discovery violations.’ O'Donnell ex rel. Mitro v. Allstate
Ins. Co., 734 A.2d 901, 908 (Pa.Super.Ct.1999).” Duda v. Standard Ins. Co., 649
F. App'x 230, 237 (3d Cir. 2016)
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412 (3d Cir. 2012) (quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248
(1986)). For an issue to be genuine, “all that is required is that sufficient evidence
supporting the claimed factual dispute be shown to require a jury or judge to resolve
the parties’ differing versions of the truth at trial.” Id. (quoting Anderson, 477 U.S.
at 248-49).
Accordingly, in support of a motion for summary judgment, the moving party
must show that if the evidence of record were reduced to admissible evidence in
court, it would be insufficient to allow the non-moving party to carry its burden of
proof. See Celotex v. Catrett, 477 U.S. 317, 323 (1986). Provided the moving
party has satisfied this burden, “its opponent must do more than simply show that
there is some metaphysical doubt as to the material facts.” Scott v. Harris, 550 U.S.
372, 380 (2007).
Instead, if the moving party has carried its burden, the
non-moving party must then respond by identifying specific facts, supported by
evidence, which show a genuine issue for trial, and may not rely upon the allegations
or denials of its pleadings. See Martin v. Godwin, 499 F.3d 290, 295 (3d Cir.
2007); see also Fed. R. Civ. P. 56 (c).
In adjudicating the motion, the court must view the evidence presented in the
light most favorable to the opposing party, Anderson, 477 U.S. at 255, and draw all
reasonable inferences in the light most favorable to the non-moving party, Big Apple
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BMW, Inc. v. BMW of North America, Inc., 974 F.2d 1358, 1363 (3d Cir. 1992).
Where the non-moving party’s evidence contradicts the movant’s, then the
non-movant’s must be taken as true. Id. Additionally, the court is not to decide
whether the evidence unquestionably favors one side or the other, or to make
credibility determinations, but instead must decide whether a fair-minded jury could
return a verdict for the plaintiff on the evidence presented. Id. at 252; see also Big
Apple BMW, 974 F.2d at 1363. In reaching this determination, the Third Circuit has
instructed that:
To raise a genuine issue of material fact . . . the opponent
need not match, item for item, each piece of evidence
proffered by the movant. In practical terms, if the
opponent has exceeded the “mere scintilla” threshold and
has offered a genuine issue of material fact, then the court
cannot credit the movant’s version of events against the
opponent, even if the quantity of the movant’s evidence
far outweighs that of its opponent. It thus remains the
province of the factfinder to ascertain the believability and
weight of the evidence.
Id. In contrast, “[w]here the record taken as a whole could not lead a rational trier
of fact to find for the non-moving party, there is no genuine issue for trial.”
Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986)
(internal quotation marks omitted); NAACP v. North Hudson Reg’l Fire & Rescue,
665 F.3d 464, 476 (3d Cir. 2011).
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B.
Plaintiff’s Bad-Faith Claim Fails on its Merits
In this case, Ridolfi argues that State Farm’s processing of her UIM claim was
so unreasonable that it violated Pennsylvania’s bad faith statute, 42 Pa. Cons. Stat.
Ann. § 8371. In support of this assertion of bad faith, Ridolfi points to State Farms’
misstatement of its coverage limits, alleged delay in claims processing, insistence
upon a sworn statement under oath from Ridolfi, persistence in collecting medical
records and failure to comply with insurances regulations regarding periodic status
notices to insureds as evidence of bad faith. We find, however, that, while both
parties indulged in occasional missteps in the process of reviewing and litigating this
claim, the essentially uncontested evidence does not meet the demanding, precise
and exacting legal standards prescribed under Pennsylvania law for a bad faith
insurance processing claim.
Under Pennsylvania law, “[i]n an action arising under an insurance policy, if
the court finds that the insurer has acted in bad faith toward the insured,” the court
can award the claimant interest, punitive damages, court costs and attorney fees. 42
Pa. Cons. Stat. Ann. § 8371. The Third Circuit has explained “bad faith” in this
context as follows:
“Bad faith” on part of insurer is any frivolous or
unfounded refusal to pay proceeds of a policy; it is not
necessary that such refusal be fraudulent. For purposes
of an action against an insurer for failure to pay a claim,
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such conduct imports a dishonest purpose and means a
breach of a known duty (i.e., good faith and fair dealing),
through some motive of self-interest or ill will; mere
negligence or bad judgment is not bad faith.
Nw. Mut. Life Ins. Co. v. Babayan, 430 F.3d 121, 137 (3d Cir. 2005). Although an
insurer’s conduct need not be fraudulent to rise to the level of bad faith, “mere
negligence or bad judgment is not bad faith.” Id. (quoting Brown v. Progressive
Ins. Co., 860 A.2d 493, 501 (Pa. 2004). Rather, under Pennsylvania law, “[b]ad
faith is a frivolous or unfounded refusal to pay, lack of investigation into the facts, or
a failure to communicate with the insured. See Coyne v. Allstate Ins. Co., 771
F.Supp. 673, 678 (E.D.Pa.1991) (bad faith is failure to acknowledge or act promptly
on the claims, or refusing to pay without reasonable investigation of all available
information); Romano v. Nationwide Mut. Fire Ins. Co., 435 Pa.Super. 545, 646
A.2d 1228 (1994).” Frog, Switch & Mfg. Co., Inc. v. Travelers Ins. Co., 193 F.3d
742, 751 (3d Cir. 1999). “Ultimately, in order to recover on a bad faith claim, the
insured must prove: (1) that the insurer did not have a reasonable basis for denying
benefits under the policy; and (2) that the insurer knew of or recklessly disregarded
its lack of a reasonable basis in denying the claim.” Nw. Mut. Life Ins. Co. v.
Babayan, 430 F.3d 121, 137 (3d Cir. 2005). Further, “[t]o recover for bad faith, ‘a
plaintiff must show by clear and convincing evidence that the insurer (1) did not
have a reasonable basis for denying benefits under the policy and (2) knew or
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recklessly disregarded its lack of a reasonable basis in denying the claim.’” Post v.
St. Paul Travelers Ins. Co., 691 F.3d 500, 522 (3d Cir. 2012) (quoting Condio v. Erie
Ins. Exch., 899 A.2d 1136, 1143 (Pa. Super. Ct. 2006)) (emphasis added). “[T]his
heightened standard requires the insured to provide evidence ‘so clear, direct,
weighty and convincing as to enable a clear conviction, without hesitation, about
whether or not the defendants acted in bad faith.’ Bostick v. ITT Hartford Grp., 56
F.Supp.2d 580, 587 (E.D.Pa.1999) (citations omitted).” Amica Mut. Ins. Co. v.
Fogel, 656 F.3d 167, 179 (3d Cir. 2011).
The defendant can defeat a plaintiff’s bad faith claim by demonstrating that it
had a reasonable basis to deny the claim. Id. at 523. Furthermore, “[a]t the
summary judgment stage, the insured’s burden in opposing a summary judgment
motion brought by the insurer is ‘commensurately high because the court must view
the evidence presented in light of the substantive evidentiary burden at trial.’ ”
Babayan, 430 F.3d at 137 (quoting Kosierowski v. Allstate Ins. Co., 51 F. Supp. 2d
583, 588 (E.D. Pa. 1999) (citing Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255
(1986)); see also Verdetto v. State Farm Fire and Cas. Co., 837 F. Supp. 2d 480, 484
(M.D. Pa. 2011) (“[I]n order to defeat a motion for summary judgment, a plaintiff
must show that a jury could find by ‘the stringent level of clear and convincing
evidence’ that the insurer lacked a reasonable basis for its handling of the claim and
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that it recklessly disregarded its unreasonableness.”), aff’d 510 F. App’x 209 (3d
Cir. 2013); McCabe v. State Farm Mut. Auto. Ins. Co., 36 F. Supp. 2d 666, 669 (E.D.
Pa. 1999).
It is also well-established that it is not bad faith for an insurance company to
“conduct a thorough investigation into a questionable claim.” Babayan, 430 F.3d
at 138. Accordingly, courts applying Pennsylvania law have found that an insurer
satisfies its burden by “showing ‘a reasonable basis’ for investigating a claim, and is
thus entitled to judgment as a matter of law, where it demonstrates the existence of
certain ‘red flags’ which prompted it to further investigate an insured’s claim.”
Verdetto, 837 F. Supp. 2d at 484 (quoting Brown v. Liberty Mut. Ins. Group, 2001
U.S. Dist. LEXIS 781, *8-11, 2001 WL 87741, *3-4 (E.D. Pa. Jan. 30, 2001)).
Thus, the mere passage of time does not define bad faith. Rather, an inference of
bad faith only arises when time passes as part of a pattern of knowing or reckless
delay in processing a meritorious insurance claim. In short:
Delay is a relevant factor in determining whether bad faith
has occurred, but a long period of time between demand
and settlement does not, on its own, necessarily constitute
bad faith. Rather, courts have looked to the degree to
which a defendant insurer knew that it had no basis to deny
the claimant; if delay is attributable to the need to
investigate further or even to simple negligence, no bad
faith has occurred. See, e.g., Klinger, 115 F.3d at 234
(suggesting that delay is relevant consideration in bad
faith claim when insurer knew that liability was clear and
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there was no basis to deny claim); Quaciari, 998 F.Supp.
at 582–83 (granting summary judgment for insurer in part
because periods of delay were “equally attributable” to
plaintiff and defendant; holding also that “even if all delay
were attributable to Allstate, it would not, without more,
be sufficient to establish bad faith”); Grove v. Aetna Cas.
& Sur. Co., 855 F.Supp. 113, 115 (W.D.Pa.1993) (stating
that although multiple requests for information may
constitute bad faith, delay is not necessarily equivalent to
rejection of claims.
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).
Judged by these legal guideposts, we find that Ridolfi has not shown on these
essentially undisputed facts “conduct [by State Farm which] imports a dishonest
purpose and . . . a breach of a known duty (i.e., good faith and fair dealing), through
some motive of self-interest or ill will.” Nw. Mut. Life Ins. Co. v. Babayan, 430
F.3d 121, 137 (3d Cir. 2005). Therefore, mindful of the fact that “in order to defeat
a motion for summary judgment, a plaintiff must show that a jury could find by ‘the
stringent level of clear and convincing evidence’ that the insurer lacked a reasonable
basis for its handling of the claim and that it recklessly disregarded its
unreasonableness, ”Verdetto v. State Farm Fire and Cas. Co., 837 F. Supp. 2d 480,
484 (M.D. Pa. 2011)), aff’d 510 F. App’x 209 (3d Cir. 2013), we find that this legal
threshold has not been met and will grant State Farm’s motion for summary
judgment on this claim.
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In assessing the reasonableness of State Farm’s response in this case, we
observe that certain essential facts are undisputed.
This case involves an
under-insured motorist policy claim against State Farm. Thus, the liability of State
Farm was contingent upon a determination of the liability of the original tortfeasor,
and an assessment of whether the policy limits on the original tortfeasor’s insurance
policy rendered that tortfeasor under-insured.
Given these contingencies, a
determination of whether a valid under-insured motorist claim exists often must
await factual and legal developments in the underlying claim against the original
tortfeasor. This process necessarily can create some delay in claims adjustment,
delays that are not evidence of bad faith but simply reflect the process of careful
claims evaluation.
So it is in this case. Ridolfi was injured in October of 2008 in an accident
with the original tortfeasor, who was insured by Liberty Mutual. While Ridolfi
initially placed both the tortfeasor and her own insurer on notice of this accident by
2009, Ridolfi’s initial efforts were justifiably focused on her claim against the
original tortfeasor and that tortfeasor’s insurance carrier.
Those efforts were
pursued in earnest in 2010, when Ridolfi filed her lawsuit against the tortfeasor in
state court and these state court proceedings were protracted.
Indeed, it is
undisputed that Ridolfi did not resolve this underlying claim, which serves as the
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legal and factual predicate for her UIM claim, until September of 2014.
Furthermore, when Ridolfi ultimately resolved this claim with the insurer of this
allegedly under-insured tortfeasor she did so for a sum that was below that
tortfeasor’s policy limits. While this tactical litigation choice may well have been
justified, the settlement of the underlying claim against what one alleges to be an
under-insured motorist for less than the policy limits certainly raises questions
concerning the extent to which Ridolfi’s own insurer has an obligation to make
further payments to her under its under-insured motorist insurance coverage.
Indeed, oftentimes it is both prudent and reasonable for a UIM insurer to await some
determination of liability and damages in the underlying tortfeasor case before
trying to make an informed assessment of any UIM claim. See Walter v. Travelers
Pers. Ins. Co., No. 4:12-CV-346, 2016 WL 6962620, at *6 (M.D. Pa. Nov. 29, 2016)
(“it was reasonable for [the insurer] to await a determination regarding whether [the
insured’s] injuries exceeded the . . . primary insurance coverage thresholds under the
[primary] policy, before resolving its UIM claim.”)
These considerations inform our analysis of Ridolfi’s bad faith-delay
argument in this case. In her response to this summary judgment motion, Ridolfi
invites us to find that the delay which occurred in processing this claim should be
measured from 2009, the date upon which State Farm was on notice of the accident
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involving Ridolfi and the tortfeasor. But this argument ignores the fact that, at that
time, no UIM claim had been made against State Farm, no tort case had been filed in
state court against the original tortfeasor, and no determination had been made of
that tortfeasor’s liability, the scope of Ridolfi’s injuries or the adequacy of the
original tortfeasor’s insurance coverage. All of these essentially undisputed factors
caution against beginning the time clock for bad faith purposes at this early date.
Rather, we believe that August 28, 2013, is the earliest date which may serve
as the starting date for assessing the reasonableness of any claims processing delay
in this case. That date is the date upon which Ridolfi’s counsel placed State Farm
on notice of a potential UIM claim, and the very language used by counsel to notify
State Farm of this potential claim underscores why it would be inappropriate to
measure alleged delay from any earlier date.
In this August 28, 2013,
correspondence Ridolfi’s counsel simply stated that Ridolfi was “put[ting] [State
Farm] on notice that this case may involve a UM/UIM potential claim.” (emphasis
added.)
Thus, even in August of 2013, Ridolfi’s notice to State Farm was
contingent and equivocal, since it simply indicated that a potential UIM claim may
exist. Given Ridolfi’s own guarded characterization of this claim in August of
2013, it cannot be said that Ridolfi can show by clear and convincing evidence that
State Farm should have recognized this UIM claim four years earlier in 2009.
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Indeed, this court has in the past held that the date upon which a plaintiff clearly
notifies an insurance carrier of a potential UIM claim serves as the most appropriate
benchmark for measuring delay in evaluating that claim, notwithstanding prior
communications between the parties. Shaffer v. State Farm Mut. Auto. Ins. Co.,
No. 1:13-CV-01837, 2014 WL 5325340, at *7 (M.D. Pa. Oct. 20, 2014), aff'd, 643
F. App'x 201 (3d Cir. 2016).
Once this claim was made by Ridolfi’s counsel, the parties engaged in an
on-going process aimed at attempting to resolve this claim. These efforts were
unsuccessful but that lack of success, standing alone, does not demonstrate clear and
convincing evidence of bad faith. Quite the contrary, even when we construe the
evidence in a light most favorable to the plaintiff, we find that this claims processing
chronology reflects a confluence of events and actions, and that in some instances
the plaintiff’s own actions may have contributed to some of these delays. In
reaching this conclusion, we are constrained to assess this legal issue in the
undisputed factual context of this case, where once State Farm was placed on notice
of Ridolfi’s potential claim it received two settlement demands, one in November of
2013 for $700,000, and a second non-negotiable demand in April of 2014 for the full
UIM policy limits, $200,000. Given the dimensions of these demands, prudence
dictated a careful review of this claim, and it appears that State Farm undertook such
22
a review.
In the course of this review, State Farm promptly, but erroneously, initially
identified the UIM policy limits as $50,000/$100,000 in September of 2013. While
Ridolfi cites this error as evidence of bad faith on State Farm’s part, we note that the
undisputed evidence provided some basis for this original, and erroneous, report
since the Ridolfis’ insurance application actually sought this lower level of
coverage, but State Farm underwrote a policy which gave the plaintiff more UIM
coverage than she had requested. Moreover, when this discrepancy was identified
by plaintiff’s counsel, State Farm promptly reformed its policy coverage position in
November of 2013, to accurately state greater policy limits of $100,000/$300,000.
Thus, the policy limits were revised and corrected long by State Farm before Ridolfi
made her policy limits demand upon State Farm and these policies limits were
correctly understood by all parties some ten months prior to the settlement of the
underlying claim against the original tortfeasor. On these facts, the brief delay and
confusion regarding policy limits simply cannot be seen as part and parcel of some
bad faith self-dealing by State Farm.
Nor do we find that State Farm’s insistence upon obtaining a statement under
oath from Ridolfi in June of 2014 was evidence of bad faith. On this score, it is
entirely undisputed that State Farm has the right to insist upon such a statement from
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Ridolfi under its contract of insurance with the plaintiff. Indeed, securing such
statements is not uncommon in these cases, and is typically not regarded as evidence
of bad faith. See Shaffer v. State Farm Mut. Auto. Ins. Co., No. 1:13-CV-01837,
2014 WL 5325340 (M.D. Pa. Oct. 20, 2014), aff'd, 643 F. App'x 201 (3d Cir. 2016).
Furthermore, by the time that State Farm took this statement from Ridolfi, it was
confronted by two significant demands from the plaintiff, demands which warranted
a careful evaluation of her injuries, losses and claims. Moreover, the medical
information State Farm possessed was limited in some respects since it did not
include medical information pre-dating the accident; nor did it encompass medical
records after March of 2012. Thus, at the time of this statement in June 2014, there
was a two year gap in the medical information available to State Farm, information
which was important to a fully informed assessment of this policy limits demand and
an overall evaluation of the case.
Further, it seems undisputed that the statement under oath obtained from
Ridolfi in June of 2014 produced relevant information which assisted in claims
evaluation since Ridolfi disclosed during that statement that she had been involved
in a prior accident, and reported that she had undergone medical treatment after
March 2012, the last date upon which medical records had been produced. In short,
this action by State Farm in obtaining a statement under oath from Ridolfi was
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commonplace, was provided for under the insurance policy, was prudent given the
nature of the plaintiff’s demands, and was productive in that it produced evidence
relevant to an assessment of those demands. Therefore, this action cannot be seen
as bad faith claims processing.
In reaching this conclusion we recognize that Ridolfi argues that State Farm’s
insistence upon taking this statement under oath constituted bad faith conduct
because Ridolfi had been previously deposed in the underlying tort case involving
the original tortfeasor in February of 2012. According to Ridolfi, State Farm had
been invited to attend this deposition but had elected not to do so. Given this prior
deposition, Ridolfi invites us to find bad faith based upon State Farm’s insistence
some two years later on obtaining its own sworn statement from the plaintiff.
We will decline this invitation. While State Farm denies that it was invited to
this deposition, even if we construe the evidence in a light most favorable to Ridolfi
and find that State Farm was invited to attend the deposition, we conclude that the
failure to attend this deposition does not evidence bad faith. First, given State
Farm’s status as a non-party, it is doubtful that this company could have participated
in the deposition in any meaningful fashion. Second, the deposition took place
some 16 months prior to the first notice by Ridolfi that she intended to bring a UIM
claim against State Farm. Until State Farm was notified of this potential UIM claim
25
in August of 2013, we do not believe that it had an obligation to attend this
deposition, and we cannot find bad faith based simply upon this insurer’s lack of
prescience and inability to predict what would transpire some 16 months later.
Third, even if State Farm had attended this deposition in February of 2012, by June
of 2014 it would still have been justified in requiring a statement under oath from
Ridolfi, who was demanding a policy limits payment, in order to document the
scope and extent of her injuries and treatment since 2012. Since it is not bad faith
for an insurance company to “conduct a thorough investigation into a questionable
claim,” Babayan, 430 F.3d at 138, we cannot find that this through, and productive,
inquiry into Ridolfi’s policy limits IUM claim rises to the level of bad faith.
Likewise, the manner in which the parties obtained and exchanged medical
records, which is cited by Ridolfi as evidence of bad faith, in our view falls short of
the mark even when considered in a light most favorable to Ridolfi. As we have
noted this process was marked by missteps, delays and confusion by all parties,
however, some of those difficulties and delays are attributable, at least in part, to the
plaintiff. For example, between November 2013 and January 2014, there was an
initial delay between Ridolfi’s counsel and State Farm in ensuring that State Farm
had received those records that were in plaintiff’s possession.
This initial
confusion contributed to several months delay in evaluating this claim, but the
26
evidence does not allow a finding of bad faith on State Farm’s part. Quite the
contrary, after State Farm was unable to locate the records which plaintiff’s counsel
believed he had forwarded to this insurer in November of 2013, State Farm took the
initiative to pursue this matter with counsel in January of 2014, writing and calling
counsel to obtain these records. This show of initiative by State Farm in seeking
out medical information is inconsistent with a claim of “conduct [by State Farm
which] imports a dishonest purpose and . . . a breach of a known duty (i.e., good
faith and fair dealing), through some motive of self-interest or ill will.” Nw. Mut.
Life Ins. Co. v. Babayan, 430 F.3d 121, 137 (3d Cir. 2005). Furthermore, once
receipt of these records revealed gaps in medical information, both preceding the
2008 accident, and after that accident from March 2012 forward, State Farm was
justified in undertaking efforts to secure this additional medical information.
Furthermore, any fully informed assessment of this claim entailed not only
development of Ridolfi’s medical history, a process which the parties pursued
throughout 2013 and 2014, but also an understanding of the outcome of Ridolfi’s
claim against the original tortfeasor who had struck and injured her.
This
component of the claims evaluation process was only resolved in September of
2014, when Ridolfi settled that underlying case for $85,000, a sum which fell below
the tortfeasor’s policy limits.
While many considerations go into a claim
27
settlement, and Ridolfi may not be penalized for accepting less than the policy limits
in this original action, the fact that the underlying claim settled for less than the
policy limits after protracted litigation is certainly a factor which is relevant to State
Farm’s evaluation of this claim and any determination of whether the plaintiff has
shown that “a jury could find by ‘the stringent level of clear and convincing
evidence’ that the insurer lacked a reasonable basis for its handling of the claim and
that it recklessly disregarded its unreasonableness, “Verdetto v. State Farm Fire and
Cas. Co., 837 F. Supp. 2d 480, 484 (M.D. Pa. 2011)), aff’d 510 F. App’x 209 (3d
Cir. 2013), the legal benchmark for assessing a bad faith claim on summary
judgment. State Farm could justifiably await some resolution of the underlying tort
claim as part of its evaluation of this UIM claim, since the UIM claim is inextricably
linked to the underlying negligence claim and the adequacy of insurance coverage
on that claim. Indeed, in this precise factual setting we have held that “it was
reasonable for [the insurer] to await a determination regarding whether [the
insured’s] injuries exceeded the . . . primary insurance coverage thresholds under the
[primary] policy, before resolving its UIM claim.” See Walter v. Travelers Pers.
Ins. Co., No. 4:12-CV-346, 2016 WL 6962620, at *6 (M.D. Pa. Nov. 29, 2016).
Finally, Ridolfi has argued that State Farm’s violated the Pennsylvania Unfair
Claims Settlement Practices Act 40 P.S. §1171.1 et seq. and the associated Unfair
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Insurance Practices Regulations (31 Pa. Code §146.1 et seq.), which require
insurance companies to provide 45 day updates on the status of insurance claims, by
failing to provide such written claims updates in accordance with the timetable set
by regulations. Ridolfi asserts that this alleged failure to comply with insurance
regulations is evidence of bad faith conduct which would defeat State Farm’s partial
summary judgment motion. On this score, the controlling legal standards can be
simply stated:
A violation of these insurance rules can be considered when
examining a bad faith claim under §8371. See, Romano v. Nationwide Mut Fire
Ins. Co., 435 Pa, Super. 545, 646 A.2d 1228 (1994), (holding that a trial court can
consider the Unfair Insurance Practices Act, 40 P.S. §§ 1171.1-.15 (UIPA), when
determining whether an insurer acted in bad faith under 42 Pa.C.S.A. § 8371.)
However, it is also clear beyond peradventure “that a violation of the UIPA or the
UCSP is not a per se violation of the bad faith standard.” Oehlmann v. Metro. Life
Ins. Co., 644 F. Supp. 2d 521, 530 (M.D. Pa. 2007). In short, “the United States
Court of Appeals for the Third Circuit and this court have held that alleged
violations of the Unfair Insurance Practices Act do not, in and of themselves,
constitute bad faith pursuant to 42 Pa. Cons.Stat. § 8371. Leach v. Northwestern
Mut. Ins. Co., 262 F. App'x 455, 459 (3d Cir.2008) (concluding that ‘insofar as
[plaintiff’s] claim for bad faith was based upon an alleged violation of the UIPA, it
29
failed as a matter of law’); UPMC Health Sys. v. Metro. Life Ins. Co., 391 F.3d 497,
505–06 (3d Cir.2004) (finding that the plaintiff ‘cannot rest its bad faith claim on the
violations of the UIPA’); Dinner v. United Servs. Auto. Ass'n Cas. Ins. Co., 29 F.
App'x 823, 827 (3d Cir.2002) (concluding that ‘a violation of the UIPA or the UCSP
is not a per se violation of the bad faith standard’); Oehlmann v. Metro. Life Ins. Co.,
644 F.Supp.2d 521, 531 (M.D.Pa.2007) (‘reject[ing] that the alleged violations of
UIPA and UCSP are bad faith per se’ ).” Stricker v. State Farm Mut. Auto. Ins. Co.,
No. 1:12-CV-565, 2012 WL 2153977, at *2, n.2 (M.D. Pa. June 13, 2012).
This case aptly illustrates why technical violations of these state insurance
regulations cannot be equated with bad faith. The record before us amply reveals
active, extensive and on-going communications between State Farm and Ridolfi’s
counsel once Ridolfi notified State Farm in August of 2013 that it was “put[ting]
[State Farm] on notice that this case may involve a UM/UIM potential claim.” Our
review of the substance of these multiple communications, which spanned the
following year, reveals that even when the communications are viewed in a light
most favorable to Ridolfi, these communications do not support a claim of bad faith
shown by clear and convincing evidence. Given that the communications, in their
substance, do not allow for a finding of bad faith here, it would be anomalous to
conclude that the fact that the communications did not meet the technical frequency
30
requirements mandated by insurance regulations, standing alone, established a bad
faith claim in this case. Therefore, like many other courts have done in the past, we
will decline to exalt insurance procedure over substance and find that substantively
reasonable conduct constitutes bad faith simply because it failed to comply with
insurance regulatory procedures.
IV.
Conclusion
In sum, even when we construe the evidence in a light most favorable to the
plaintiff, we find that this evidence will not permit a conclusion in accordance with
the stringent standards prescribed by state law that State Farm acted in bad faith
when assessing this claim. Therefore, State Farm’s motion for partial summary
judgment will be granted. This does not mean that Ridolfi is without recourse
against her insurer, State Farm. Instead, it simply means that this case will proceed
forward on Ridolfi’s breach of contract claim against State Farm.
A separate order consistent with this memorandum opinion follows.
/s/ Martin C. Carlson
Martin C. Carlson
United States Magistrate Judge
Dated: April 10, 2017
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