Presented by the Insurance Coverage/Bad Faith Litigation Practice Group

Legal Updates for Coverage and Bad Faith

February 26, 2015

Edited by Allison L. Krupp, Esq.

Pennsylvania

Motion for summary judgment on stacking issue denied where policy number for the policy in effect at the time of the accident was different than the policy number for the policy in effect at inception.

Connolly v. Progressive Northern Ins. Co., et al., No. 3:13-cv-2717 (M.D. Pa. Feb. 4, 2015)

In this case, defendants sought dismissal of plaintiff’s claim for stacked underinsured motorist “UIM” benefits, dismissal of plaintiff’s statutory bad faith claim, and dismissal of all claims against Progressive Casualty Insurance Company and Progressive Northern Insurance Company on the grounds that neither was in privity with plaintiff. On the date of the subject accident, plaintiff was covered by an automobile insurance policy issued by defendant Progressive Northern Insurance Company. Plaintiff’s parents had rejected stacked UIM coverage at the inception of the policy. Plaintiff argued that the rejection was not dispositive because other policies written by Progressive, which did not contain stacking rejections, may have covered him at the time of the accident. Plaintiff also claimed that defendants refused to provide certified copies of relevant insurance documents and that defendants’ refusal to conduct a reasonable investigation of plaintiff’s claim demonstrated statutory bad faith. The court held that the record was devoid of evidence establishing a contract of insurance between plaintiff and Progressive Casualty Insurance Company at the time of the accident and, therefore, Progressive Casualty Insurance Company was not a properly named defendant. The court denied defendant’s motion for summary judgment with respect to the stacking issue since the court could not conclude that stacking was unavailable to plaintiff. The policy number of the policy in effect at the time of the accident did not match the policy number for the policy in effect at the time the stacking waivers were signed. The court also held that the bad faith claim should be left for the jury.

The Pennsylvania Superior Court ruled that the trial court had erred by granting summary judgment in favor of defendant on the statute of limitations issue in this limited tort case.

Varner-Mort v. Kapfhammer, 2015 PA Super 14 (Pa. Super. Ct. Jan. 21, 2015)

The parties were in a motor vehicle accident in 2009, and plaintiffs subsequently sued defendant for negligence and loss of consortium. Defendant argued that the applicable two-year statute of limitations barred plaintiffs’ causes of action since the suit was not filed within two years of the date of the subject accident. Plaintiffs argued that the statute of limitations did not begin to run until plaintiff alleged that she had suffered a “serious injury” and was, therefore, entitled to full tort benefits. The trial court granted the motion for summary judgment and considered that plaintiff was reasonably put on notice that she had suffered a serious injury prior to the first MRI on August 13, 2009. On appeal, the Superior Court concluded that plaintiff’s action for personal injury may have been timely filed, depending upon whether the jury finds credible her testimony regarding when her injury was diagnosed as serious. Thus, the court concluded that the trial court had erred by granting defendant’s motion for summary judgment.

Nationwide had no duty to defend or indemnify defendants in the underlying action where the intentional and criminal acts exclusion applied.

Nationwide Mutual Fire Ins. Co. v. Norton, No. 6557 of 2013 (Luzerne Cnty. C.C.P. Oct. 24, 2014)

The issue in this case was whether Nationwide had a duty to defend or indemnify defendants under the Nationwide policy covering their residence and real estate. Two police officers had sustained personal injuries while arresting defendant at the subject property in relation to a domestic dispute. The officers subsequently sued defendants, and defendants sought defense and indemnification under their policy. The Nationwide policy included an exclusion for intentional acts and criminal acts. The court found it was clear that defendant had admitted to acting with a mens rea other than negligence since he had pled guilty to the criminal charges. The court also held that the criminal acts, therefore, fell within the intentional and criminal acts exclusion of the Nationwide policy. Thus, the court ruled that Nationwide had no duty to defend or indemnify defendants with respect to the underlying case filed by the police officers.

Florida

There was no liability insurance coverage for the tenants of the property where they did not meet the definition of insured under the policy.

Moon v. Cincinnati Ins. Co., 2015 U.S. Dist. LEXIS 1459 (11th Cir. Jan. 27, 2015) (unpublished)

This action arose from the drowning death of a two-year-old child in a swimming pool at a home that was being rented by plaintiffs Shawn and Tanya Moon. Plaintiff Tanya Moon was babysitting the child at the time of accident. The property was owned by Shawn Moon’s father, Terry Moon. Terry Moon’s insurance policy with defendant extended coverage to “any person while acting as [Terry Moon’s] real estate manager.” The decedent’s parents subsequently brought suit against Shawn and Tanya Moon and obtained judgment in excess of $10 million. After initially defending them under a reservation of rights, Cincinnati Insurance subsequently denied coverage and withdrew its defense of the Moons. Cincinnati Insurance reasoned that the policy did not cover Shawn and Tanya Moon through their relationship with Terry Moon. The Moons asserted that they were entitled to coverage under the terms of the policy that extended coverage to real estate managers of the property. The court disagreed and held that there were no allegations in the complaint that the Moons were acting as real estate managers at the time of the accident. As tenants of the property, the Moons were not covered by Terry Moon’s homeowners policy.

One of the defendants was inappropriately named in a declaratory judgment action where the underlying negligence action had been settled within policy limits and no excess judgment had been entered against her.

GEICO General Ins. Co. v. Farag, 2015 U.S. App. LEXIS 1088 (11th Cir. Jan. 26, 2015) (unpublished)

In this case, GEICO appealed from the district court’s order granting defendant’s motion for summary judgment in a declaratory judgment action stemming from a 2008 motor vehicle accident. At the time of the accident, defendant was insured under an auto policy issued by GEICO to her parents, Hussein and Monica Farag. After the accident, the injured individual in the other vehicle, Gould, sued the Farags for negligence. Gould’s claim against Monica Farag was later settled for the $100,000 policy limits, and Monica was dismissed from the underlying case. A final judgment was later entered in favor of Gould and against Hussein and Sara Farag for approximately $300,000. GEICO subsequently filed a declaratory judgment action against the Farags, seeking a declaration from the court that it had not handled the underlying claims in bad faith. The district court granted Monica Farag’s motion for summary judgment on the basis that she should not have been included as a defendant in the declaratory judgment action. On appeal, the court considered that no excess judgment had been entered against Monica and the underlying claim had been settled within policy limits. Thus, the potential for Monica to bring a claim against GEICO for failing to act in good faith was so conjectural, hypothetical or contingent that the district court did not err in determining that she should not have been joined in the lawsuit.

Ohio

Summary judgment entered in favor of defendant insurer on breach of contract and bad faith claims where plaintiff had failed to put forth any evidence to support either claim after his disability benefits were terminated.

Banks v. American Heritage Life Ins. Co., 2015 U.S. Dist. LEXIS 5202 (N.D. Ohio Jan. 5, 2015)

Plaintiff had purchased a disability policy from defendant. Plaintiff was later hospitalized after he suffered damage to his kidneys due to his diabetes. As a result, plaintiff alleged that he could no longer work as an interstate truck driver, and he made a claim for disability benefits. Defendant initially paid plaintiff benefits, but then requested additional information and documentation relative to the claim. Plaintiff failed to provide the requested information. It was also later learned that plaintiff had renewed his CDL and was observed driving his personal vehicle on local roads and highways. As a result, defendant terminated his benefits. Plaintiff sued for breach of contract and bad faith. Considering defendant’s motion for summary judgment, the court found that, aside from his own self-serving testimony, plaintiff had failed to provide evidence supporting his position that he was disabled. Thus, summary judgment was entered in favor of defendant with respect to the breach of contract claim. With respect to the bad faith claim, the court held that defendant had “reasonable grounds” to question plaintiff’s disability claim after plaintiff failed to provide the requested documentation and had been observed driving and going about his daily life with ease. Thus, summary judgment was entered in favor of defendant with respect to the bad faith claim as well.

New York

Plaintiffs’ flood-related claim was denied where the homeowners policy had expired prior to Superstorm Sandy.

Fletcher v. The Standard Fire Ins. Co., 2015 U.S. Dist. LEXS 5989 (E.D. N.Y. Jan. 17, 2015)

Plaintiffs sought to recover flood-related damages to their residence from Superstorm Sandy, pursuant to the Standard Flood Insurance Policy issued by defendant. Plaintiffs had failed to timely renew their homeowners policy, and the policy expired prior to the flood damage. While plaintiffs admitted that they had not remitted the renewal premium to defendant prior to the flood damage, they argued that their mortgagee, CitiMortgage, may have paid the premiums on their behalf. Plaintiffs offered no evidence to support this statement. Defendant, however, did offer evidence that it had not received the payment from either plaintiff or CitiMortgage. The parties filed cross motions for summary judgment. The court ruled that there was no issue of material fact that defendant had not received the renewal payment prior to the expiration of the policy. Thus, the court concluded that plaintiffs were not entitled to coverage for the flood-related damages.

_{The material in this law alert has been prepared for our readers by Marshall Dennehey Warner Coleman & Goggin. It is solely intended to provide information on recent legal developments, and is not intended to provide legal advice for a specific situation or to create an attorney-client relationship. We welcome the opportunity to provide such legal assistance as you require on this and other subjects. To be removed from our list of subscribers who receive these complimentary Coverage and Bad Faith updates, please contact alkrupp@mdwcg.com. If however you continue to receive the alerts in error, please send a note to alkrupp@mdwcg.com.}