O'Donnell ex rel. Mitro v. Allstate Ins. Co.

• Decision Date: 30 June 1999
• Citation: 734 A.2d 901,1999 PA Super 161
• Parties: Mary V. O'DONNELL, By and Through Her Attorney-In-Fact Joan T. MITRO, Appellant, v. ALLSTATE INSURANCE COMPANY, Appellee.
• Court: Pennsylvania Superior Court

734 A.2d 901

1999 PA Super 161

Mary V. O'DONNELL, By and Through Her Attorney-In-Fact Joan T. MITRO, Appellant, v. ALLSTATE INSURANCE COMPANY, Appellee.

Superior Court of Pennsylvania.

Argued April 28, 1999.

Filed June 30, 1999.

Robert J. Reger, Wayne, for appellants.

Bonnie S. Stein, Morrisville, for appellee.

Before DEL SOLE, MONTEMURO¹ and BECK, JJ.

MONTEMURO, J:

¶ 1 Appellant, Mary O'Donnell, through her attorney-in-fact Joan Mitro, appeals from the judgment entered in the Chester County Court of Common Pleas following an unsuccessful jury trial in an action for bad faith against her insurer, Allstate Insurance Company (Allstate). For the reasons set forth below, we affirm.

¶ 2 This matter arises from a claim submitted by Mary O'Donnell, through her daughter and attorney-in-fact, Joan Mitro, for benefits under a homeowner's insurance policy. On July 17, 1994, the home of Mary O'Donnell was allegedly burglarized. The burglary was discovered by Mitro's husband, Jay McAtee, who notified the police. At the time of the alleged break-in, no one was living in the house and it was listed for sale; it was later learned that no one had been living there for six months due to Ms. O'Donnell's admission to a nursing home. Officer Chappelle testified that when he arrived at the scene, he saw no signs of forced entry, and the interior of the home appeared neat and orderly. Moreover, the Officer noted the lack of valuables, and subsequently discovered through investigation that Ms. O'Donnell's family had previously removed many items from the home in preparation for its sale.²

¶ 3 At the time of this incident, the O'Donnell residence was covered by a homeowner's policy issued by Allstate. Ms. Mitro first contacted Allstate on August 1, 1994, two weeks after the loss, at which time Senior Claim Representative Adrienne Gallo was assigned to the matter. Ms. Mitro informed Ms. Gallo that she would be handling the claim pursuant to a power of attorney since her mother was hospitalized. In a letter addressed to Ms. Mitro, Allstate requested a complete list of stolen items, including the dates and places of purchase as well any original receipts or other indicia of ownership.

¶ 4 At the end of September, Ms. Mitro forwarded a packet of information containing a list of the stolen items, copies of receipts, and miscellaneous photographs and instruction manuals. The list of missing items included: twelve rare silver and gold coins; 12 five piece sterling silver Oneida place settings and eight serving pieces; 1.3 carat diamond ring and matching wedding band; double and single strand cultured pearl necklaces; sterling silver and diamond bracelet; antique gold watch; pearl pin and earring set; Peugeot gold-plated watch; Lladro nativity set; silver candlesticks; Lenox dish and vase; GE VCR and camera; Canon 35mm camera; Panasonic clock radio/recorder; Sony portable tv/radio; and a Fendi leather handbag. Ms. Mitro estimated the value of the stolen property at over $12,000.00.

¶ 5 Upon receipt of Ms. Mitro's information, Allstate began to conduct an investigation. In an attempt to verify the claimed losses, Allstate uncovered numerous inconsistencies in the information provided by Ms. Mitro. For example, many receipts submitted as proof of purchase for various stolen items were actually in Ms. Mitro's name, thus suggesting Mitro's rather than O'Donnell's ownership of the items. Therefore, over the next few months, Allstate requested certain additional information from Ms. Mitro including: the original receipts for the missing items; a copy of the power of attorney; a sworn proof of loss;³ a copy of Ms. O'Donnell's husband's death certificate; a copy of the Agreement of Sale for the property; an Examination under Oath⁴ of both Ms. O'Donnell and Ms. Mitro; and the addresses and telephone numbers of Ms. Mitro's uncle and brother who provided affidavits to support the existence and value of the stolen coins and nativity set, aggregately estimated at over $2000.00. During this time, Allstate also contacted Ms. O'Donnell, who resided at a long-term care facility, to verify certain matters. ¶ 6 Ms. Mitro soon became frustrated with Allstate's investigative practices after receiving additional requests for information which she considered irrelevant and duplicative, as well as discovering that Allstate had contacted her dementia-stricken mother without permission; therefore, she failed to provide Allstate with a sworn proof of loss statement,⁵ and refused to submit to an Examination under Oath or furnish the Agreement of Sale and the addresses of her brother and uncle. Instead, on May 4, 1995, Ms. Mitro filed a complaint against Allstate alleging breach of contract, bad faith and violations of the Unfair Trade Practices and Consumer Protection Law, 73 P.S. § 201-2, claiming that despite her efforts to comply with Allstate's requests, the insurer had unreasonably refused to evaluate her claim and issue either a denial or payment for the stolen items.

¶ 7 The matter proceeded to a jury trial during which both parties presented evidence and expert testimony. Allstate claimed that it did not act in bad faith, reasoning that certain "red-flags" were present in this case which required a more thorough investigation to verify the claimed loss. After deliberations, the jury returned a verdict in favor of Allstate. Upon the denial of her post-trial motions, Ms. Mitro filed the instant appeal claiming that a new trial is warranted based on four allegations of trial court error.⁶

¶ 8 In this appeal, Appellant raises an issue of first impression by seeking to ascertain the proper scope of 42 Pa.C.S.A. § 8371. Specifically, we are asked to determine whether in an action for bad faith against an insurer, the jury is restricted to considering only evidence of bad faith which occurred prior to the filing of the lawsuit, or, whether it may also consider evidence of an insurer's bad faith conduct occurring during the pendency of litigation. Upon review, we conclude that a narrow construction of section 8371, as suggested by the former, is contrary to the purpose of the statute to deter bad faith conduct of insurers.

¶ 9 Appellant's claim is presented in the context of a challenge to jury instructions. The purpose of a jury charge is to clarify the legal principles at issue. General Equipment Mfr. v. Westfield Ins. Co., 430 Pa.Super. 526, 635 A.2d 173, 184 (1993), appeal denied, 537 Pa. 663, 644 A.2d 1200 (1994). Thus, a jury instruction will be upheld if it accurately reflects the law and is sufficient to guide the jury in its deliberations. Von der Heide v. Commonwealth of Pa., 553 Pa. 120, 126-27, 718 A.2d 286, 290 (1998). Conversely, a new trial is warranted if a jury instruction is fundamentally erroneous and may have been responsible for the verdict. Chanthavong v. Tran, 452 Pa.Super. 378, 682 A.2d 334, 340 (1996).

¶ 10 At trial, Appellant challenged the court's jury instruction regarding the proper scope of Allstate's alleged bad faith conduct. After defining bad faith and the plaintiff's burden of proof, the court stated:

It's been argued to you that subsequent to the institution of suit, statements were taken under oath, and whether the insurance company should have had to pay based on that. Obviously what we are talking about here [regarding bad faith] is what occurred prior to the institution of the lawsuit, the conduct of the insurance company prior to the point where we get ourselves involved in a lawsuit.

(N.T. 2/11/98, vol. III at 285). After retiring to deliberate, the jury issued a question:

In judging the issue of bad faith, are we judging the handling of the case by Allstate until the lawsuit was filed or through today?

(N.T. 2/11/98, vol. IV at 4). The court responded: "Until the lawsuit was filed." (Id.).

¶ 11 While acknowledging that there is no state court authority on this point, Appellant argues that restricting the jury's consideration to evidence of Allstate's pre-lawsuit conduct is against the spirit of the bad faith statute, 42 Pa.C.S.A. § 8371. Appellant contends that Allstate's submission of interrogatories seeking "frivolous" and irrelevant information, as well as its refusal either to accept or deny Appellant's claim following her deposition, constitute clear acts of bad faith which the jury should have been permitted to consider in its evaluation of Allstate's conduct. See Appellant's Brief at 20.

¶ 12 It is well settled that an insurer is obligated to act in good faith and fair dealing with its insured. See Kilmore v. Erie Ins. Co., 407 Pa.Super. 245, 595 A.2d 623, 626 (1991),

appeal denied, 529 Pa. 664, 604 A.2d 1030 (1992). However, in D'Ambrosio v. Pennsylvania Nat'l Mut. Cas. Ins. Co., 494 Pa. 501, 431 A.2d 966 (1981), our Supreme Court noted that "[a]lthough the seriousness of `bad faith' conduct by insurance carriers cannot go unrecognized," id. at 505, 431 A.2d at 969, a judicially created cause of action is unnecessary since the provisions of the Uniform Insurance Practices Act (UIPA), enforced by the state Insurance Commissioner, are sufficient to deter bad faith conduct. Id. at 507, 431 A.2d at 970.

¶ 13 In 1990, our legislature responded to the Court's refusal to create a common law remedy by enacting section 8371. This statute provides that

[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 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(1)-(3).

¶ 14 Although it is not defined by the statute, our Court has adopted the following definition of "bad faith" as applicable in the context of insurance:

"Bad faith" on part of insurer is any

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