Kosierowski v. Allstate Ins. Co., Civ.A. 98-5221.

• Decision Date: 04 June 1999
• Docket Number: No. Civ.A. 98-5221.,Civ.A. 98-5221.
• Citation: 51 F.Supp.2d 583
• Parties: Barbara German KOSIEROWSKI, Plaintiff, v. ALLSTATE INSURANCE CO., Defendant.
• Court: U.S. District Court — Eastern District of Pennsylvania

51 F.Supp.2d 583

Barbara German KOSIEROWSKI, Plaintiff, v. ALLSTATE INSURANCE CO., Defendant.

No. Civ.A. 98-5221.

United States District Court, E.D. Pennsylvania.

June 4, 1999.

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Eric L. Keepers, Joseph F. Roda, Roda and Nast, P.C., Lancaster, PA, for plaintiff.

Marshall J. Walthew, Eric M. Schweiker, Dechert, Price & Rhoads, Philadelphia, PA, for defendant.

MEMORANDUM & ORDER

KATZ, Senior District Judge.

Plaintiff Barbara German Kosierowski brought this action alleging that defendant Allstate Insurance Company acted in bad faith in its handling of her claim for under-insured motorist benefits under her policy. Allstate now moves for summary judgment. Because the plaintiff has not shown the existence of a genuine issue of material fact through evidence that a reasonable jury could find to be clear and convincing, the motion will be granted.

I. Background¹

The facts in this case are, for the most part, undisputed. On October 7, 1992, Kosierowski was injured when her vehicle was rear-ended by a car driven by an underinsured motorist (UIM). The tortfeasor was insured for only $15,000, but Kosierowski had a policy with Allstate that provided UIM coverage up to $100,000. By letter dated August 9, 1993, Joseph Mallon, plaintiff's attorney, informed Allstate that the tortfeasor's insurer had tendered its $15,000 limits and requested Allstate's consent to settle Kosierowski's claim against the tortfeasor. In response, Allstate sent a form letter asking Kosierowski to provide information about the tortfeasor before it would agree to settle the claim. Mallon informed Allstate that Kosierowski had no duty to perform this investigation and that Allstate was required to notify her within thirty days whether it would consent to settlement.

Allstate consented to settlement, and no action occurred in the case for almost two years following the settlement with the tortfeasor. On October 11, 1995, Mallon demanded UIM policy limits of $100,000, stating that Kosierowski had suffered lost wages and loss of earning capacity in excess of $118,000 and compensable medical expenses in excess of $12,000. On October 23, 1995, Allstate said that it would schedule plaintiff's independent medical examination (IME) after receiving Kosierowski's employment records, her medical records for the preceding ten years, and information pertaining to her marital and family status. Mallon provided some of this information by letter dated January 10, 1996, and asked Allstate to schedule an IME, which was performed by Dr. Bocher on February 7, 1996. Dr. Bocher issued a report on February 23, 1996, finding that Kosierowski had various soft tissue injuries. The report concluded that her symptoms were persistent and could continue indefinitely.

Over the next two months, Allstate requested additional information on plaintiff's medical and wage losses, and Mallon repeatedly brought up the possibility of arbitration should a settlement not be reached. On April 26, 1996, he unequivocally demanded such arbitration in accordance with the policy provisions. Allstate named Hugh Donaghue as its outside counsel, and on May 24, 1996, he named Alexander DiSanti as Allstate's arbitrator. Although Mallon had already identified Kosierowski's arbitrator, Allstate requested that name again. On May 29, 1996, Mallon telephoned Donaghue and informed him that Kosierowski had selected an arbitrator and requested scheduling of the plaintiff's sworn statement. More than four months later, on October 8, 1996, Donaghue scheduled the statement for October 28, 1996. A neutral arbitrator was not selected until October 15, 1996. It was shortly after these events, by letter dated November 8, 1996, that Mallon informed Allstate that he was considering a bad faith suit.

On November 20 and 22, 1996, Allstate ran Kosierowski's claim through Colossus, a computer program used by Allstate to calculate the settlement value of claims. The first evaluation produced a settlement range of $11,624 to $13,824, although Huber, the adjustor on the case, independently evaluated the case as worth $50,000 to $60,000. On the same day, Allstate made an offer of $50,000 to Kosierowski. Two days later, with the addition of different variables, Colossus produced a settlement range of $50,760 to $61,060. On December 5, 1996, Allstate gave Huber $100,000 in settlement authority, but Huber did not exercise that authority, instead asking Mallon what he thought of the $60,000 offer. Mallon said that the offer was $50,000, not $60,000; after negotiations, Huber made an offer of $80,000. Kosierowski agreed to accept $80,000 but would not release the bad faith claim. Allstate next offered $100,000 to settle the bad faith and the UIM claim, and Mallon refused, stating that plaintiff was still willing to accept $80,000 without a release of the bad faith claims. Finally, on December 8, 1996, Allstate agreed to settle the case for $100,000 with no release of the bad faith claim. Kosierowski accepted this offer.

Following these events, Kosierowski brought a claim of bad faith against Allstate for its handling of her case. Allstate now moves for summary judgment, arguing that (1) plaintiff has no evidence to support an award of punitive damages; (2) plaintiff has not presented sufficient facts from which a jury could conclude that Allstate acted in bad faith; (3) plaintiff has no proof that she suffered any harm by Allstate's actions; and (4) plaintiff's expert opinion does not provide clear and convincing evidence that Allstate acted without a reasonable basis. As the plaintiff has not presented evidence that a reasonable jury could find to be clear and convincing that Allstate acted in bad faith, the court does not reach defendant's first and third contentions.

II. Discussion²

A. Bad Faith

Pennsylvania law provides that 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.

In Terletsky v. Prudential Property and Casually Insurance Company, 437 Pa.Super. 108, 649 A.2d 680 (1994), the Pennsylvania Superior Court explained that bad faith by an 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, 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.

Terletsky, 649 A.2d at 688. The plaintiff must demonstrate "(1) that the insurer lacked a reasonable basis for denying benefits; and (2) that the insurer knew or recklessly disregarded its lack of reasonable basis." Klinger v. State Farm Mut. Auto. Ins. Co., 115 F.3d 230, 233 (3d Cir. 1997). While an insurer is required to accord the interests of its insureds the same consideration it gives its own, it is not required actively to submerge its own interests. See Hyde Athletic Indus. v. Continental Cas. Co., 969 F.Supp. 289, 307 (E.D.Pa.1997); Leo v. State Farm Mut. Auto. Ins. Co., 939 F.Supp. 1186, 1190 (E.D.Pa.1996).

To prevail on a bad faith claim, a plaintiff must prove both elements by clear and convincing evidence. See Polselli v. Nationwide Mut. Fire Ins. Co., 23 F.3d 747, 750 (3d Cir.1994); Leo, 939 F.Supp. at 1190. Accordingly, the plaintiff's burden in opposing a summary judgment motion is commensurately high because the court must view the evidence presented in light of the substantive evidentiary burden at trial. See, e.g., Anderson, 477 U.S. at 255, 106 S.Ct. 2505; Quaciari v. Allstate Ins. Co., 998 F.Supp. 578, 581 (E.D.Pa.1998).

B. Plaintiff's Allegations

The plaintiff makes the following specific allegations of bad faith:

1. Allstate unreasonably delayed the resolution of Kosierowski's claim by refusing to appoint defense counsel and name an arbitrator and by failing to schedule a statement under oath for many months.

2. Allstate unreasonably made no settlement offer for more than a year following plaintiff's demand, even though its own doctor's medical opinion supported plaintiff's position; when settlement was eventually offered, it was unreasonably low.

3. Allstate improperly attempted to use settlement of plaintiff's UIM claim as leverage to obtain a release of the bad faith claim.

4. Allstate improperly asked Kosierowski to perform investigations that were Allstate's responsibility.

5. Allstate applied improper business practices to plaintiff's claim.

The court will consider each claim in turn.

1. Delays in Naming the Arbitrator and Scheduling a Statement under Oath

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 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. &...