159 F. Supp. 3d 562
E.D. Pa.2016Background
- On August 4, 2010, Jeffrey and Amiee Kelly were rear-ended by a drunk driver; they sustained injuries, medical expenses, and lost wages.
- The Kellys settled with the tortfeasor for the policy limits and then submitted an underinsured motorist (UIM) claim to Progressive Advanced Insurance Company.
- Progressive declined to pay the Kellys’ UIM claims and did not make a settlement offer.
- The Kellys sued Progressive for breach of contract, statutory bad faith under 42 Pa.C.S. § 8371, and violation of the Pennsylvania Unfair Trade Practices and Consumer Protection Law (UTPCPL), seeking damages and fees.
- Progressive moved to dismiss the statutory claims, arguing the complaint fails to state a § 8371 bad-faith claim and that UTPCPL does not reach claims-handling; Progressive conceded liability of the tortfeasor and applicability of the UIM coverage but characterized the dispute as a valuation disagreement.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether plaintiffs plead statutory bad faith under § 8371 | Kellys: Progressive unreasonably denied payment, failed to investigate, and ignored medical documentation | Progressive: Dispute is valuation only; no facts show unreasonable denial or bad faith | Court: Allegations that Progressive refused to pay, failed to investigate, ignored records, and made no reasonable offer suffice to state a § 8371 claim |
| Whether UTPCPL applies to post‑formation claims handling | Kellys: Progressive’s claim handling was deceptive and caused an ascertainable loss | Progressive: UTPCPL does not cover handling of insurance claims; plaintiffs lack justifiable reliance and misfeasance facts | Court: UTPCPL does not apply to claims-handling; § 8371 is the exclusive statutory remedy for post-contract conduct |
| Pleading standard on motion to dismiss | Kellys: Complaint gives fair notice and factual allegations of misconduct | Progressive: Plaintiffs must plead more than disagreement over valuation | Court: Applied Twombly/Iqbal standard; accepted pleaded facts as true and found they permit a reasonable inference of bad faith |
| Whether insureds must allege justifiable reliance for UTPCPL | Kellys: Alleged losses from deceptive conduct by insurer | Progressive: Plaintiffs did not plead justifiable reliance | Court: Did not reach merits because UTPCPL is inapplicable to claims handling; UTPCPL requires purchase/formation context |
Key Cases Cited
- Toy v. Metropolitan Life Ins. Co., 928 A.2d 186 (Pa. 2007) (statutory bad faith under § 8371 applies to insurer’s post‑formation conduct)
- Terletsky v. Prudential Prop. & Cas. Ins. Co., 649 A.2d 680 (Pa. Super. 1994) (insurer may be liable for bad faith when it lacks a reasonable basis for denying benefits)
- O’Donnell ex rel. Mitro v. Allstate Ins. Co., 734 A.2d 901 (Pa. Super. 1999) (failure to investigate can support a bad faith claim)
- Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007) (complaint must plead factual content permitting the reasonable inference of liability)
- Ashcroft v. Iqbal, 556 U.S. 662 (2009) (pleading standard: more than speculative or merely consistent allegations required)
- Nordi v. Keystone Health Plan W., Inc., 989 A.2d 376 (Pa. Super. 2010) (UTPCPL does not provide a remedy for insurer’s claims‑handling; § 8371 is exclusive)