McLaren v. AIG Domestic Claims, Inc.
853 F. Supp. 2d 499
E.D. Pa.2012Background
- McLaren, a Pennsylvania CNM, sues AIG Domestic Claims, Inc. in diversity against its insured National Union; AIG is a Delaware subsidiary of National Union with alleged authority over defense, settlements, and claims administration.
- McLaren’s policy with National Union provides professional liability coverage; premiums were paid for 2004–2006 policy years.
- Miller litigation against McLaren and St. Luke’s Hospital proceeded in Lehigh County, PA; AIG notified, appointed defense counsel, and engaged in settlement negotiations.
- Millers proposed a settlement requiring McLaren’s consent and payment to MCARE; McLaren asserts consent was coerced and later withdrawn.
- Global settlement offer of $900,000 allegedly extended with McLaren's withdrawal of consent; AIG allegedly refused to tender policy limits to MCARE, affecting enforcement.
- Second Amended Complaint asserts two counts: Bad Faith under 42 Pa.C.S.A. § 8371 and Breach of Contract; court grants motion to dismiss both counts with prejudice, dismissing the entire Second Amended Complaint.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether AIG qualifies as McLaren’s insurer under § 8371 | McLaren pleads AIG as de facto insurer and alter ego of National Union | AIG is not the insurer; policy lists National Union; no privity with McLaren | Bad faith claim dismissed; AIG not an insurer under § 8371 |
| Whether McLaren's breach of contract claim lies against AIG | AIG acted as insurer via agency/alter ego; breach of contract against AIG permissible | No contract between McLaren and AIG; no privity or viable alter ego theory | Breach of contract claim dismissed for lack of contractual privity |
| Whether McLaren adequately pleaded alter ego or de facto insurer status | Facts show AIG acted as insurer and alter ego of National Union | Allegations rely on conclusions; insufficient to pierce corporate veil or establish insurer status | Alter ego/de facto insurer theory rejected; insufficient factual basis to deem AIG an insurer under § 8371 |
| Whether agency relationship between AIG and National Union creates contract liability | Agency supports liability under contract | Agency does not create privity for breach of contract claims between McLaren and AIG | No contractual liability; agency does not establish direct contract with McLaren |
| Whether any amendment could cure the pleading defects | Curative amendment possible | Amendment would be futile given lack of privity and insurer status | Leave to amend denied; dismissal with prejudice |
Key Cases Cited
- Conley v. Gibson, 355 U.S. 41 (1957) (set initial pleading standards (notice pleading))
- Twombly v. Bell Atlantic Corp., 550 U.S. 544 (2007) (plausibility pleading standard)
- Iqbal v. Ashcroft, 556 U.S. 662 (2009) (facial plausibility required for claims)
- Fowler v. UPMC Shadyside, 578 F.3d 203 (3d Cir. 2009) (two-step contextual analysis for Rule 12(b)(6))
- Eastern Minerals & Chemicals Co. v. Mahan, 225 F.3d 330 (3d Cir. 2000) (alter ego piercing standard under PA law)
- Partners Coffee Company, LLC v. Oceana Services and Products Company, 700 F.Supp.2d 720 (W.D. Pa. 2010) (cited for reviewing bare alter ego claims)
- Electron Energy Corp. v. Short, 408 Pa. Super. 563, 597 A.2d 175 (Pa. Super. Ct. 1991) (contractual privity requirement; no privity with insurer adjuster)