Rhodes v. USAA Casualty Insurance
31 Pa. D. & C.5th 496
Pennsylvania Court of Common P...2013Background
- Rhodeses sued USAA in Pennsylvania state court over underinsured motorist (UIM) claim and alleged bad faith in settlement timing.
- Rhodes I (unpublished) reversed trial court on summary judgment against USAA and denied Rhodeses’ partial summary judgment.
- Rhodes II addressed USAA’s disclosure of Rhodeses’ attorney files to USAA and clarified law of the case.
- Rhodeses demanded $175,000; USAA offered progressively from $5,000 to $100,000 before ultimately agreeing to $175,000 in January 2004.
- Key medical evidence emerged late: doctors linked neck issues to the accident, while some reports suggested otherwise; causation contested.
- The trial court found delays were reasonable and not caused by bad faith; Rhodeses appealed seeking a finding of bad faith and unreasonable delay.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Was USAA’s delay in paying the settlement demand unreasonable? | Rhodeses argue no reasonable basis existed for delaying payment. | USAA contends delays were reasonable given investigation and evolving medical evidence. | No clear and convincing showing of unreasonable delay; delay deemed reasonable. |
| Did USAA lack a reasonable basis for denying benefits under 8371? | USAA had no reasonable basis to withhold $175,000 sooner. | USAA had a reasonable basis based on medical/causation information and settlement pace. | USAA had a reasonable basis; no bad faith under §8371 proven. |
| Did the alleged conduct of USAA’s personnel support bad faith under the Pennsylvania Code or UIPA? | Inequitable conduct reflected in Barboza/IOP/claims handling violated standards. | No clear and convincing evidence of violations by USAA’s personnel beyond reasonable practice. | Code/UIPA violations not shown with clear and convincing evidence. |
| Did Rhodeses prove, by clear and convincing evidence, that USAA knew or recklessly disregarded its lack of a reasonable basis? | USAA knew there was no reasonable basis and acted with ill will. | There is insufficient evidence of knowledge or reckless disregard. | Not proven; evidence did not establish knowledge or reckless disregard. |
| Should missing witness testimony be considered for impact on bad faith ruling? | Court should apply missing witness rule to unfavorable testimony. | Missing witness rule not warranted here; credible evidence exists to resolve issues. | Misssing witness rule not applied; credibility resolved the issues. |
Key Cases Cited
- Rhodes I, 951 A.2d 1225 (Pa. Super. 2008) (two prior Superior Court determinations framing the bad-faith standard and liability)
- Rhodes II, 21 A.3d 1253 (Pa. Super. 2011) (law of the case; reasonableness of settlement offers and bad-faith inquiry)
- Adamski v. Allstate Ins. Co., 738 A.2d 1033 (Pa. Super. 1999) (clear and convincing standard applies in bad-faith cases)
- Terletsky v. Prudential Property & Casualty Ins. Co., 649 A.2d 680 (Pa. Super. 1994) (two-part test for bad-faith claims; reasonable basis and knowledge/reckless disregard)
- Condio v. Erie Ins. Exch., 899 A.2d 1136 (Pa. Super. 2006) (reasonable basis required; contesting UM/UIM claims not per se bad faith)
- Horowitz v. Fed. Kemper Life Assurance Co., 57 F.3d 300 (3d Cir. 1995) (reasonable basis suffices to defeat bad-faith claim)
- Bonenberger v. Nationwide Mutual Insurance Co., 791 A.2d 378 (Pa. Super. 2002) (definition of bad faith and impact on settlement conduct)
- Williams v. Hartford Casualty Insurance Company, _ (Pa. Super. 2000) (code-based conduct not automatically bad faith; requires clear evidence)
- Lappile v. AMEX Assurance Co., 928 A.2d 251 (Pa. Super. 2007) (IOP/compliance considerations in bad-faith analysis)