Smith v. Allstate Insurance
2012 U.S. Dist. LEXIS 152773
| W.D. Pa. | 2012Background
- This case involves Allstate Insurance Company’s motion for summary judgment on a two-count complaint by Susan P. Smith alleging contractual bad faith and statutory bad faith under 42 Pa.C.S. § 8371.
- Plaintiff previously had a motor vehicle accident on June 13, 2004, treated for injuries, including knee issues later requiring arthroscopic surgery.
- Plaintiff had an underinsured motorist (UIM) claim under an Allstate policy; the UIM claim was arbitrated and an award of $135,000 was issued with payment to Plaintiff.
- Plaintiff asserts Allstate acted in bad faith in handling the UIM claim, including failing to investigate promptly, selecting biased examiners, and delaying arbitration.
- Allstate argues that a contractual bad faith claim cannot lie after payment under an arbitration award and seeks dismissal of Count I; it also seeks summary judgment on Count II, arguing lack of clear and convincing evidence of bad faith.
- The court analyzes whether a breach of contract claim based on bad faith may proceed alongside payment of policy proceeds and whether there is a genuine dispute of material fact regarding bad faith under 42 Pa.C.S. § 8371.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Contract claim after arbitration payment | Smith may pursue breach of contract for bad faith | Allstate claims no contract claim after payment | Denial of summary judgment on Count I |
| Bad-faith claim under § 8371 | Smith shows unreasonable denial and knowledge of lack of basis | Allstate argues no reasonable basis proven | Denial of summary judgment on Count II |
| Appropriate standard for limited tort threshold | Allstate applied incorrect permanent impairment standard | Dispute exists on whether correct standard was used | Genuine dispute of material fact precludes summary judgment on Count II |
Key Cases Cited
- Birth Center v. St. Paul Cos., 567 Pa. 386, 787 A.2d 376 (2001) (Pa. 2001) (bad faith damages when insurer acts in bad faith; damages flow from bad faith conduct)
- Terletsky v. Prudential Prop. & Cas. Ins. Co., 649 A.2d 680 (Pa. Super. Ct. 1994) (Pa. Super. Ct. 1994) (bad faith standard; clear and convincing evidence; permissive in summary judgment context)
- Simmons v. Nationwide Mut. Fire Ins. Co., 788 F. Supp. 2d 404 (W.D. Pa. 2011) (W.D. Pa. 2011) (implied covenant of good faith; not duplicative with contract claim)
- Willow Inn, Inc. v. Public Serv. Mut. Ins. Co., 399 F.3d 224 (3d Cir. 2005) (3d Cir. 2005) (bad faith includes unreasonable delay and failure to communicate)