Strausser v. Merchants Insurance Group, 3:12-cv-01551

Strausser sues Merchants Insurance for breach of contract and Pennsylvania bad-faith statute involving underinsured motorist (UIM) benefits.
UIM claim filed January 2010 following December 18, 2007 accident; Plaintiff alleges serious injuries.
Defendant investigated and identified “red flags” from Plaintiff’s medical/history; nonetheless agreed to arbitrate under policy.
Arbitrator awarded Plaintiff $135,000 in August 2013 and Defendant paid that amount in August 2013.
Delay from filing to arbitration spanned about 43 months; Defendant cites nonresponsive medical provider and mediator emergency as causes.
Parties dispute whether delays and piecemeal information requests constitute bad faith; Court applies Terletsky standard in a federal diversity context.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether Defendant had a reasonable basis to delay settlement	Strausser argues Defendant delayed unreasonably.	Merchants contends its investigation and timing were reasonable.	No; material factual disputes remain.
Whether Defendant’s conduct amounted to bad faith under Terletsky	Evidence shows unreasonable delay and pressure tactics.	Delay and reliance on medical opinions can be legitimate.	Material factual issues preclude summary judgment.
Whether piecemeal authorizations and requests supported a finding of bad faith	33 authorizations over >1 year evidences coercive strategy.	Such requests are routine and not per se bad faith.	Jury may determine bad faith; summary judgment denied.
Whether mediation delay and independent medical evaluation timing support bad faith	Delays in mediation and late IME undermined legitimate settlement.	Delays were due to unrelated issues and defenses were reasonable.	Jury should assess credibility; no preclusive ruling.

Terletsky v. Prudential Property and Casualty Insurance Co., 437 Pa. Supra 108 (Pa. 1994) (two-part bad-faith test requiring knowing or reckless disregard of lack of reasonable basis)
Klinger v. State Farm Mutual Insurance Co., 115 F.3d 230 (3d Cir. 1997) (predicts Pennsylvania Supreme Court would adopt Terletsky standard in bad-faith context)
Conoshenti v. Public Service Electric & Gas, 364 F.3d 135 (3d Cir. 2004) (federal standard for evaluating summary judgment with disputed facts)
Anderson v. Liberty Lobby, Inc., 477 U.S. 242 (U.S. 1986) (genuine issue of material fact needed to defeat summary judgment; no credibilities judged on motion)
Celotex Corp. v. Catrett, 477 U.S. 317 (U.S. 1986) (burden shifting for movant on summary judgment)