Articles & Updates

No Bad Faith For Alleged Failure To Uncover Applicable Limits

Dec 15, 2020 | Articles & Updates

The United States District Court for the Western District of Pennsylvania recently granted an insurer’s motion for summary judgment on a bad faith claim after finding that the insurer’s failure to uncover the availability of additional policy limits “amounts at best to a showing of negligence.”  The Court further held that the insured had not presented any evidence that the insurer did not investigate, valuate, and negotiate with the insured in good faith or stopped doing so during the adjustment process.  See Bogats v. State Farm Mut. Auto. Ins. Co, 2020 WL 7027480 (W.D. Pa. Nov. 30, 2020).

In Bogats, the insured was involved in an automobile accident from which he sustained various injuries requiring medical treatment.  Shortly following the accident, the insured submitted an application for benefits to the insurer.  As part of the application, the insured was asked to describe all automobiles owned by the insured or any member of the insured’s family residing in the same household, and the insured listed his and his wife’s four vehicles.  The insured did not list any other vehicles.  The insurer informed the insured that his policy provided $60,000 in UIM benefits, based upon the insureds $15,000 policy, which was stacked with four vehicles. The insured later agreed to resolve his UIM claim for $50,000.

Approximately one month after the UIM claim settled, the insured emailed the insurer’s counsel and expressed concern about the UIM coverage that was available to him.  For the first time, the insured indicated that his stepson resided with him and his wife and that his stepson owned a vehicle which insured by the insurer.  The insurer subsequently investigated the insured’s stepson’s address and advised the insured that the stepson’s policy had a different address and last name than the insured’s, therefore there would be no UIM coverage under the stepson’s policy.  In response, the insured explained that the stepson had always lived with him and his wife and that the address on the stepson’s policy was the stepson’s father’s address and was only listed on the policy for billing purposes.  After the insurer reviewed the underwriting process with the agent who had procured the policy for the stepson, the insurer determined $100,000 in UIM coverage was available under the stepson’s policy.  When the insurer did not meet the insured’s demand for payment, the insured sued the insurer for breach of contract and statutory bad faith.  The bad faith claim was based on the insurer’s initial misrepresentations regarding the limits of coverage.  The insurer moved for summary judgment on the bad faith claim, which the Court granted.

In dismissing the bad faith claim, the Court held that the insurer’s failure to uncover the availability of the stepson’s policy and add it to the available UIM coverage “amounts at best to a showing of negligence.”  The Court found it significant that the insured did not mention the stepson and his vehicle when he had an opportunity to identify the automobiles of family members residing in the household.  In addition, the Court held that the insured failed to present any evidence to show that the insurer’s conduct in the adjustment and negotiation process was “colored by the lack of good faith.”  Rather, the Court found that the insured’s bad faith claim amounted to nothing more than a dispute over the value of the insured’s claim.  Accordingly, the Court concluded that there is no material issue of fact as to either element of a bad faith claim under Section 8371.