Articles & Updates

No Bad Faith for “Reasonable, Not Perfect” Claims Handling

Mar 15, 2023 | Articles & Updates

Article by Adam Murdock, Esq.

The Eastern District of Pennsylvania recently granted an insurer’s motion for summary judgment after finding that an insurer’s procedures need only be reasonable, not perfect and that the insurer did not act in bad faith regarding alleged delays when the insurer’s overarching goal was to obtain the necessary information to reasonably evaluate the claim.  See  See Borden v. NGM Ins. Co., 2023 WL 2403768 (E.D. Pa. Mar. 8, 2023).

In Borden, the insured was involved in a motor vehicle accident with an underinsured driver in August 2017.  The insured was covered under a commercial automobile insurance policy, which provided underinsured motorist coverage.  Plaintiff reported the accident to the insurer in October 2017 and informed the insurer of his need for ongoing medical treatment.  The insurer did not inform the insured that he was entitled to UIM benefits at this time.

Upon receipt of a letter of representation in May 2019, the insurer opened a UIM file, provided insured’s counsel with policy documents, and requested information regarding the insured’s injuries and treatment.  Insured’s counsel responded that he would provide records as soon as they were received.  Insurer followed up with counsel in June and July regarding the records but received no response. Discovery revealed that several of the insured’s treatment records were sent to the insurer prior to May 2019 but were not reviewed.

In November 2019, Plaintiff’s counsel provided a demand package to the insurer, including treatment records.  The parties exchanged communications in December, and the insurer requested the insured’s Examination Under Oath and informed the insured of the correct UIM policy limits.  The insurer reassigned the claim in February 2020, and the new claims adjuster requested additional information for his evaluation of the insured’s claim.  In March 2020, counsel for the insured requested a response to his policy limits demand and enclosed a copy of a proposed complaint against the insurer.  Counsel for the insurer informed counsel for the insured that the insurer was continuing to review and evaluate information related to the insured’s claim and that it had not yet completed its investigation.  The insured filed suit in April 2020 alleging breach of contract and bad faith.  The breach of contract claim resolved following the completion of discovery, and the insurer moved for summary judgment on the bad faith claim.

The Court dismissed the bad faith claim after finding that the insurer “failed to handle [the insured’s] claim with the utmost diligence and care.  However, an insurance company’s procedures need only be reasonable, not perfect.”

The insured argued that the insurer unreasonably delayed payment of the UIM claim when it did not initiate his UIM claim in October 2017 and did not inform him of his UIM benefits under the policy.  The Court dismissed this argument after finding that the insured first characterized the claim as “medical only” and did not inform the insurer of his intent to pursue a UIM claim until May 2019.  The Court additionally found that the insurer did not act in bad faith in failing to advise the insured of his UIM benefits because an insurer has no affirmative duty to inform its insureds of the benefits under the policy, and there was no evidence that the insurer deceived or persuaded the insured not to assert his UIM rights under the policy.

With respect to the insurer’s conduct after the UIM claim was asserted, the Court found that the insurer’s handling of the insured’s UIM claim does not rise to the level of bad faith as a matter of law.  The insured argued that the insurer unreasonably failed to (1) independently investigate the insured’s medical records, (2) promptly respond to the insured’s demand package, and (3) tender its policy limits prior to the close of discovery.  The Court found that the insured contributed to the insurer’s delays and that the insurer’s “overarching goal was to obtain the necessary information to reasonably evaluate [the insured’s claim].”  The Court found that it was not reckless for the insurer to rely on the insured’s counsel’s representation that he would provide relevant records even though the insurer had at least some treatment records in connection with the first-party claim.  The Court found that the insurer promptly responded to the demand package when it requested the insured’s EUO regarding the extent of his injuries.  Finally, the Court found that the insurer did not aggressively litigate the action and did not impermissibly delay payment by utilizing the full discovery period.