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No Bad Faith In Concluding Injury Would Not Breach Limited Tort

The Middle District of Pennsylvania recently granted an insurer’s motion for partial summary judgment to dismiss a bad faith claim after finding that the claims representative conducted a reasonable investigation and made a reasonable settlement offer of $1,000 based on the information available. The Court held that Plaintiff did not identify any evidence from which a juror could find that the insurer lacked a reasonable basis for its preliminary settlement offer. See Castillo v. Progressive Ins., 2021 WL 963478 (M.D. Pa. Mar. 15, 2021).

In Castillo, the insured was a passenger in a vehicle that was involved in a motor vehicle accident with an uninsured driver. The insured’s policy with the insurer provided UM coverage subject to the limited tort threshold. Upon demand from the insured for the uninsured motorist (“UM”) policy limits, the insurer opened a UM claim and assigned it to a claims representative who initiated an investigation. The claims representative reviewed the insured’s medical records and concluded that the insured’s injuries would not likely breach the limited tort threshold. While the insured received treatment at the emergency room on the date of the accident, and then with her family doctor four months later, she did not otherwise treat for accident-related injuries until approximately 19 months after the accident. The claims representative noted that the insured’s explanation for the gap in treatment—that treatment was contraindicated due to the insured’s pregnancy—was not consistent with the medical records, which suggested that the insured’s pregnancy was conceived five months after the accident. Based on his review of information available to him, the claims representative made an initial offer of $1,000 to resolve the insured’s UM claim. When the insured declined the offer, the claims representative invited a demand from the insured and made it clear that the insurer was open to further settlement negotiations.

Three days after declining the insurer’s settlement offer, the insured sued the insurer for breach of contract and statutory bad faith. The insured argued that the insurer acted in bad faith by failing to adequately review and evaluate her UM claim thus resulting in an insignificant settlement offer. The insurer filed a motion for partial summary judgment to dismiss the bad faith claim, which the Court granted.

The Court found that the claims representative conducted a reasonable investigation and made a reasonable settlement offer based on the information available. In so finding, the Court observed that the insurer reviewed the insured’s medical records, noted the limited-tort election and payment from the primary insurer, noted the delay in treatment, and acknowledged the insured’s explanation for the delay and dismissed the same based on the medical records. The Court noted that “the record establishes nothing more than a legitimate disagreement over the causation of [the insured’s] injuries and valuation of her claim,” which is “not tantamount to bad faith.” The Court held that while the insured characterized the insurer’s investigation as “lackluster” and “uninspiring,” the insured presented little in the way of argument, and nothing in the way of evidence, to establish that the insurer lacked a reasonable basis for, or knew of or recklessly disregarded the lack of a reasonable basis for, its $1,000 offer. To the contrary, the Court found that the insurer articulated legitimate reasons for doubting causation, reasonably concluded the claim would not pierce the limited-tort threshold, and “most importantly” made clear that its offer was not final.