Articles & Updates

No Bad Faith In Denial Based Upon Disputed Residency

Apr 6, 2021 | Articles & Updates

A judge in the Middle District of Pennsylvania recently granted an insurer’s motion for partial summary judgment and dismissed a bad faith claim after finding that the insurer had “more than a reasonable basis” for denying UIM coverage and that the insurer did not act in reckless disregard of its obligations under the plaintiff’s policy.  See Fuentes v. USAA General Indemnity Co., 2021 WL 1225934 (M.D. Pa. Apr. 1, 2021).

In Fuentes, decedent was a passenger in a vehicle he owned when he was killed in an accident with an uninsured driver.  The plaintiff, decedent’s stepfather, was the administrator of decedent’s estate, and he secured first-tier uninsured motorist (UM) coverage policy limits of $15,000 under the decedent’s automobile insurance policy.  The plaintiff alleged that the UM policy limits were inadequate to cover the losses suffered by decedent, so the plaintiff submitted a second-tier claim on behalf of the decedent’s estate for UIM coverage under the plaintiff’s own automobile policy with the defendant insurer.  The plaintiff alleged that the decedent was entitled to UM coverage at the time of the accident since the decedent was an insured family member living in plaintiff’s household. The plaintiff filed a writ of summons against the insurer.  While investigating the claim, the insurer requested that the plaintiff file a complaint with respect to his claim for UM benefits under his policy so that the insurer could engage in discovery to develop the facts.  The insurer ultimately denied the plaintiff’s UM claim after finding that UM coverage did not extend to decedent since he was not a “covered person” under the policy at the time of the accident.

The plaintiff’s complaint raised counts for UM coverage/breach of contract and statutory bad faith.  The insurer filed a counterclaim for declaratory judgment.  The parties filed cross-motions for summary judgment.  The court denied the summary judgment motions on the UM coverage/breach of contract and declaratory judgment claims after finding that there were many genuine disputed material facts as to whether the decedent was a resident of the plaintiff’s household.

Even though the court denied summary judgment as to the contractual claims, the court granted the insurer’s motion with respect to the plaintiff’s bad faith claim.  The court found that the plaintiff had not presented clear and convincing evidence that the insurer acted in bad faith when it denied his claim for UM coverage for the decedent’s estate.  The court noted that the insurer relied upon the statements of the decedent’s girlfriend and girlfriend’s mother that decedent was living with them, as well as the fact that the plaintiff had removed decedent from his auto policy after decedent moved to live with his girlfriend.  The court further noted that the insurer requested and considered additional information from the plaintiff regarding decedent’s residency at the time of the accident.  The court concluded that the insurer had “more than a reasonable basis” to investigate where the decedent was residing at the time of the accident and that the insurer’s denial of the plaintiff’s UM claim made on behalf of the decedent’s estate was not an act in reckless disregard of its obligations under the plaintiff’s policy.  The court additionally concluded that the insurer did not force plaintiff to file a complaint to collect UM benefits that were owed to the plaintiff, as the plaintiff alleged, since the plaintiff had already initiated his lawsuit and an insurer’s exercising of its procedural right to serve a Rule to File Complaint is not bad faith.