Articles & Updates

No Bad Faith or “Nefarious Purpose” in Updating Liability Assessment & Settlement Value

Mar 10, 2023 | Articles & Updates

Article by Adam Murdock, Esq.

The Middle District of Pennsylvania recently granted an insurer’s motion for summary judgment on a bad faith claim after finding that the insured failed to produce sufficient evidence to show the insurer lacked a reasonable basis for its investigation, evaluation, and settlement offers related to the insured’s underinsured motorist claim.  See Barbato v. Progressive Specialty Ins. Co., 2023 WL 2287646 (M.D. Pa. Feb. 28, 2023).

In Barbato, the insured was involved in a motor vehicle accident and was insured under an automobile insurance policy that provided $15,000 in underinsured motorist (“UIM”) coverage.  The claim professional assigned to handle the UIM claim determined that the accident occurred when the insured was driving straight in a left-turn-only lane and the other driver made a left turn from the right-hand lane.  As such, the claims professional initially concluded that each driver was 50% at fault for the accident.  After discussing the claim with her supervisor, the claim professional revised her liability assessment to 40% against the insured and 60% against the other driver.  The claim professional then reviewed the insured’s medical records and, after reducing the value of the claim to account for the insured’s share of fault for causing the accident, determined that the value of the claim was within the other driver’s liability limits.  The claim professional made an initial settlement offer based upon future defense costs.

After the initial settlement offer was rejected, the claim professional again reviewed the claim with her supervisor and then updated her evaluation.  In the updated evaluation, the claim professional reduced the insured’s fault for causing the accident to 25% “in an attempt to resolve the claim.”  With the lesser share of fault, the updated settlement evaluation was up to the policy limits of $15,000, and the claims professional contacted the insured’s counsel in an attempt to settle the claim.  Counsel would not engage in settlement discussions and the lawsuit was filed.

The UIM claim settled shortly after suit was filed and the insurer filed a motion for summary judgment on the bad faith claim.  The Middle District granted summary judgment in favor of the insurer.  In so doing, the court noted that the facts were largely undisputed, including the insured’s partial fault for the accident, the claim professional’s handling of the claim, and the response and lack thereof of the insured’s counsel.  The court held that a dispute over the value of a claim does not demonstrate insurance bad faith under Pennsylvania law.  Additionally, the court found that the updated evaluation and reassessment of liability was not unreasonable or “for some nefarious purpose.”  The court iterated that even if the original apportionment of fault was incorrect, that still would not demonstrate bad faith, as the insurer is not required to show that their investigation yielded the correct conclusion; rather, it must show that it conducted a review or investigation sufficiently thorough to yield a reasonable foundation for its actions.  Finally, the court stated that “additional investigation” such as speaking to the insured, his medical providers, or the other driver was not necessary in this claim and not required under Pennsylvania law.

Tangentially, the court also noted in its opinion that the insured’s invocation of Nanty-Glo v. American Surety Co., 163 A. 523 (Pa. 1932) as a bar to the insurer’s use of testimony from its own witnesses to establish facts is misplaced, as the federal courts have consistently held that the court may rely upon testimonial evidence in reaching a decision on a summary judgment motion.