Articles & Updates

UTPCPL Claim Against Insurance Professional Fraudulently Joined

Oct 1, 2021 | Articles & Updates

In Holohan v. Mid-Century Ins. Co., the Eastern District of Pennsylvania denied an insured’s motion to remand under the fraudulent joinder doctrine and granted an insurer’s motion to dismiss claims for bad faith, breach of contract, and violation of the Pennsylvania Unfair Trade Practices and Consumer Protection Law (“UTPCPL”) that an insured brought against two of the insurer’s claims adjusters. See 2021 WL 4399659 (E.D. Pa. Sept. 27, 2021).

The insured was involved in two separate motor vehicle accidents. As a result of the first accident, the insured sustained numerous injuries, and the insurer began making payment for his treatment. Following the second accident, in which the insured’s injuries were exacerbated, the insurer closed the insured’s first party medical benefits claim relating to the first accident. Despite obtaining a Peer Review determination that the insured’s treatment was related to the first accident, the insurer refused to pay for treatment under the first claim even though more than $80,000 in first party medical benefits were available. After the second accident, the insured filed an underinsured motorist (“UIM”) claim arising from the first accident. Despite having determined that the insurer’s injuries and treatment were related to the first accident and that the second accident aggravated his symptoms, the insurer still refused to pay UIM benefits to the insured.

The insureds sued the insurer for breach of contract, common law and statutory bad faith, and violations of the Motor Vehicle Financial Responsibility Law (“MVFRL”). The insureds also sued the insurer’s claims adjusters for breach of contract, bad faith, and violations of the UTPCPL. The insurer removed the case to the Eastern District and moved to dismiss the bad faith claims against it, as well as all claims against its claims adjusters.

As an initial matter, the Court held that one of the claims adjusters, a Pennsylvania citizen and resident, was fraudulently joined because Plaintiffs could not assert plausible claims against him (and the other claims adjuster named as an individual defendant). The Court held that the claims adjusters acted in the course and scope of their employment at all times, and there was no allegation that either of them issued the insurance policy or personally agreed to pay the UIM claim. Additionally, the Court held that Pennsylvania law does not support a bad faith claim against a claims adjuster and that such claims have bene found impermissible under Section 8371. As to the UTPCPL claim, the Court noted that the claims adjusters were not the insured’s insurance broker, nor were there factual allegations of malfeasance based on a contractual obligation between the insured and the claims adjusters. Accordingly, the Court denied the insured’s motion to remand and dismissed all claims against the claims adjusters.

With respect to the claims brought against the insurer, the Court declined to dismiss the statutory bad faith claims after finding that the insurer’s reliance on Peer Reviews could factually support a claim of bad faith. The Court dismissed the common law bad faith claims as they were subsumed within the breach of contract claims.