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Conclusory Allegations of Bad Faith Against Insurer Insufficient to Survive Motion to Dismiss (PA)

January 8, 2021

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<p style="text-align: justify;">Recently, in <em><a href="">Daniel Dietz v. Liberty Mutual Insurance Company</a>, </em>the Eastern District of Pennsylvania considered whether the factual averments in the plaintiff’s complaint were sufficient to overcome Liberty Mutual Insurance Company’s partial motion to dismiss Dietz’s bad faith claim pursuant to Federal Rule of Civil Procedure 12(b)(6).</p>
<p style="text-align: justify;">By way of brief background, Dietz was involved in a motor vehicle accident with a driver who was insured by Farmers’ Insurance Company. At the time of the accident, Dietz was insured under an automobile policy issued by Liberty. On behalf of Dietz, Liberty obtained a settlement; unfortunately, the settlement was insufficient to cover all of Dietz’s medical expenses from the accident. Accordingly, Dietz submitted an underinsured motorist claim (“UIM”) with Liberty, which Liberty ultimately denied. Subsequently, Liberty offered to settle the UIM claim; however, Dietz rejected the proposed settlement as he believed Liberty erroneously did not obtain an additional stacking waiver when Dietz added a fifth vehicle to his automobile policy. After Liberty denied Dietz’s request for a copy of Liberty’s underwriting file, Dietz commenced the instant action, alleging claims for a declaratory judgment, breach of contract and bad faith.</p>
<p style="text-align: justify;">In support of its motion to dismiss, Liberty argued Dietz failed to state a bad faith claim upon which relief can be granted. In consideration of 42 Pa.C.S. § 8371 through the lens of the Court’s well-established standard of review, the Court determined Dietz failed to plead a claim for bad faith as the complaint contained no factual content indicating Liberty lacked a reasonable basis for denying his claim and that Dietz failed to show it either knew or recklessly disregarded its lack of reasonable basis. In addition, the Court concluded Dietz’s complaint, as pleaded, asks the Court to infer Liberty’s motive in refusing to produce its underwriting file was to deceive Dietz. Further, the Court cited other reasons why Liberty could have refused to produce a copy of its underwriting file, such as the fact that underwriting files often contain confidential business information.</p>
<p style="text-align: justify;">As the Court held the complaint failed to make any real factual averments, the Court granted Liberty’s motion and dismissed Dietz’s claim for bad faith. Ultimately, this case is a reminder of impact motions to dismiss can have on litigation in federal courts, and the premium courts place on well-pled complaints.</p>
Thanks to Lauren Berenbaum for her contribution to this post. Please contact <a href="">Heather Aquino</a> with any questions.

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