post-mortem report and testimony of Dr. Halbert E. Fillinger, Jr. ("Fillinger"), the Coroner of Bucks County and the person who performed the autopsy on McClay. Fillinger concluded that Reynoso was the driver. In reaching this conclusion, Fillinger relied on statements that McClay's body was found in the passenger seat, the type and location of McClay's injuries, and the absence of brake or accelerator pedal marks on McClay's shoes.
The case was tried before a jury in September, 1985, and on October 1, 1985, the jury, finding that Reynoso was the driver and was negligent, rendered a verdict and judgment for plaintiffs. The judgment was molded to a total sum of $ 266,290.29. On November 4, 1985, plaintiffs filed a writ of execution and interrogatories on Kemper. By filing these documents plaintiffs initiated this lawsuit against Kemper for breach of its duty of good faith.
Plaintiffs' position is that Kemper did not investigate, consider, and settle plaintiffs' claim in good faith. Kemper was contacted several times by plaintiffs' attorneys to settle the claim against Reynoso. In particular, Robert Rosen, Esquire ("Rosen") contacted Kemper by telephone and letter on August 29, 1983, September 23, 1983, and October 14, 1983. On each of those occasions Rosen made demand for full payment of the policy limits on the uninsured motorist coverage and the full wage loss. Kemper did not respond to any of these offers until March 7, 1985, when Kemper offered to settle the case against Reynoso for $ 15,000.00, the amount of the full wage loss policy limits.
The court does not know the extent of Kemper's effort to find Reynoso between the time of the accident and March 4, 1985, when Kemper took the recorded statement. The court believes that Reynoso would not have been easy to find as the record suggests that Reynoso did not seem to have a stable residence. Nevertheless, the court will assume for purposes of Kemper's motion that Kemper did not make a serious attempt to locate Reynoso until March, 1985.
Kemper, moving for summary judgment, argues that under Pennsylvania law the duty of good faith extends only between the insurance company and the insured. Here, the insurance policy issued by Kemper only covered the Opel. Under the policy, if McClay was driving, she was covered by the policy under the uninsured motorist provision. If Reynoso was driving, he was a permissive user and was covered as an additional insured. Kemper asserts that since Reynoso was the insured and since Reynoso has consistently maintained that he was driving, Reynoso could not now sue Kemper for breach of good faith. As a result, according to Kemper, plaintiffs, who stand in the shoes of Reynoso as equitable subrogees, cannot maintain an action against Kemper for breach of good faith.
A motion for summary judgment must be granted if "there is no genuine issue as to any material fact and . . . the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c).
Pennsylvania recognizes a claim for bad faith against insurance companies. Cowden v. Aetna Casualty & Surety Co., 389 Pa. 459, 134 A.2d 223 (1957). Underlying the bad faith claim is the principle that, arising from the insurance contract, there is a contractual duty between the insurer and the insured to act in good faith. Gray v. Nationwide Mutual Insurance Co., 422 Pa. 500, 223 A.2d 8 (1966).
Recently the United States Court of Appeals for the Third Circuit declared that in Pennsylvania the duty of good faith is between only the insured and the insurer. Puritan Insurance Co. v. Canadian Universal Insurance Co., 775 F.2d 76 (3d Cir. 1985). In that case the insured bore no risk of liability. The risk was carried by the insured's primary insurer and the insured's excess insurer. The primary insurer and the insured wanted to try the case. The excess insurer, who bore the risk of the lion's share of liability, wanted to settle the case. The case was tried and the jury awarded plaintiff $ 1,413,152.25. The case was later settled for $ 1,350,000.00. The excess insurer was, thus, liable for $ 850,000.00. Subsequently, the excess insurer sued the primary insurer for $ 850,000.00 plus punitive damages. The third circuit held that the primary insurer did not owe a direct duty of good faith to the excess insurer. 775 F.2d at 79.
Similarly, the appellate courts in Pennsylvania have expressly stated that the duty of good faith only runs between the insurer and the insured. The Supreme Court of Pennsylvania has stated, in pertinent part:
By asserting in the policy the right to handle all claims against the insured, including the right to make a binding settlement, the insurer assumes a fiduciary position towards [sic] the insured and becomes obligated to act in good faith and with due care in representing the interests of the insured. If the insurer is derelict in his duty, as where it negligently investigates the claim or unreasonably refuses an offer of settlement, it may be liable regardless of the limits of the policy for the entire amount of the judgment secured against the insured. Gedeon v. State Farm Mutual Automobile Insurance Company, 410 Pa. 55, 59, 188 A.2d 320, 322 (1963).
Gray v. Nationwide Mutual Insurance Company, 422 Pa. 500, 504, 223 A.2d 8, 9-10 (1966). See Shearer v. Reed, 286 Pa. Super. 188, 428 A.2d 635 (1981).
Consequently, under Pennsylvania law, plaintiffs here can assert only the rights of Reynoso since plaintiffs have acquired Reynoso's rights by way of equitable subrogation. Plaintiffs have acquired no greater rights than those of Reynoso. As a result, plaintiffs can recover under their bad faith claim only if Reynoso could have recovered from Kemper if Reynoso had brought this lawsuit.
Clearly Reynoso could not maintain a bad faith claim against Kemper. At the scene of the accident Reynoso stated that McClay was driving the car. In a taped telephone interview, Reynoso told Kemper that McClay was driving. At a deposition and at trial, under oath, Reynoso testified that McClay was the driver of the car. Reynoso could not contend, now that his credibility has been tested at trial and a jury has found against him, that Kemper acted in bad faith by not settling this lawsuit.
Similarly, plaintiffs, Reynoso's equitable subrogees, cannot recover from Kemper for bad faith.
To the extent that plaintiffs argue that Kemper acted in bad faith towards plaintiffs, plaintiffs cannot prevail. Plaintiffs were not the insured in this litigation and, as such, Kemper did not owe plaintiffs a direct duty of good faith. Consequently, since no direct duty of good faith runs between Kemper and plaintiffs, the evidence proffered by plaintiffs that Kemper acted in bad faith toward plaintiffs is irrelevant.
For the reasons stated in the foregoing Memorandum, Kemper's motion will be granted and plaintiffs' motion will be denied.
An appropriate Order will be entered.
AND NOW, TO WIT, this 15th day of May, 1986, for the reasons stated in the accompanying Memorandum, IT IS ORDERED as follows:
1. Kemper Group, d/b/a Federal Kemper Insurance Company's motion for summary judgment is granted ; and
2. Plaintiffs' motion for summary judgment is denied.