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:
[B]y 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 (Pa.Super.Ct. 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.