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LEO v. STATE FARM MUT. AUTO. INS. CO.

October 12, 1995

LINDA LEO
v.
STATE FARM MUTUAL AUTOMOBILE INSURANCE CO.



The opinion of the court was delivered by: POLLAK

 POLLAK, J.

 This action, which derives from a dispute over insurance coverage, was originally brought by the plaintiff, Linda Leo, a resident of Pittsburgh, Pennsylvania, in the Court of Common Pleas of Philadelphia County. The defendant, State Farm Mutual Automobile Insurance Company ("State Farm"), an Illinois corporation with its principal place of business in Illinois, filed a timely notice of removal based upon this court's diversity jurisdiction. State Farm has now moved to dismiss portions of the complaint, asserting that they fail to state a claim upon which relief can be granted under Pennsylvania law. For the reasons discussed below, this motion will be granted in part and denied in part.

 I. Background.

 As is usual in ruling on a motion to dismiss, the following account of the facts of this case assumes the accuracy of the allegations set forth by Leo in her complaint. On July 15, 1992, Linda Leo and her husband were involved in an automobile accident with another car. The accident left Leo with a disorder called "left tarsal syndrome," as a result of which she had to have surgery. *fn1" Despite the surgery, Leo's ankle was permanently injured, causing her pain and limiting her mobility. Leo incurred some $ 17,147.99 in medical expenses and lost $ 11,233.75 in wages; because she had only $ 14,000 in medical and wage loss benefits, this left her with $ 14,381.74 in uncompensated losses. State Farm was the insurer of the other driver, and paid Leo its policy limit, which was $ 50,000.

 Leo and her husband also had three insurance policies from State Farm, however, which provided a total of $ 75,000 in underinsured motorist coverage. Accordingly, Leo then, through her attorney, sought to recover from State Farm in its capacity as her insurer, asserting that the other motorist had been underinsured. Leo's suit before this court is based upon the difficulties that she allegedly encountered in securing a settlement of that claim from State Farm. Briefly, Leo's efforts to settle her claim began on December 13, 1993, when her counsel forwarded a range of information on Leo's claim to State Farm. They ended in February 1995, when State Farm paid a $ 75,000 arbitration award to Leo. According to Leo, State Farm's first offer of settlement, in the amount of $ 25,000, was made on February 10, 1995, on the morning of the arbitration hearing in the case. In the intervening fourteen months, State Farm declined to make any offer to settle the case and allegedly delayed the handling of Leo's claim in a variety of ways, including requiring an independent medical evaluation of Leo and requiring Leo to make a statement under oath about her claim. State Farm also declined to pay interest, attorney's fees or costs for the arbitration award.

 Leo's complaint makes claims that are divided into five counts:

 
Count I asserts that State Farm's conduct was in bad faith, in violation both of the insurance policy's implied covenant of good faith and fair dealing and of 42 Pa. C.S.A. Section 8371. Complaint, P 29.
 
Count II asserts that State Farm's conduct "constitutes unfair or deceptive acts or practices prohibited by the Pennsylvania Unfair Trade Practices and Consumer Protection Law, 73 P.S. Section 201, et seq., and the Unfair Insurance Practices Act, 40 P.S. Section 1171.1 et. seq., and the Unfair Claims Settlement Practices regulations, 31 Pa. Code Section 146, et seq." Complaint, P 33. (This count also enumerates six asserted violations of the Unfair Insurance Practices Act.)
 
Count III asserts that State Farm's conduct constitutes "misrepresentation, fraud and deceit" in that State Farm "knowingly, willfully and/or recklessly misrepresented to Plaintiffs the nature and extent, terms, conditions, and duration of the coverage for which plaintiffs were paying premiums," in violation of obligations imposed by "the policy's implied covenant of good faith and fair dealing, the statutes of the Commonwealth of Pennsylvania, and the regulations of the Insurance Department of the Commonwealth of Pennsylvania." Complaint, P 36.
 
Count IV asserts that State Farm has violated its obligation to negotiate in good faith towards a fair settlement, in violation of "fiduciary, contractual and statutory obligations". Complaint, P 41. Count V asserts that "an implied covenant of the subject policy of insurance is the insurer's promise to indemnify the insured promptly," Complaint, P 43 (emphasis omitted), and that State Farm failed to do so, and also failed to notify Leo of its reasons for its delay, in violation of its contract with Leo and of Pennsylvania law.

 State Farm's motion to dismiss asserts that Count II attempts to assert a claim under Pennsylvania's Unfair Insurance Practices Act (UIPA), and that, because Pennsylvania law does not permit courts to enforce the UIPA either directly or indirectly, this claim must be dismissed. State Farm's motion to dismiss also argues that Counts IV and V seek to assert a common-law claim based upon State Farm's alleged bad-faith conduct, and that the Pennsylvania courts have not permitted such claims on the facts that Leo alleges.

 II. Leo's Claims under the Unfair Insurance Practices Act.

 Leo and State Farm are in agreement that only the Pennsylvania Insurance Commissioner may enforce the UIPA directly. See Hardy v. Pennock Insurance Agency, Inc., 365 Pa. Super. 206, 529 A.2d 471, 478 (Pa. Super. 1987). The UIPA is not, however, an exclusive remedy for claims of insurer misconduct; such claims may be brought under the Pennsylvania Unfair Trade Practices and Consumer Protection Law ("Consumer Protection Law"), which creates a private right of action. *fn2" See Pekular v. Eich, 355 Pa. Super. 276, 513 A.2d 427, 433 (Pa. Super. 1986) (finding that the UIPA does not bar claims ...


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