related to tarsal tunnel syndrome and that her care to date was appropriate.
On August 19, 1994, attorney Perlstein again demanded the policy limit of $ 75,000. State Farm did not make any offer. Instead, by letter dated September 1, 1994, attorney Luchsinger reminded attorney Perlstein of the outstanding request for a statement under oath. Attorney Luchsinger, by letter dated November 10, 1994, again inquired when the plaintiff would be available to provide a statement under oath and acknowledged that the statement was the only item that State Farm needed in order to engage in settlement discussions. Another letter from attorney Luchsinger, dated December 8, 1994, confirmed that the statement under oath was scheduled for January 27, 1995. However, according to a letter dated December 20, 1994, the statement under oath was rescheduled until February 9, 1995.
The statement was taken on that day. The arbitration hearing was held the next day. On the day of the arbitration, State Farm offered $ 25,000 to settle the case before the hearing was held. That offer was refused and the arbitration hearing proceeded. The arbitrators awarded the plaintiff $ 75,000, which State Farm paid on or about February 22, 1995.
In the course of discovery for this lawsuit, the following State Farm employees were deposed: Arlene McGonagle, L. Scott Whiteside and Michael Moyer. In addition to the facts noted above, Mr. Whiteside and Mr. Moyer provided the following information. During his deposition, Mr. Whiteside testified that, during the entire time he was charged with evaluating the plaintiff's UIM claim, he never knew that Ms. McGonagle had valued the plaintiff's claim at $ 50,000 to $ 85,000. Deposition of L. Scott Whiteside ("Whiteside Dep.") at 92.
Mr. Whiteside also testified that he never attempted to put a value on the plaintiff's UIM claim until he had received the IME report and the plaintiff's statement under oath. Id. at 24-25, 36-37. He testified that he needed the plaintiff's statement under oath to determine "the present status of the person, whether or not their injuries are resolving, whether or not they continue to work or if they're having problems working, whether or not they continue to have pain in the given injured areas whether or not their injuries possibly caused them to actually fail more than they had previously, as to their standard of life." Id. at 29-30. He further testified that, until he had that information, attorney Luchsinger was not authorized to settle the plaintiff's UIM claim for any amount. Id. at 93-94.
Mr. Moyer was Mr. Whiteside's superior from the time Mr. Whiteside was assigned the plaintiff's UIM claim until just after the arbitration hearing. Id. at 50-51. Mr. Moyer testified that, on May 24, 1994, he had valued the plaintiff's UIM claim at $ 12,000. Deposition of Michael Moyer ("Moyer Dep.") at 13-15.
However, he did not authorize Mr. Whiteside to settle the plaintiff's claim for $ 12,000 because it was his understanding that attorney Perlstein had demanded $ 75,000 and would not lower his demand. Id. Mr. Moyer also testified that the IME did not lower the value of the plaintiff's claim. Id. at 26. In fact, the IME "supported some of her subjective . . . complaints," id. at 33, and was "to some extent" favorable to her claim. Id. at 34. Nonetheless, after reviewing the IME no offer was made for two reasons. First, he and Mr. Whiteside believed that attorney Perlstein would not accept less than $ 75,000. Id. at 28-29. Second, because the plaintiff's complaints were subjective in nature, Mr. Moyer decided that a statement under oath was needed to complete a full evaluation. Id. at 31.
Mr. Moyer stated that, in his view, Mr. Da Conceicao was 100% at fault for the accident. Id. at 41. He also testified that he agreed with Mr. Whiteside that no offer could be made until after the plaintiff's statement under oath was obtained. Id. at 50-51. On the morning of the arbitration, Mr. Whiteside told Mr. Moyer that he had discussed the plaintiff's statement under oath with defense counsel and that defense counsel had said the plaintiff was a good, credible witness. Id. at 52. Accordingly, Mr. Moyer authorized a settlement offer of $ 25,000. Id.
A. Count I
In count one of the complaint, the plaintiff advances a claim of bad faith. State Farm argues that its handling of the plaintiff's UIM claim did not constitute bad faith for the following reasons: it immediately began investigating the plaintiff's claim upon receiving notice, its requests for an IME and statement under oath were in accordance with the terms of the plaintiff's policy, and it made its offer within twenty-four hours of receiving the plaintiff's statement under oath. Defendant State Farm's Motion for Summary Judgment at PP 35-36. In addition, State Farm identifies the following facts as providing reasonable bases for disputing the value of the plaintiff's UIM claim: the plaintiff had already received $ 50,000, the plaintiff was able to continue working full-time, and the plaintiff had last seen a doctor regarding her tarsal tunnel syndrome on February 23, 1993. Memorandum of Law in Support of Defendant State Farm's Motion for Summary Judgment ("State Farm's Memorandum") at 10-11. The plaintiff counters by arguing that State Farm's insistence on a statement under oath before making any offer was unreasonable and constituted bad faith. Plaintiff's Memorandum of Law in Opposition to Defendant's Motion for Summary Judgment at 9-12. The plaintiff also argues that the offer State Farm made on the morning of the arbitration was unreasonable and constituted bad faith. Id. at 10-11.
In Pennsylvania, there is no common law remedy for bad faith on the part of insurers.
Terletsky v. Prudential Property & Casualty Insurance Co., 437 Pa. Super. 108, 649 A.2d 680, 688 (Pa. Super. 1994) (citing D'Ambrosio v. Pennsylvania National Mutual Insurance Co., 494 Pa. 501, 431 A.2d 966, 970 (Pa. 1970)). However, the Pennsylvania legislature has created a statutory remedy for bad faith on the part of insurers, which is codified at 42 Pa. C.S.A. § 8371. In the insurance context bad faith has a particular meaning:
"Bad faith" on part of insurer is any frivolous or unfounded refusal to pay proceeds of a policy; it is not necessary that such refusal be fraudulent. For purposes of an action against an insurer for failure to pay a claim, such conduct imports a dishonest purpose and means a breach of a known duty (i.e., good faith and fair dealing), through some motive of self-interest or ill will; mere negligence or bad judgment is not bad faith.
Terletsky, 649 A.2d at 688 (quoting Blacks' Law Dictionary, 139 (6th ed. 1990)). Bad faith must be proven by clear and convincing evidence. Id. To recover under a claim of bad faith, "the plaintiff must show that the defendant did not have a reasonable basis for denying benefits under the policy and that defendant knew or recklessly disregarded its lack of a reasonable basis for denying the claim." Id.
In determining whether an insurer has acted with bad faith, one must bear in mind that:
it has long been the law in Pennsylvania that an insurer stands in a fiduciary relationship to its insured and must accord the interest of its insured the same faithful consideration it gives its own interest. This is not to say that the insurer is bound to submerge its own interest in order that the insured's interest may be made paramount. . . . The evaluation of the case by the insurance company must be honest, intelligent and objective.