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WILLIAMS v. HARTFORD CAS. INS. CO.

February 22, 2000

DAVID WILLIAMS AND SUSAN WILLIAMS, PLAINTIFFS,
V.
HARTFORD CASUALTY INSURANCE COMPANY, DEFENDANT.



The opinion of the court was delivered by: Katz, Senior District Judge.

MEMORANDUM AND ORDER

Plaintiffs David and Susan Williams bring this action against defendant Hartford Casualty Insurance Company, alleging bad faith in its handling of their claim for underinsured motorist (UIM) benefits. Now before the court is Hartford's motion for summary judgment. Because there is no clear and convincing evidence by which a reasonable jury could find bad faith, the motion will be granted.

I. Background*fn1

In May 1996, plaintiff David Williams, a West Goshen Township police officer, was involved in an automobile accident while on duty. Mr. Williams suffered injuries including a brachial plexus stretch injury to his left shoulder and arm,*fn2 injury to his right eye, a spinal cord contusion, and imbedded glass near the ulnar nerve of his left arm, which required two surgeries. As a result of the accident, Mr. Williams also developed reflex sympathetic dystrophy on his left side,*fn3 memory loss, and depression. His injuries rendered him unable to return to work as a police officer, although after the accident, Mr. Williams was able to complete the few remaining credits necessary for his undergraduate degree and, in September 1997, to enroll as a full-time student at Widener University School of Law. His first semester grades at Widener were poor and he took a medical leave of absence from law school in February 1998. As of September of last year, Mr. Williams intended to return to school for the spring 2000 semester.

The liability of the driver who struck Mr. Williams' car was not in question and the tortfeasor's insurance company settled Mr. Williams' claim for the policy limit of $25,000 in September 1996.

The plaintiffs had UIM insurance with Travelers/Aetna Insurance Co. (Travelers), their personal automobile insurer. West Goshen Township also had UIM coverage with Hartford. The limit of the Travelers' policy was $300,000, and the limit of the Hartford policy was $1,000,000. Plaintiffs notified West Goshen of their intent to claim*fn4 under its UIM policy on December 18, 1996, and Hartford received notice of the claim on January 7, 1997.

Beginning in January 1997, Hartford regularly received Mr. Williams' medical records from plaintiffs' lawyer, Ivan Feiner. As early as February 1997, Feiner indicated that his clients were seeking the policy limit from Hartford. See Def. Ex. 6 (Feb. 6, 1997 Mem. from Lee Abel, Hartford, to Carol Luiz, Hartford).*fn5 On March 19, 1997, he sent a written demand to both insurers for the combined policy limit of $1,300,000. Neither insurer countered with an offer and plaintiffs demanded arbitration in April 1997.

In November, Hartford sought medical records directly from Mr. Williams' providers when Viletto sent subpoenas to the neutral arbitrator for execution. When several of Mr. Williams' providers failed to respond to the subpoenas, Viletto then requested authorizations for release of medical records from Mr. Williams in January 1998. An independent medical examination (IME) of Mr. Williams was also performed in January. In February, just prior to the initial arbitration date and prompted by Mr. Williams' withdrawal from law school, Hartford requested a continuance so that their expert could conduct a vocational assessment. The arbitration was rescheduled for April 1998, and Mr. Williams underwent the vocational assessment in March 1998.

Plaintiffs renewed their demand for Hartford's policy limit in February 1998, after Feiner reviewed the report of the IME. See Def. Ex. 41 (Feb. 12, 1998 Ltr. from Feiner to Viletto). At no time did plaintiffs offer to settle for less than Hartford's policy limit of $1,000,000. See Def. Ex. 47 (Pl. Resp. to Def's Requests for Admission (Set 1)).

Hartford's initial offer of $500,000 was made six days before the April arbitration. After plaintiffs refused, Hartford increased its offer to $650,000. It is unclear whether Feiner informed the plaintiffs of this new offer, see Def. Ex. 23 at 31-33 (Dep. of Feiner); in any event, plaintiffs did not accept and the arbitration preceded. The arbitration resulted in an award of $900,000 to the plaintiffs — $600,000 to Mr. Williams and $300,000 to Mrs. Williams. Plaintiffs subsequently filed this action against Hartford, alleging that its handling of their claim was in bad faith.

II. Discussion*fn7

A Standards

In Pennsylvania, an insured may bring a cause of action against an insurer who has acted in bad faith. See 42 Pa.C.S. § 8371.*fn8 Bad faith has been defined as

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 breach of a known duty (i.e. good faith and fair dealing), through some ...

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