The opinion of the court was delivered by: Katz, Senior District Judge.
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
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
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
From approximately February 1997, Hartford apparently believed
that there was a question of whether the Hartford or Traveler's
policy was the primary insurer — that is there was a question
regarding which policy the plaintiffs would have to exhaust first
before collecting on the second policy.*fn6 In June 1997, Lee
Hartford adjuster, informed Feiner by letter that Hartford's
policy was in excess to Travelers' policy. Hartford also
appointed its arbitrator in June. In August 1997, Hartford
reversed its position regarding the priority of coverage when its
counsel, Harold Viletto, conceded that Hartford's policy was
primary. Mr. Williams' deposition was taken in September 1997. In
October, Hartford sought an authorization from Mr. Williams for
the release of his West Goshen Township workers' compensation and
employment files. After the neutral arbitrator was selected in
October 1997, the arbitration was scheduled for February 1998.
See Def. Reply, Ex. 25 (Nov. 24, 1997 Ltr. from Anthony J.
Frayne, neutral arbitrator, to Feiner, et al.).
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.
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 ...