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Blaylock v. Allstate Insurance Co.

January 7, 2008


The opinion of the court was delivered by: William W. Caldwell United States District Judge


I. Introduction

We are considering the parties' cross-motions for summary judgment. This is an action under Pennsylvania law for the bad-faith handling of a claim for uninsured motorist (UM) coverage. Plaintiffs are Rita Blaylock and Lonnie Blaylock, husband and wife, and Defendant is Allstate Insurance Company, Plaintiffs' automobile insurer.*fn1

Rita Blaylock was injured in an automobile accident with another driver who had no insurance. She made a claim against Allstate for UM coverage, which would have been in the amount of $15,000. Allstate refused, asserting that she had signed a form rejecting it. Blaylock disputed this, asserting that the signature on the form was not hers, thereby entitling her under Pennsylvania law to UM coverage regardless of the policy provisions. At arbitration, Plaintiff won in a split decision and then filed this action in state court. Defendant removed it here, invoking our diversity jurisdiction.

In Plaintiff's motion for summary judgment, she argues that Allstate acted in bad faith because it insisted upon arbitrating the UM coverage issue when it had no reasonable basis for doing so. She mainly asserts that Allstate simply decided from the outset to deny her claim even when she presented evidence to the contrary, including a sworn statement that the signature was not hers and the opinion of a handwriting expert backing her up.

In Allstate's motion for summary judgment, it mainly argues that the bad faith claim has no merit because it did have reasonable grounds to contest the UIM claim. Those grounds included a signed rejection form, albeit only a poor microfiche copy, and the opinion of a handwriting expert rebutting that of Plaintiff's expert, if only to opine that no expert opinion could be made about the genuineness of the signature on the form, one way or the other.

Our job is not to decide whether the signature was Plaintiff's or not, only whether Allstate acted in bad faith in resisting the claim. Because Plaintiff must prove in part that Allstate lacked any reasonable ground for doing so, and must prove that part of her case by clear and convincing evidence, we will enter summary judgment for defendant Allstate and against Plaintiff.

II. Standard of Review

"Summary judgment can only be granted 'if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law.' Fed. R. Civ. P. 56(c). We 'must view the facts in the light most favorable to the nonmoving party and draw all inferences in that party's favor.'" Andreoli v. Gates, 482 F.3d 641, 647 (3d Cir. 2007)(quoted case omitted).

We must also apply the same evidentiary standard that would be used by the fact finder at trial. Northwestern Mut. Life Ins. Co. v. Babayan, 430 F.3d 121, 129, 137 (3d Cir. 2005)(on summary judgment, applying the clear-and-convincing standard of proof to an insurer's attempt to rescind an insurance policy and to the insured's bad faith claim); see also Heinlein v. Progressive N. Ins. Co., No. 05-1769, 2007 WL 2071676, at *3 (W.D. Pa. July 17, 2007); Employers Mut. Cas. Co. v. Loos, 476 F. Supp. 2d 478, 491-92 (W.D. Pa. 2007); Nat'l Recovery Agency, Inc. v. AIG Domestic Claims, Inc., No. 4:05-CV-0033, 2006 WL 1289545, at *10 (M.D. Pa. May 9, 2006).

An insured has to prove her bad faith claim by clear and convincing evidence. Greene v. United Services Auto. Ass'n, A.2d, 2007 WL 4110632, at *9 (Pa. Super. 2007). Thus, Defendant's motion must be granted if Defendant establishes that Plaintiff's evidence on summary judgment would not persuade any reasonable fact finder clearly and convincingly that Allstate had handled her UM claim in bad faith. Conversely, Plaintiff's motion must be granted if she shows clearly and convincingly that no reasonable fact finder could believe that Allstate had not acted in bad faith. See In re Bressman, 327 F.3d 229, 238 (3d Cir. 2003)(a party moving for summary judgment that has the burden of proof at trial must show that "'on all the essential elements of its case . . . no reasonable jury could find for the non-moving party'")(quoted case omitted).

III. Background

Based on the parties' evidentiary submissions, the following is the undisputed background to the summary-judgment motions. We will sometimes borrow the parties' language without attribution.

A. Policy Formation and Coverage

At her deposition, Plaintiff testified that in August 1990 (some twelve years before the accident) Plaintiff and her husband applied for the policy. She requested the same coverage as her husband had for an Allstate policy issued in Ohio. (Doc. 33, Def.'s SMF ¶ 2; doc. 44, Pl.'s Reply.) At first, Allstate's agent quoted a price that was too high, but later came down on price, explaining, so Plaintiff testified, that he had made a mistake, that the rates were different for different areas. (Doc. 32-8, Blaylock Dep., pp. 15-17.)

Plaintiff went to the agent's office to sign an application form. (Id., p. 21.) She remembers signing at least one form, but there may have been more. (Doc. 32-8, Blaylock Dep., pp. 23-24.) She concedes her signature does appear to be on the application form, dated August 13, 1990,*fn2 but she is not 100 percent sure. (Id., pp. 24-25.) There were three other forms that appeared to have her signature on them, all required by Pennsylvania law and all of them also dated August 13, 1990.

First, there was the "Rejection of Uninsured Motorist Protection" form.*fn3 Plaintiff denied that the signature on that form was hers. (Doc. 30-7, Pl.'s statement under oath, Ex. F, pp. 9-10). Her husband denied that it was his handwriting. (Doc. 30-8, Lonnie Blaylock's statement under oath, Ex. G, pp. 4-5). The second was an "Important Notice" form, advising Plaintiff of certain coverages available under Pennsylvania law, as pertinent here, UM coverage.*fn4 The form advised her that her signature indicated she understood the coverages available and which ones she had selected. Plaintiff testified that she did not recognize the form but that her signature was on it. (Doc. 32-8, Blaylock Dep., pp. 26-27.) The third form was a "Notice to Named Insureds," advising her that for a smaller premium she could elect a "limited tort option" form of relief under Pennsylvania law if she was injured in an auto accident.*fn5 Plaintiff did not remember the form, but she testified the signature opting for the limited tort option "looked like [her] handwriting." (Id. pp. 27-28.)

The policy as initially purchased had bodily injury coverage of $15,000 per person and $30,000 per occurrence, $5,000 for property damage per occurrence, $10,000 for medical expenses per person, and $30,000 per accident in underinsured (UIM) motorist coverage. These limits appeared on the declaration page. (Doc. 33, Def.'s SMF ¶ 7; doc. 44, Pl.'s Reply.) This coverage differed from the Ohio policy in that the new policy had (1) lower bodily injury limits, (2) lower property damage limits, (3) higher medical payment limits, (4) omitted collision coverage entirely, (5) omitted comprehensive coverage, (6) omitted UM coverage, and (7) added UIM coverage. (Id., ¶ 8 and Pl.'s Reply.)

The policy became effective on August 14, 1990. About a month later, it was amended. The medical payment coverage was reduced to $5,000, and the UIM coverage was dropped. As indicated, the insureds never had UM coverage, and the premiums they paid did not include UM coverage. (Id., ¶ 22 and Pl.'s Reply.)

The policy was effective on a semiannual basis, so from the time the insureds purchased the policy in August 1990 until the date of the accident in January 2003, defendant Allstate sent the insureds the following documents every six months on or about August 14 and on or about February 14: (1) a cover letter saying it was time to renew; (2) a statement of premiums owed for each covered vehicle; (3) a form describing the coverages the insureds had and also specifically stating that UM coverage and UIM coverage had been rejected; (4) cards showing proof of insurance for the six-month period; and (5) a declaration page showing the coverages in force and noting that UM and UIM coverage had been rejected. When the insureds would amend their coverage occasionally, they received the same documents (Doc. 32-19 and 32-20, Def.'s Ex. I; doc. 47-7, Def.'s Ex. H.) Lonnie Blaylock admits having received these documents, (doc. 32-21, Def.'s Ex. J, Lonnie Blaylock Dep., pp. 10, 13), and Plaintiff admits having received the proof-of-insurance cards. (Doc. 32-8, Def.'s Ex. G, Rita Blaylock Dep., pp. 36-37.)

B. How the Claim for UM Coverage Was Resolved

On January 3, 2003, Plaintiff was in an accident with a driver who had no insurance. (Doc. 33, Def.'s Statement of Material Facts (SMF) ¶ 23; doc. 44, Pl.'s Reply.) At some point shortly thereafter, she contacted Allstate and was told she had only "med pay" coverage and no other coverages. (Doc. 33, Def.'s SMF ¶ 24; doc. 44, Pl.'s Reply.)

Plaintiff retained a lawyer. On February 14, 2003, her lawyer advised Defendant that Plaintiff was going to pursue a UM claim. (Doc. 33, Def.'s SMF ¶ 29; doc. 44, Pl.'s Reply; doc. 30-4, Pl.'s Ex. C.) About two weeks later, on March 3, 2003, Allstate replied that Plaintiff had no UM coverage. Plaintiff's lawyer then asked Allstate to produce a signed UM rejection form.*fn6 Allstate produced a copy of the form, dated August 13, 1990, the date Plaintiff applied for the policy. (Doc. 30-6, Pl.'s Ex. E, the rejection form.) The copy was made from a microfiche record because Allstate had destroyed the original, apparently as a matter of course. (Doc. 46-3, Wright Dep., pp. 37-38; doc. 30-16, Rooney Dep., pp. 24-25.) The copy was a poor one; portions of the signature had not transferred to the microfiche. (Doc. 47-4, Def.'s Ex. D, report of Def.'s handwriting expert; doc. 30-9, report of Pl.'s handwriting expert. p. 2; doc. 30-6, Pl.'s Ex. E, the rejection form.)

On or about April 2, 2003, Plaintiff's counsel advised Allstate that the signature on the form was not Plaintiff's and demanded that the policy be reformed to provide $15,000 in UM coverage, matching the limits of the bodily injury liability coverage in the policy. (Doc. 33, Def.'s SMF ¶ 31; doc. 44, Pl.'s Reply). At some point in April, he also demanded arbitration. (Doc. 33, Def.'s SMF ¶ 33; doc. 44, Pl.'s Reply.) As a result, in May 2003, Defendant retained M. Gerard Bradley, Esq. (Doc. 45-24, Pl.'s Ex. V; doc. 33, Def.'s SMF ¶ 33; doc. 44, Pl.'s Reply.) Bradley was retained to investigate the claim, which generally would have included taking the statement of the insured under oath and advising Allstate on steps to take about the claim. (Doc. 33, Def.'s SMF ¶ 34; doc. 44, Pl.'s Reply; Doc. 32-22, Rooney Dep., pp. 19-21.)*fn7

By September 22, 2003, Colleen E. Rooney was the claims representative handling the claim for Allstate. On that date, she wrote a message to Robert Edwards, a claims supervisor, asking how to proceed since Plaintiff was denying she had signed the UM coverage rejection form. Edwards wrote back on the same day: "Defend on no coverage. Let a panel decide," (doc. 30-12, CM/ECF page 67), meaning an arbitration panel. On November 11, 2003, she wrote to Edwards again, and he replied, "Panel. Minimal coverage if we lose." (Id., CM/ECF page 68.)

On January 9, 2004, Bradley took the statements of the Blaylocks under oath. Both of them denied that the signature on the rejection form was Rita Blaylock's. (Doc. 30-7, Pl.'s Ex. F, Rita Blaylock Dep., pp. 9-10; doc. 30-8, Pl.'s Ex. G, Lonnie Blaylock Dep., pp. 4-5.) In March 2004, Tanya D. Wright began handling the claim for Allstate. (Doc. 30-12, CM/ECF page 69.)

In August 2004, the Blaylocks sent Allstate the report of their handwriting expert, Julie Edison. (Doc. 30-9, Pl.'s Ex. H, report dated August 19, 2004.) Edison noted "the poor quality of the photocopy" of the signature on the UM coverage rejection form, but was still able to opine that the signature on the form was not Rita Blaylock's. (Id., p. 2).

In turn, Allstate retained its own expert, Gus R. Lesnevich. In a report, dated October 5, 2004, Lesnevich opined that it was "not possible to render any conclusion as to the authenticity" of the signature. (Doc. 30-10, Pl.'s Ex. I, report at p. 2.) He also observed that [t]he reproduction quality of this signature is extremely poor and portions of the signature were not reproduced during the copy process." (Id., p. 1.) He also remarked:

If one were to attempt to reproduce (fill in) the missing portions of the questioned "Rita M. Baylock" signature, utilizing a genuine Rita M. Blaylock signature as a guide, it would appear that the questioned "Rita M. Blaylock" signature would, in fact, bare (sic) a resemblance to a genuine Rita M. Blaylock signature. (Id., p. 2.)*fn8

In Allstate's view, it could have resolved the issue in court because the policy precludes arbitrators from deciding coverage issues. (Doc. 46-4, Def.'s Ex. E, the policy, CM/ECF page 43), but Edwards decided to accept arbitration because of the "relatively small amount of money" involved; it was less costly for both sides and quicker just to arbitrate the claim. (Doc. 46-5, Def.'s Ex. F, Edwards Dep., pp. 22-26).

The arbitration was held on March 10, 2005. In a split decision, the panel found for Plaintiff, with Allstate's arbitrator siding with Allstate. (Doc. 30-13, Pl.'s Ex. L; doc. 30-12, CM/ECF page 67, entry for June 4, 2003.) Allstate had agreed that if coverage was found, it would pay Plaintiff the $15,000 limit required under Pennsylvania law. It also agreed that it would pay Blaylock's passenger $6,000 for her injuries as well. Allstate did not appeal the arbitrators' decision. It paid the amounts owed. It also billed the Blaylocks the premiums for UM coverage back to January 3, 2003, the date of the accident. This lawsuit followed.

Bradley, Allstate's attorney, and Wright, the claims representative responsible for the claim at the time of the arbitration, testified to their reasons for contesting Plaintiff's claim.*fn9 Bradley said that after taking the Blaylocks' statements, he had questions about their credibility since Plaintiff would have been receiving renewal notices for years indicating there was no UM coverage. Additionally, Plaintiff's expert had credibility problems as well since Allstate's expert said ...

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