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Stephano v. Tri-Arc Financial Services

March 4, 2008


The opinion of the court was delivered by: Judge Vanaskie


This action stems from an insurance company's objection to paying first-party benefits to reimburse a third-party beneficiary's medical expenses for alleged injuries resulting from a motor vehicle accident. Plaintiff Kimberly Stephano has sued Tri-Arc Financial Services, Inc. ("Tri-Arc"),*fn1 Frontier Adjusters and Frontier Adjusters, Inc. (collectively "Frontier"), and Lexington Insurance Company ("Lexington") for breach of contract and violations of 42 PA. CONS. STAT. § 8371, the Pennsylvania bad faith statute, and the Pennsylvania Motor Vehicle Financial Responsibility Law ("MVFRL"), 75 PA. CONS. STAT. §§ 1701 et seq. Specifically, Ms. Stephano alleges that Lexington, individually and through its authorized agents, Frontier and Tri-Arc, failed to pay third-party benefits in breach of its contract with Bama Leasing (also known as Auto Trakk, LLC ("AutoTrakk")) (Compl. ¶¶ 33-43), and acted in bad faith by, among other things, stalling, delaying and refusing to promptly pay benefits without a reasonable basis.*fn2 (Id. at ¶ 47.)

Defendant Frontier moved to dismiss Plaintiff's breach of contract claim and both Defendants Frontier and Lexington moved to dismiss Plaintiff's claim of bad faith under 42 PA. CONS. STAT. § 8371.*fn3 (Dkt. Entries 3, 6.) Defendant Frontier's Motion to Dismiss will be granted as to Plaintiff's bad faith claim because Plaintiff is unable to allege facts from which it may be inferred that Frontier is an "insurer" within the meaning of 42 PA. CONS. STAT. § 8371. Defendant Lexington's Motion to Dismiss Plaintiff's § 8371 bad faith claim will be denied because, contrary to Lexington's argument, Plaintiff's bad faith claim is not preempted by 75 PA. CONS. STAT. § 1797.


On June 27, 2005, Ms. Stephano was involved in a motor vehicle accident while a passenger in a Pontiac Grand AM SE1 leased by Bama Leasing to Deborah Hodgins. (Compl. ¶¶ 6 & 10.) Ms. Stephano sustained cervical and lumbar injuries as a result of the accident. (Compl. ¶ 13.) She received treatment for her injuries from Dr. Leroy Pelicci, M.D., and Valley Open MRI. (Id. at ¶ 15.) Her medical bills totaled more than $5,480. (Id. at ¶ 31.)

Ms. Stephano did not own a motor vehicle and was not a named insured on any policy of automobile insurance. (Id. at ¶ 8.) She attempted to recover her medical costs through the insurance policy of Deborah Hodgins, the lessee of the Pontiac Grand AM SE1. Ms. Hodgins apparently maintained an insurance policy with Progressive Insurance Company ("Progressive Insurance"). Upon contacting Progressive Insurance, however, Ms. Stephano learned that Ms. Hodgins' policy had lapsed. (Id. ¶ 18.)

Concluding that she was not covered under any policy of automobile insurance, Ms. Stephano applied for assistance through the Pennsylvania Assigned Claims Plan ("PACP"). The PACP denied her application because Bama Leasing, the owner of the Pontiac Grand AM SE1, was required to carry an insurance policy on the vehicle and would in fact be responsible for providing coverage. (Id. ¶ 19.)

Ms. Stephano followed up with Bama Leasing, which informed her that the vehicle was covered through E-Surance and that she should contact it. (Id. at ¶ 20.) Ms. Stephano complied and contacted E-Surance, which advised her that its policy was no longer in effect on the day of the accident. (Id.; Ex A., Dkt. Entry 6-2, at 15.)

On July 13, 2006, since both E-Surance and Progressive Insurance had denied having a policy in effect on the date of the accident, Ms. Stephano submitted a claim for first-party benefits to Bama Leasing. In a letter written by her attorney to Bama Leasing requesting a Personal Injury Protection ("PIP") application, Ms. Stephano indicated that E-Surance denied coverage of the vehicle and she was consequently asserting a claim on Bama Leasing's own insurance policy. (Id. at ¶ 21; Ex. B, Dkt. Entry 6-2, at 17.) Bama Leasing responded, advising Ms. Stephano that Tri-Arc would manage her insurance claim.

Over the next few months Ms. Stephano made repeated requests for a PIP application from Tri-Arc, but to no avail. (Id. at ¶ 22.) Then, almost four months after her original request, Ms. Stephano's attorney mailed Bama Leasing a second letter, dated October 5, 2006, requesting a PIP application and explaining that Bama Leasing's continued failure to produce the PIP application could result in the filing of a bad faith claim under 42 PA. CONS. STAT. § 8371 and the MVFRL. (Ex. C, Dkt. Entry 6-2, at 19.) Finally, on October 17, 2006, Tri-Arc faxed Ms. Stephano a PIP application. (Ex. D., Dkt. Entry 6-2, at 22-23.)

Ms. Stephano completed the application and submitted it to Tri-Arc on November 2, 2006. After waiting over a month for a response, Ms. Stephano's attorney wrote another letter to Bama Leasing, dated December 13, 2006, inquiring why Ms. Stephano's medical bills had not been approved or reduced. (Ex. F, Dkt. Entry 6-2, at 29.)

In January, Frontier, a business organized under the laws of the Commonwealth of Massachusetts, informed Dr. Pelicci that it was "working on behalf of Lexington Insurance Company and their insured Auto Trakk, LLC, (also known as Bama Leasing) in reference to" Ms. Stephano's claim. (Ex. G, Dkt. Entry 6-2, at 33-34; Compl. ¶ 3.) Frontier advised Dr. Pelicci that an investigation was conducted to determine whether or not the Lexington policy issued to Auto Trakk was applicable to this specific loss. (Ex. G, at 33-34.) This investigation revealed that Progressive Insurance "had an active policy on the vehicle at the time of loss" (effective until October 30, 2005), and that a "file and claim number were assigned on 12/21/2006." (Id.)

Later that month, Dr. Pelicci notified Ms. Stephano that Frontier had conducted an investigation finding Progressive Insurance had an active policy at the time of the accident. (Compl. ¶ 28.) Ms. Stephano then attempted to contact Frontier to advise them that the policy by Progressive Insurance had expired, but never received a return phone call. (Id. at ¶ 29.)

On March 23, 2007, Ms. Stephano filed this action in the Court of Common Pleas of Lackawanna County. One month later, on April 23, 2007, Defendant Lexington removed the case to this Court. (Notice of Removal, Dkt. Entry 1.)


A. Standard for Rule 12(b)(6) Motion to Dismiss

In considering a motion to dismiss for "failure to state a claim upon which relief can be granted," Fed. R. Civ. P. 12(b)(6), the Court must accept all well-pled facts of the complaint as true, as well as all reasonable inferences drawn therefrom. Javorski v. Nationwide Mutual Ins. Co., No. 3:06-CV-1071, 2006 WL 2225851, at *7 (M.D. Pa. Aug. 2, 2006). A motion to dismiss under Rule 12(b)(6) should only be granted where "'it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief.'" Id. at *6 (quoting Conley v. Gibson, 355 U.S. 41, 45-46 (1957)). The moving party bears the burden to establish the absence of an actionable claim. Id. at *7 (citing Johnsrud v. Carter, 620 F.2d 29, 33 (3d Cir. 1980)).

B. Frontier's Motion to Dismiss

The general Pennsylvania statute authorizing recovery for an insurance company's bad faith towards an insured is codified as 42 PA. ...

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