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Robert J. Aumen and Sharon M. Aumen v. Nationwide Mutual Insurance Co

March 8, 2011

ROBERT J. AUMEN AND SHARON M. AUMEN, PLAINTIFFS
v.
NATIONWIDE MUTUAL INSURANCE CO., DEFENDANT



The opinion of the court was delivered by: Magistrate Judge Prince

JUDGE JONES

REPORT AND RECOMMENDATION

I. Procedural Background

Pursuant to an Order entered on January 6, 2011 (Doc. 28), the Honorable John E. Jones referred the pending Motion for Summary Judgment to the undersigned for the purpose of preparing a Report and Recommendation.

Plaintiffs initiated this action by filing a complaint on March 17, 2010 (Doc. 1) against their insurer, Defendant Nationwide Mutual Insurance Co. ("Nationwide"). The complaint alleged Defendant engaged in bad faith in the investigation and handling of Plaintiffs' claim for underinsurance motorist benefits ("UIM"), in violation of the Pennsylvania Unfair Insurance Practices Act, 40 P.S. §1171 et seq.

On November 3, 2010, Defendant filed a motion for summary judgment, a supporting brief and a statement of material facts. (Docs. 18, 20, 21). Plaintiffs filed an affidavit, a brief in opposition to the motion, a counter-statement of material facts and exhibits on November 17, 2010 (Docs. 23, 24, 25, 26),*fn1 to which Defendant filed a reply brief on November 10, 2010 (Doc. 27).*fn2 The matter is now ripe for disposition. For the reasons that follow, it will be recommended that the Defendant's motion for summary judgment be granted.

II. Factual Background

The factual background giving rise to the complaint is as follows: Plaintiff Robert Aumen was involved in a motor vehicle accident while in a van owned by his employer, Utz, on November 25, 2003 in Westminster, Maryland. At that time, Plaintiffs were the beneficiaries of a policy of motor vehicle insurance, Number 172486, issued by the Defendant. The insurance policy provided benefits of $50,000.00 per person and $100,000.00 per accident, and these benefits were "stacked" for three vehicles, thus rendering a maximum coverage of $150,000.00 per person. The policy further provided for wage loss and medical expenses. The tortfeasor in the accident, Dale White, had a policy of insurance with Progressive Insurance, which provided liability coverage in the amount of $25,000.00.*fn3

Inasmuch as Plaintiffs maintained that their injuries exceeded this amount, they made a claim for UIM benefits with Defendant on January 22, 2004. In response, on March 29, 2004, Defendant issued a reservation of rights letter to Plaintiffs indicating that the matter was being investigated. Defendant thereafter informed Plaintiffs that it would not be paying lost wages or UIM benefits because Plaintiff was in his employer's vehicle at the time of the accident.

Thereafter, a written demand for arbitration on the UIM claim was sent to Defendant on February 23, 2007. Defendant accepted coverage of Plaintiffs' UIM claim in December, 2007 and communicated this to Plaintiffs' counsel in February, 2008. On January 15, 2009, Defendant agreed to a settlement of the UIM claim for $80,000.00 in exchange for a general release from Plaintiffs. Arguing that this general release is violative of the Pennsylvania's Unfair Insurance Practices Act and that the Defendant acted in bad faith in resolving the UIM claim, the present action followed.

III. Standard of Review

Federal Rule of Civil Procedure 56(c) requires the court to render summary judgment " . . . forthwith 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). "[T]his standard provides that the mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment; the requirement is that there be no genuine issue of material fact." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48 (1986) (emphasis in original).

A disputed fact is "material" if proof of its existence or nonexistence would affect the outcome of the case under applicable substantive law. Anderson, 477 U.S. at 248; Gray v. York Newspapers, Inc., 957 F.2d 1070, 1078 (3d Cir. 1992). An issue of material fact is "genuine" if the evidence is such that a reasonable jury could return a verdict for the nonmoving party. Anderson, 477 U.S. at 257; Brenner v. Local 514, United Brotherhood of Carpenters and Joiners of America, 927 F.2d 1283, 1287-88 (3d Cir. 1991).

When determining whether there is a genuine issue of material fact, the court must view the facts and all reasonable inferences in favor of the nonmoving party. Moore v. Tartler, 986 F.2d 682 (3d Cir. 1993); Clement v. Consolidated Rail Corporation, 963 F.2d 599, 600 (3d Cir. 1992); White v. Westinghouse Electric Company, 862 F.2d 56, 59 (3d Cir. 1988). In order to avoid summary judgment, however, the nonmoving party may not rest on the unsubstantiated allegations of his or her pleadings. When the party seeking summary judgment satisfies its burden under Rule 56(c) of identifying evidence which demonstrates the absence of a genuine issue of material fact, the nonmoving party is required by Rule 56(e) to go beyond the pleadings with affidavits, depositions, answers to interrogatories or the like in order to demonstrate specific material facts which give rise to a genuine issue. Celotex Corporation v. Catrett, 477 U.S. 317, 324 (1986). The party opposing the motion "must do more than simply show that there is some metaphysical doubt as to the material facts." Matsushita Electric Industrial Co. v. Zenith Radio, 475 U.S. 574, 586 (1986). When Rule 56(e) shifts the burden of production to the nonmoving party, that party must produce evidence to show the existence of every element essential to its case which it bears the burden of proving at trial, for "a complete failure of proof concerning an essential element of the nonmoving party's case necessarily renders all other facts immaterial." Celotex, 477 U.S. at 323. See Harter v. G.A.F. Corp., 967 F.2d 846, 851 (3d Cir. 1992).

IV. Discussion

"UIM insurance is designed to protect an insured from a negligent driver of another vehicle who causes injury to the insured, but through no fault of the insured, lacks adequate coverage to compensate the insured for his or her injuries." Nationwide Mut. Ins. Co. v. Cosenza, 258 F.3d 197, 209 (3d Cir. 2001). While there is no common law remedy for the bad faith handling of insurance claims by an insurer, Pennsylvania law, 42 Pa. C.S.A. § 8371, provides a statutory remedy for such claims. Although the term "bad faith" is not defined in the statute, the Pennsylvania courts have followed the definition provided by Black's Law Dictionary:

"Bad faith" on [the] part of [an] 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.

MGA Ins. Co. v. Bakos, 699 A.2d 751, 754 (Pa. Super. Ct. 1997) (internal citations omitted).

The Pennsylvania courts have stated: "[t]o succeed in a bad faith claim, the insured must present clear and convincing evidence that 'the insurer did not have a reasonable basis for denying benefits under the policy and that the insurer knew of or recklessly disregarded its lack of reasonable basis in denying the claim.'"

Bonenberger v. Nationwide Mut. Ins. Co., 791 A.2d 378, 380 (Pa. Super. Ct. 2002). Such a claim can be made as to the handling of UIM claims. Boenberger, 791 A.2d at 379. Further, "[t]he 'clear and convincing' standard requires a showing by the plaintiffs that the evidence is so clear, direct, weighty and convincing as to enable a clear conviction, without hesitation, about whether or not the defendants acted in bad faith." Bostick v. ITT Hartford Group, Inc., 56 F. Supp. 2d 580, 587 (E.D. Pa.1999) (quoting Stafford v. Reed, 70 A.2d 345 (1950)) (internal citations omitted). Moreover, "mere negligence or bad judgment is not bad faith. To support a finding of bad faith, the insurer's conduct must be ...


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