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Frank Sabella v. Nationwide Mutual Insurance Company and John Does 1-10

August 14, 2012

FRANK SABELLA,
PLAINTIFF
v.
NATIONWIDE MUTUAL INSURANCE COMPANY AND JOHN DOES 1-10,
DEFENDANTS



The opinion of the court was delivered by: Judge Sylvia H. Rambo

MEMORANDUM

Before the court is Defendant, Nationwide Mutual Insurance Company's ("Nationwide" or "Defendant"), motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6) for failure to state a claim. (Doc. 7.) For the reasons set forth below, the motion will be granted.

I. Background

A. Facts*fn1

Invoking this court's diversity jurisdiction, Plaintiff filed this lawsuit bringing a claim for underinsured motorist ("UIM") benefits following a motor vehicle accident. The complaint sets forth claims for declaratory judgment (Count I), bad faith (Count II), and breach of contract (Count III) arising out of Nationwide's alleged failure to pay UIM benefits to Plaintiff in accordance with the terms of an insurance policy issued to Plaintiff by Nationwide. (See Doc. 1, Compl.)

On May 20, 2008, Plaintiff filled a lawsuit in the Court of Common Pleas for Lancaster County bringing a claim for first party medical benefits (the "Lancaster lawsuit"). (Id. ¶ 9.) Around the same time, Plaintiff filed the present UIM action. (Id. ¶ 10.) Because the parties were unable to agree to the amount of damages, the UIM action proceeded to arbitration pursuant to the terms of the policy. (Id. ¶ 11.) At the arbitration, the panel of arbitrators found the valuation of damages to be $100,000.00. (Id. ¶ 13.) The arbitrators stated:

After deliberation upon the evidence presented, the Board of Arbitrators arrived at the monetary award for the claimant, Frank Sabella. The arbitrators unanimously agreed upon a valuation of the damages of $100,000.00 for all damages. This amount has not been molded by the arbitrators and does not reflect what may have happened in the third-party action.

(Id.)

It is undisputed that the policy limit for the tortfeasor's liability coverage was $300,000.00. (Id. ¶ 12.) Following the arbitrators' decision, Nationwide did not mold the award. (Id. ¶ 14.) Had Nationwide done so, the parties are in agreement that, by operation of law, Nationwide would have been entitled to a credit in the amount of the tortfeasor's liability coverage, here, $300,000.00, thus reducing the $100,000.00 award to zero. (Id.)

On January 31, 2011, Plaintiff and Defendant executed a settlement agreement in the Lancaster County lawsuit. (Id. ¶ 15.) On March 3, 2011, Plaintiff filed a motion to confirm the UIM arbitration award under the Lancaster lawsuit docket. (Id. ¶ 16.) Defendant opposed the motion to confirm the award, arguing that decision was not an "award," but a "valuation of Plaintiff's damages."*fn2 (Id. at 16.)

As part of Defendant's opposition to the motion, Defendant produced an affidavit from the arbitrators dated March 28, 2012, that was allegedly obtained in an ex parte manner. (Id. ¶ 17.) The affidavit, attached to the complaint as Exhibit E, states:

Our determination of the $100,000.00 total value of the case was made without knowledge of the third party limits. Pursuant to agreement of counsel, we only learned of the third party limits after we made our determination of the total valuation of the case. Thus, it is our understanding that in light of the third party policy limits, there was to be no award of underinsured motorist benefits and it was not our intent to award underinsured motorist benefits. (Id. ¶ 17; Ex. E.)

While the motion to confirm the UIM arbitration award was pending, a praecipe to settle, discontinue and end the case was filed on the Lancaster County lawsuit docket, presumably mooting the motion to confirm. (Id. ¶ 19.) In the case before this court, Plaintiff is seeking a declaration "that the arbitration award is deemed a final judgment in the amount of $100,000 in light of the award and in light of Defendant's failure to mold that award" and requesting damages in the amount of the award. (Id. ¶ 24.) Plaintiff's bad faith ...


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