FINDINGS OF FACT AND CONCLUSIONS OF LAW
TERRENCE F. McVERRY, District Judge.
Plaintiff Nicholas Schifino commenced this lawsuit on August 15, 2011 by filing a four-count Complaint in the Court of Common Pleas of Allegheny County, Pennsylvania against Geico General Insurance Company ("GEICO"), Allied Insurance Company ("Allied") and Electric Insurance Company ("Electric") in which he seeks underinsured motorist ("UIM") benefits pursuant to automobile insurance policies issued by each Defendant. Plaintiff alleges that each Defendant has breached its contractual duties (Counts I, III, and IV) and that GEICO has engaged in bad faith (Count III) in violation of 42 PA. CONS. STAT. ANN. § 8371. GEICO removed the action to this Court on August 24, 2011 on the basis of diversity jurisdiction.
GEICO ultimately moved for summary judgment on the bad faith claim. The Court heard oral argument from counsel on December 7, 2012 and denied that motion one week later in a Memorandum Opinion and Order. (ECF No. 49).
By Order of Court dated March 15, 2013, the UIM claim was bifurcated from the bad faith claim for the purpose of trial. This case was initially scheduled for a jury trial, but the parties later waived that right.
On June 10 and 11, 2013, the Court conducted a non-jury trial in which it heard witness testimony and evidence. All parties were represented by counsel who presented and argued the issues skillfully and effectively. The transcripts of the proceedings were filed of record. Proposed Findings and Facts and Conclusions of Law were due on or before July 9, 2013 with responses thereto due on or before July 23, 2013. Those filings were timely made by Plaintiff and GEICO with which Allied and Electric joined in full. See ECF Nos. 113, 114. Accordingly, the issues are ripe for disposition.
Based on the testimony and evidence presented during trial and the applicable law, the Court enters the following Findings of Fact and Conclusions of Law pursuant to Federal Rule of Civil Procedure 52(a).
A. JOINT STIPULATIONS
1. The parties have filed of record Joint Stipulations (ECF No. 91) in which they set forth the following:
a. Plaintiff was involved in a motor vehicle accident that occurred on October 26, 2009 at the intersection of Frankstown and Rodi Roads in Penn Hills Township;
b. At the time of the collision, Plaintiff was a passenger in a 2007 Dodge Ram Pick-up Truck owned by John B. Derubeis and operated by Jeffrey Derubeis. The collision occurred when they were struck from behind by a 1998 Dodge Dakota operated by Andrew Hurayt ("Hurayt");
c. Hurayt was negligent in causing the accident;
d. Plaintiff sustained personal injuries as a result of the collision;
e. At the time of the collision, Hurayt was insured by a motor vehicle insurance policy issued by Erie Insurance Company ("Erie");
f. The Erie policy provided for $50, 000.00 in liability insurance coverage.
g. The truck operated by Jeffrey Derubeis was insured by GEICO which provided UIM coverage in the amount of $300, 000;
h. Plaintiff was a resident relative of Karen Vargecko and Mark Vargecko who, at the time of the collision, were insured by Allied which provided UIM coverage in the amount of $100, 000;
i. Plaintiff was a resident relative of Tina Long who, at the time of the collision, was insured by Electric which provided UIM coverage in the amount of $100, 000;
j. Provisions in both the Allied and Electric policies reflect that when their respective policies are in equal priority to any other policy, the UIM coverage available to any insured cannot exceed the amount by which the highest limit for any one vehicle under any one policy in the second priority exceeds the limit applicable under the policy in the first priority, meaning that the Allied and Electric policies have maximum exposure of $50, 000 each for potential UIM liability;
k. GEICO is the first priority source of underinsured motorist benefits for Plaintiff;
l. Plaintiff does not have any automobile insurance of his own and is considered to have "full-tort" coverage;
m. The medical expenses claimed by Plaintiff in this lawsuit total $78, 028, and the parties agree that the amount of the medical charges are fair and reasonable;
n. All of Plaintiff's medical records and bills are authentic;
o. All of the medical witnesses who testified are qualified as experts in their respective fields; and
p. The issues to be decided [in the UIM phase of this case] are the extent of the injuries sustained by the Plaintiff in the accident, the extent to which the injuries are compensable, and the amount of the medical bills for which Defendants must compensate Plaintiff.
2. The Court accepted and admitted these Joint Stipulations into evidence during the non-jury trial. See Trial Tr., ECF No. 115 at 3-4.
B. ISSUES BEFORE THE COURT
3. For Plaintiff to recover UIM benefits for damages as a result of the motor vehicle accident, he must establish that Hurayt was negligent; that he sustained damages; that such negligence caused his damages; that the amount of the liability insurance of Hurayt was inadequate to fully compensate Plaintiff for his injuries and damages; that the defendant insurance companies issued policies of automobile liability insurance coverage which afforded UIM coverage and remained in full force and effect on the date of the accident. The parties have stipulated to the liability and coverage aspects of the claim, but dispute the extent to which the post-accident medical treatment of Plaintiff is related to the October 2009 collision. Defendants submit (1) that they are responsible for the medical expenses and damages related to the first post-accident back surgery (a lumbar laminectomy and fusion procedure performed in February 2010); (2) that they should not have to pay the expenses and damages associated with the second post-accident back surgery (an interbody fusion performed in February 2011 because the February 2010 fusion attempt failed) to which they argue that Plaintiff failed to mitigate his damages by stopping smoking-a significant factor in the development of pseudoarthrosis or failed fusions; and (3) that they are not responsible for his third post-accident surgery (a laminectomy and fusion performed in February 2012) to which they contest that Plaintiff's neck/cervical injuries are causally related to the accident.
4. Additionally, Plaintiff contends that GEICO acted in bad faith by failing to conduct a proper investigation into his UIM claim or make an appropriate, justified, and timely settlement offer in the handling of his UIM claim. The parties dispute whether any recovery by Plaintiff in an amount greater than the offer but less than the demand constitutes bad faith.
5. The Court will separately address the UIM and bad faith aspects of this case. For the reasons that follow, the Court will find in favor of Plaintiff and against GEICO in the UIM phase, in favor of Allied and Electric and against Plaintiff, and in favor of GEICO and against Plaintiff in the bad faith phase.
II. THE UNDERINSURED MOTORIST PHASE
A. FINDINGS OF FACT
i. Plaintiff's Background & Pre-Accident Condition
1. Plaintiff is a fifty-nine (59) year-old male and a resident of Penn Hills Township, Pennsylvania. Plaintiff has a high-school education and some vocational training. He is divorced with two adult daughters and two grandchildren.
2. Plaintiff worked as an automobile mechanic for various dealerships until 1992 when he sustained an injury during the course of his employment at Dodgeland that ultimately ended his career. At that time, as Plaintiff was running through the garage to retrieve a tool he struck his head against the tire of an elevated vehicle. The impact resulted in chronic neck and back injuries that affected his ability to stand or sit for prolonged periods. Plaintiff filed a claim for disability benefits with the Social Security Administration the following year.
3. Plaintiff later sought surgical treatment for the work-related injuries. The nature of his pre-accident treatment is generally not in dispute.
4. In 1994, Plaintiff underwent a C7-T1 laminectomy, foraminotomy and decompression on the left at C-8, performed by Dr. Jorge Acevedo at Shadyside Hospital. Following this surgery, Plaintiff received additional treatment from Dr. Acevedo for lower back and neck pain.
5. Dr. Acevedo again performed surgery on Plaintiff in 2000 to treat a herniated disc in his lower back at L-4-L-5. Plaintiff continued his treatment for neck and back pain after the second surgery in 2000, which initially included only physical therapy but later progressed to pain management therapy with Dr. Paul Lieber around 2001. Dr. Lieber's treatment consisted of injections/prolotherapy and narcotic medications. Plaintiff remained under the care of Dr. Lieber until around April 2006.
6. Beginning in 1998, Plaintiff was also under the care of his primary care physician Dr. Gregory Smith who is board certified in internal medicine. Dr. Gregory Smith treated Plaintiff until 2010 when he became Vice-Chair of the Department of Family Medicine at UPMC, which required additional administrative work and reduced clinical hours. Plaintiff presented the expert testimony of Dr. Gregory Smith at trial via his video deposition. The Court found his testimony credible.
7. Dr. Gregory Smith has treated Plaintiff for his chronic neck and back pain and for a litany of other medical issues: hypertension, coronary artery disease, fibromyalgia, and tobacco use. Plaintiff also suffers from multiple sclerosis and diabetes, and Dr. Gregory Smith coordinates his care for those conditions. Plaintiff has visited Dr. Gregory Smith on twenty to thirty occasions, and his complaints typically focused on chronic neck and back pain, myofascial/musculoskeletal-type pain symptomatic of fibromyalgia, and some radicular pain into his left arm. The severity of Plaintiff's symptoms fluctuated throughout these visits, but they were fairly controlled with a combination of prescription medication and pain management treatment.
8. Around late 2001, Plaintiff completed a questionnaire for the Social Security Administration ("SSA") as part of a recertification process, attesting that he remained totally disabled and unable to perform most activities of daily living.
9. In addition to the 1992 accident, Plaintiff has had other orthopedic injuries such as a neck fracture in June 2003 from a fall down the steps at his residence. Plaintiff attributes this accident to a loss of consciousness immediately before the fall.
10. Plaintiff later underwent a posterior decompression with foraminotomies performed by Dr. Bonarati in August 2006.
11. From late 2007 until October 2009, Plaintiff experienced only minor neck and back discomfort with soreness throughout those areas. Complaints of radicular pain continued during this time, but the symptoms were basically controlled with prescriptions for NSAIDS and opiates. This treatment also allowed for increased functioning, as compared to the restricted lifestyle that he reported when he completed the SSA questionnaire. Plaintiff could now walk unimpeded, take the garbage out, cut the grass, and go fishing, although he considered himself still somewhat limited in those activities.
12. Plaintiff likewise experienced pre-accident symptoms from his multiple sclerosis and fibromyalgia. The symptoms he attributes to his multiple sclerosis are "hot and cold" sensations in his hands and feet as well as some slight vision loss. The symptoms he attributes to his fibromyalgia include diffuse pain, some muscle aches, and burning/stinging of the skin. Plaintiff experiences occasional flare-ups related to fibromyalgia, such as when he went to the emergency room at UPMC St. Margaret Hospital in September 2009 for treatment of arm and neck pain that resolved with intravenous medication.
13. Plaintiff has been a lifelong cigarette smoker, beginning when he was twelve-years-old. Plaintiff typically smoked one pack per day, but has reduced his intake on occasion to as little as three cigarettes per day and tried to quit smoking completely for about six months. As of the date of his testimony, Plaintiff was still smoking approximately one-half pack per day.
ii. The Motor Vehicle Accident
14. Plaintiff was a passenger in Derubeis' truck when they were struck from behind by a vehicle driven by Hurayt near a traffic light in Penn Hills Township.
15. The force from the impact caused Plaintiff to strike his head on the door handle and then hit his face on the dashboard. Plaintiff attributes his movement inside the vehicle to the ...