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Clemens v. New York Central Mutual Fire Insurance Co.

United States District Court, M.D. Pennsylvania

June 15, 2015

Clemens et al. Plaintiffs
New York Central Mutual Fire Insurance Company Defendant.


Richard P. Conaboy, Judge

We consider here numerous motions in limine filed by both the Plaintiff and the Defendant. We shall consider these, which have been fully briefed by the parties, in the order they appear on the docket.

1. Defendant's Motion in Limine Re Law Applicable to Supplementary Underinsured Motorist Claim. (Doc. 95).

The object of this motion is to have the Court declare that Plaintiffs' SUM claim was controlled by the law of New York State. Plaintiffs respond that the general rule, that a Federal court sitting in diversity generally applies the substantive law of the state in which it sits (Erie Railroad Company v. Thompkins, 304 U.S. 64, 78(1938)), Pennsylvania law should govern this claim. The parties agree that the Court's ruling on this point is pivotal because New York and Pennsylvania have different standards for determining whether an insurer has acted in bad faith, with the Pennsylvania standard being more favorable to claimants. See General Star National Insurance Company v. Liberty Mutual Insurance Company, 960 F.2d 377, 385 (3d. Cir. 1992).

Because Erie, supra, also requires that a Federal court sitting in diversity apply the choice of law rules of its host state, Pennsylvania's choice of law rules will apply. Where a "true" conflict exists because the choice of law could produce different results, Pennsylvania applies a flexible approach which combines a "significant relationship" test with a "governmental interest" analysis. Kilmer v. Connecticut Indemnity Company, 189 F.Supp.2d 237, 243(M.D.Pa. 2002) (citing Carrick v. Zurich-American Insurance Group, 14 F.3d 907, 909 (3d. Cir. 1994).

Defendant urges us to count the contacts and asserts that, on that basis, we should apply New York law. If that were the proper analysis, Defendant's argument would be more tenable. The Defendant is a New York Company, the insured was a New York resident at the time the policy was issued, and the contract was delivered in New York. However, despite these attachments to New York State, the controlling question is which state has the greater interest in the controversy and the most intimate connection with the outcome. Complaint of Bankers Trust Company, 752 F.2d 874, 882 (3d. Cir. 1984)(citing Griffith v. United Airlines, Inc., 416 Pa. 1, 203 A.2d 796 (1964) .

In this case, the injured party was harmed on the roads of Pennsylvania and resides within the Commonwealth as does the insured. Our Circuit has held that the protection of insured parties is the primary public policy underlying laws that govern the duties owed by an insurer to its insured. General Star, supra, at 379. Moreover, the public policy behind Pennsylvania's bad faith statute (42 Pa. C.S.A. § 8371) is the protection of its resident insureds from overreaching insurance companies. Thomson v. Prudential Insurance Company, 1992 WL 38132, 4(E.D.Pa. 1992).

Defendant makes much of the fact that it does not do business in Pennsylvania. Yet, the Court finds that, given the long common border between Pennsylvania and New York, it is not only foreseeable but also to be expected that numerous of Defendant's insureds travel the roads of Pennsylvania everyday. For this reason, Defendant should not be surprised to be facing a claim in a Pennsylvania court nor should it feel abused to have a case such as this governed by Pennsylvania law. We conclude that, due to its significant state interest to protect its resident insureds, Pennsylvania's interest in the outcome of this lawsuit is superior to that of New York. Defendant's motion will be denied.

2. Defendant's Motion in Limine to Preclude References to Pennsylvania Insurance Regulations and the Unfair Insurance Practices Act. (Doc. 96).

Defendant correctly asserts that the Pennsylvania Insurance Department regulates only those insurance entities licensed to do business in the Commonwealth of Pennsylvania. Defendant also correctly asserts that the provisions of Pennsylvania's Unfair Insurance Practices Act extend only to insurer's who issue insurance contracts in Pennsylvania. Because there is no dispute that Defendant neither is engaged in the business of writing insurance contracts in Pennsylvania nor licensed to do so, Defendant's motion (Doc. 96) is granted.

3. Defendant's Motion Pursuant to Federal Rule of Evidence 201 (Doc. 97).

Defendant's motion (Doc. 97) seeks a judicial determination that the driving distance between Stroudsburg, Pennsylvania and Liberty, New York is 75.7 miles and the driving distance between Stroudsburg, Pennsylvania and Scranton, Pennsylvania is 4 6.3 miles. This motion is uncontested (See Doc. 113 at 2) and, as such, will be granted.

4. Defendant's Motion in Limine to Preclude Plaintiffs from Introducing Evidence of Insurance Reserves During Trial. (Doc. 100).

Defendant's motion asserts that the relationship between the amount an insurance company reserves for a claim and the amount it ultimately offers to resolve that claim is so tenuous as to make the size of the reserve irrelevant for purposes of determining a bad faith claim. Defendant cites various district court decisions for this proposition. Plaintiff argues that the amount set aside in reserve necessarily reflects a company's assessment of the potential worth of the claim and, to the extent the reserve is dissimilar from the amount offered in settlement, is germane to an analysis of whether the company acted in bad faith in pretrial settlement negotiations. See North River Insurance Company v. Greater New York Mutual Insurance Company, 872 F.Supp 1411 (E.D.Pa. 1995) and Keefer v. Erie Insurance Exchange, 2014 WL 901123 (M.D.Pa. 2014). This Court believes that the authority cited by Plaintiffs reflects the better view. This is not to say ...

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