Green v. State Farm Mutual Automobile Insurance Company

IN THE UNITED STATES DISTRICT COURT

FOR THE MIDDLE DISTRICT OF PENNSYLVANIA

RONALD GREEN and : CIVIL ACTION NO. 3:20-CV-1534

BETTY JEAN GREEN, :

: (Judge Conner)

Plaintiffs :

:

v. :

:

STATE FARM MUTUAL :

AUTOMOBILE INSURANCE :

COMPANY, :

:

Defendant :

MEMORANDUM

Plaintiffs Ronald Green and Betty Jean Green advance claims for breach of

contract, statutory bad faith, and loss of consortium against Defendant State Farm

Mutual Automobile Insurance Company. State Farm moves to dismiss the

statutory bad faith claim and Betty Jean’s loss of consortium claim to the extent it

seeks punitive damages pursuant to Federal Rule of Civil Procedure 12(b)(6). We

will grant in part and deny in part State Farm’s motion.

I. Factual Background & Procedural History

Plaintiffs are married Pennsylvania residents. (Doc. 2 ¶ 3). In 2008, Ronald

entered into an insurance contract with State Farm under which he received

underinsured motorist (“UIM”) coverage. (See Doc. 2, Ex. A). On August 8, 2019,

Ronald, a pedestrian, was struck by a vehicle. (Doc. 2 ¶ 22). Ronald suffered

injuries as a result of this incident and has received medical treatment. (Id. ¶¶ 9-10).

Plaintiffs allege that they will have to expend time and money “for an indefinite

time in the future” to treat Ronald’s injuries, and that Ronald will suffer future

wage loss. (Id. ¶¶ 10-12).

Ronald filed notice of a possible UIM claim with State Farm on September 9,

2019, and thereafter resolved his liability claim with the driver’s insurance company

on January 17, 2020. (See id. ¶¶ 23, 24). On January 20, 2020, plaintiffs filed their

formal UIM claim along with supporting documentation, whereupon State Farm

initiated an investigation. (See id. ¶¶ 26, 36). During the investigation, plaintiffs

requested from State Farm: complete adjuster notes un-redacted, a list of offers

made and reasons for the offers, and a list of all materials reviewed by State Farm

during its evaluation of the Greens’ UIM claim. (See id. ¶ 28). Smith acknowledged

plaintiffs’ document request on April 15, 2020, and State Farm promptly retained

counsel on April 16, 2020. (See id. ¶¶ 29, 30). State Farm advised plaintiffs that

certain documents would be forwarded to their attorney, but no documents were

sent prior to the filing of the instant action. (Id.) Plaintiffs allege that State Farm’s

conduct following their notice of a potential UIM claim constitutes bad faith. (Id.

¶¶ 21-57).

Plaintiffs initially filed this action in the Court of Common Pleas of

Lackawanna County before State Farm removed the action to this court and filed

its motion to dismiss. The motion is fully briefed and ripe for disposition.

II. Legal Standard

Rule 12(b)(6) of the Federal Rules of Civil Procedure provides for the

dismissal of complaints that fail to state a claim upon which relief may be granted.

FED. R. CIV. P. 12(b)(6). When ruling on a motion to dismiss under Rule 12(b)(6), the

court must “accept all factual allegations as true, construe the complaint in the light

most favorable to the plaintiff, and determine whether, under any reasonable

reading of the complaint, the plaintiff may be entitled to relief.” Phillips v. County

of Allegheny, 515 F.3d 224, 233 (3d Cir. 2008) (quoting Pinker v. Roche Holdings,

Ltd., 292 F.3d 361, 374 n.7 (3d Cir. 2002)). In addition to reviewing the facts

contained in the complaint, the court may also consider “exhibits attached to the

complaint, matters of public record, [and] undisputedly authentic documents if the

complainant’s claims are based upon these documents.” Mayer v. Belichick, 605

F.3d 223, 230 (3d Cir. 2010) (citing Pension Benefit Guar. Corp. v. White Consol.

Indus., Inc., 998 F.2d 1192, 1196 (3d Cir. 1993)).

Federal notice and pleading rules require the complaint to provide “the

defendant fair notice of what the . . . claim is and the grounds upon which it rests.”

Phillips, 515 F.3d at 232 (alteration in original) (quoting Bell Atl. Corp. v. Twombly,

550 U.S. 544, 555 (2007)). To test the sufficiency of the complaint, the court conducts

a three-step inquiry. See Santiago v. Warminster Township, 629 F.3d 121, 130-31

(3d Cir. 2010). In the first step, “the court must ‘tak[e] note of the elements a

plaintiff must plead to state a claim.’” Id. at 130 (alteration in original) (quoting

Ashcroft v. Iqbal, 556 U.S. 662, 675 (2009)). Next, the factual and legal elements of a

claim must be separated; well-pleaded facts are accepted as true, while mere legal

conclusions may be disregarded. Id. at 131-32; see Fowler v. UPMC Shadyside, 578

F.3d 203, 210-11 (3d Cir. 2009). Once the court isolates the well-pleaded factual

allegations, it must determine whether they are sufficient to show a “plausible claim

for relief.” Iqbal, 556 U.S. at 679 (citing Twombly, 550 U.S. at 556); Twombly, 550

U.S. at 556. A claim is facially plausible when the plaintiff pleads facts “that allow[]

the court to draw the reasonable inference that the defendant is liable for the

misconduct alleged.” Iqbal, 556 U.S. at 678.

III. Discussion

A. Statutory Bad Faith

Pennsylvania law prohibits an insurer from denying an insurance claim in

bad faith. 42 PA. CONS. STAT. § 8371. To prevail on a bad-faith claim, the insured

must show that the insurer (1) “did not have a reasonable basis for denying benefits

under the policy” and (2) “knew of or recklessly disregarded its lack of reasonable

basis in denying the claim.” Amica, 656 F.3d at 179 (quoting Terletsky v. Prudential

Prop. & Cas. Ins. Co., 649 A.2d 680, 688 (Pa. Super. 1994)); see also Rancosky v.

Wash. Nat’l Ins. Co., 170 A.3d 364, 377 (Pa. 2017). Bad faith is “any frivolous or

unfounded refusal to pay proceeds of a policy; it is not necessary that such refusal

be fraudulent.” Post v. St. Paul Travelers Ins. Co., 691 F.3d 500, 523 (3d Cir. 2012)

(quoting Terletsky, 649 A.2d at 688). It requires more than “mere negligence or bad

judgment.” Id. (quoting Frog, Switch & Mfg. Co. v. Travelers Ins. Co., 193 F.3d 742,

751 n.9 (3d Cir. 1999)).

To defeat a bad-faith count, the insurer need only show that it had a

“reasonable basis” for denying the insured’s claim. See Post, 691 F.3d at 522

(quoting Fogel, 656 F.3d at 179). The insurer need not show that its conclusions or

investigatory methods were “flawless.” Turner v. State Farm Fire & Cas. Co., 260

F. Supp. 3d 419, 425 (M.D. Pa. 2017) (citing Krisa v. Equitable Life Assurance

Society, 113 F. Supp. 2d 694, 704 (M.D. Pa. 2000)). In other words, an insurer need

only “show that it conducted a review or investigation sufficiently thorough to yield

a reasonable foundation for its action.” Id.

Plaintiffs’ complaint is rife with unsupported and conclusory allegations of

bad faith. (See Doc. 2 ¶¶ 39-51). Aside from providing a timeline of events, (see id.

¶¶ 22-30), plaintiffs offer virtually no factual allegations informing the

reasonableness (or unreasonableness) of State Farm’s conduct. Instead, plaintiffs

provide “[t]hreadbare recitals of the elements of a cause of action, supported by

mere conclusory statements.” Iqbal, 556 U.S. at 678 (citing Twombly, 550 U.S. at

555. We need not credit these conclusory allegations at the Rule 12 stage. See id.

(citing Twombly, 550 U.S. at 555). This deficiency is alone enough to grant State

Farm’s motion. We nonetheless take up, and reject, Green’s ostensible grievances,

which fall into two categories: first, that State Farm unjustifiably declined to pay

plaintiffs under the policy in a timely manner despite plaintiffs’ belief that liability

was clear; and second, that some of State Farm’s conduct during the investigation

amounts to bad faith. (See Doc. 7 at 5-11; Doc. 9-2 at 7-13; Doc. 10 at 2-3).

Genuine disputes over the value of a claim are not determinative of bad faith,

see Moran v. United Servs. Auto. Ass’n, No. 3:18-CV-2085, 2019 WL 626440, at *4

(M.D. Pa. Feb. 14, 2019) (collecting cases), and an insurer does not act in bad faith

“merely because [it] makes a low but reasonable estimate of an insured’s damages,”

Smith v. State Farm Mut. Auto. Ins. Co., 506 F. App’x 133, 136 (3d Cir. 2012)

(nonprecedential) (quoting Johnson v. Progressive Ins. Co., 987 A.2d 781, 784 (Pa.

Super. Ct. 2009)). Furthermore, insurers need not blindly accede to an insured’s

demand when the value of the insured’s potential recovery is in dispute. See

Castillo v. Progressive Ins., No. 3:19-CV-1628, 2021 WL 963478, at *5 (M.D. Pa. Mar.

15, 2021) (Conner, J.) (citing Smith, 506 F. App’x at 137; Yohn v. Nationwide Ins. Co.,

No. 1:13-CV-24, 2013 WL 2470963, at *7 (M.D. Pa. June 7, 2013)).

State Farm’s alleged resistance to plaintiffs’ demands in this case does not

alone establish a plausible bad faith claim. Indeed, the complaint avers only that:

(1) plaintiffs submitted a demand letter on January 20, 2020; (2) State Farm’s claims

representative reviewed the demand letter and Ronald’s medical file (PIP “personal

injury protection” or first party benefits file); and (3) State Farm did not offer fair

value of the claim as of the date of the complaint—less than five months after

plaintiffs tendered their UIM demand. (Doc. 2 ¶¶ 22-30, 35). Plaintiffs fail to explain

how State Farm’s declination to offer plaintiffs their preferred amount—which they

do not identify—rises to the level of bad faith conduct. Plaintiffs do not allege:

whether or when State Farm actually extended an offer; what that offer was; when

and whether plaintiffs reviewed, rejected, or countered State Farm’s offer; or why

that offer was unreasonable under the circumstances. See Durdach v. LM Gen. Ins.

Co., No. 3:20-CV-00926, 2021 WL 84174, at *5 (M.D. Pa. Jan. 11, 2021); Clarke v.

Liberty Mut. Ins. Co., No. 3:18-CV-1925, 2019 WL 522473, at *6 (M.D. Pa. Feb. 11,

2019). Plaintiffs’ disagreement with an offer made by State Farm or its decision not

to extend an offer, without more, does not establish a plausible claim.

Plaintiffs’ charge that State Farm was dilatory in handling Ronald’s claim

fares no better. To show bad-faith delay, the insured must establish “the delay is

attributable to the defendant, that the defendant had no reasonable basis for the

actions it undertook which resulted in the delay, and that the defendant knew or

recklessly disregarded the fact that it had no reasonable basis to deny payment.”

Thomer v. Allstate Ins. Co., 790 F. Supp. 2d 360, 370 (E.D. Pa. 2011) (quoting

Wiedinmyer v. Harleysville Mut. Ins. Co., No. 94–19450, 1999 WL 1324202, at *215

(Pa. Ct. Com. Pl. Aug. 5, 1999)). We are mindful that the process for resolving an

insurance claim can be “slow and frustrating,” Baum v. Metro. Prop. & Cas. Ins.

Co., No. 2:16-CV-623, 2019 WL 4689024, at *6 (W.D. Pa. Sept. 26, 2019) (Conner, C.J.)

(citing Kosierowski v. Allstate Ins. Co., 51 F. Supp. 2d 583, 590 (E.D. Pa. 1999)), but a

long claims-processing period does not constitute bad faith by itself, see Thomer,

790 F. Supp. 2d at 370 (quoting Kosierowski, 51 F. Supp. 2d at 588-89).

Furthermore, delay caused by a reasonable investigation or mere negligence in

causing a delay does not amount to bad faith. See Shaffer v. State Farm Mut. Auto.

Ins. Co., 643 F. App’x 201, 204 (3d Cir. 2016) (nonprecedential); see Walter v.

Travelers Pers. Ins. Co., No. 4:12-CV-346, 2016 WL 6962620, at *6 (M.D. Pa. Nov. 29,

2016).

Plaintiffs filed their notice of a potential UIM claim in September 2019, their

formal UIM demand in January 2020, and this lawsuit in June 2020. Plaintiffs claim

the nine-month delay between the notice of a potential claim and the filing of this

suit without a payout constitutes bad faith because liability was clear. As a

threshold observation, we note several cases in our circuit holding that longer

delays do not amount to bad faith if an investigation was necessary. See, e.g.,

Thomer, 790 F. Supp. 2d at 370-73 (holding on summary judgment that 42-month

delay not bad faith); Williams v. Hartford Cas. Ins. Co., 83 F. Supp. 2d 567, 572 (E.D.

Pa. 2000) (holding on summary judgment that 15-month delay not bad faith).

Although we have not yet proceeded to discovery, the short delay in this case—nine

months from the notice of a potential claim and less than five months from the

formal demand—pales in comparison.

In any event, as explained above, plaintiffs’ allegations bely their assertion

that liability was clear. Indeed, plaintiffs claim that a further investigation would

have revealed the extent of Ronald’s injuries. In other words, had State Farm

continued with its investigation, it would have obtained the information necessary to

extend a proper settlement figure. The complaint instead suggests that the parties

were engaged in a deliberative process—during which they both reviewed relevant

documents, retained counsel, and participated in a negotiation process—shortly

before this action was filed. (See Doc. 2 ¶¶ 26-28). The complaint also suggests that

at least some of this delay was attributable to plaintiffs: in April 2020, plaintiffs

made their own requests for documents. (See id. ¶¶ 24-30). This request effectively

extended the investigative process and entitled State Farm to time to evaluate the

propriety of that request and to formulate an appropriate response. See Thomer,

790 F. Supp. 2d at 371 (“Furthermore, when Thomer did respond, she did so by

providing new medical records, and was, therefore, not resuming negotiations but

effectively bringing her claim back to square one.”). Plaintiffs no doubt would have

preferred that State Farm complete its investigation faster, but they have not pled

any facts indicating that State Farm had no reasonable basis for delaying payment

or continuing its investigation.

Lastly, plaintiffs take issue with State Farm’s decision to review Ronald’s PIP

file without his permission. (See Doc. 9-2 at 11-12; Doc. 7 at 8-9). Plaintiffs imply

that State Farm’s decision to do so violates some rule of law. However, an insurer’s

reasonable legal conclusion in an uncertain area of law does not constitute bad

faith. See Kunji Harrisburg, LLC v. Axis Surplus Ins. Co., 447 F. Supp. 3d 303, 310

(E.D. Pa. 2020) (citing Brown v. Progressive Ins. Co., 860 A.2d 493, 501 (Pa. Super.

Ct. 2004)). Neither party has pointed the court to cases discussing whether or not

an insurer’s unauthorized review of an insured’s PIP file is unlawful.1 Based on the

court’s review, it appears that insureds can request to review PIP files, but it is

unclear whether permission is required. See Zintel v. Progressive N. Ins. Co., No.

3:09-CV-2577, 2010 WL 5230911, at *1 (M.D. Pa. Dec. 16, 2010); Brown v. Great

Northern Ins. Co., No. 3:07-CV-322, 2009 WL 453218, at *1, 6 (M.D. Pa. Feb. 23,

2009); see also Kenneth v. N.J. Mfrs. Ins. Co., No. A-2898-18T3, 2020 N.J. Super.

Unpub. LEXIS 609, at *2-3 (N.J. Super. Ct. App. Div. 2020). Given the apparent

dearth of case law on this matter, we cannot conclude at this juncture that State

Farm’s decision to review Ronald’s PIP file was per se unreasonable or sufficient to

state a plausible claim of bad faith. Even if it were impermissible, plaintiffs have

not offered well-pleaded facts that State Farm knowingly or recklessly disregarded

this prohibition.

1 State Farm cites several cases for the proposition that failure to review first-

party medical files may inform the court’s bad-faith investigation inquiry, not

whether permission is required to review PIP files as a matter of law. (See Doc. 7 at

8 (citing Rosenthal v. Am. States Ins. Co., No. 1:18-CV-1755, 2019 WL 1354141 (M.D.

Pa. Mar. 26, 2019); Barry v. Ohio Cas. Grp., No. 3:04-CV-188, 2007 WL 128878 (W.D.

Pa. Jan. 12, 2007); Motorists Mut. Ins. Co. v. Musto, No. 3:05-CV-135, 2006 WL

1806002 (M.D. Pa. 2006); Thomer , 790 F. Supp. 2d 360; Pantelis v. Erie Ins. Exch.,

890 A.2d 1063 (Pa. Super. Ct. 2006)).

For these reasons, we will dismiss plaintiffs’ bad faith claim. We harbor

doubts as to whether the deficiencies in plaintiffs’ bad faith averments can be

overcome with an amended complaint, but we will grant leave to amend.

B. Punitive Damages for Loss of Consortium

State Farm separately moves to dismiss Betty Jean’s loss of consortium claim

to the extent it seeks punitive damages. (See Doc. 4 ¶¶ 28-29; Doc. 7 at 12-14). It

contends that punitive damages are unavailable in connection with loss of

consortium claims as a matter of law. (See Doc. 7 at 12-14). Loss of consortium is a

standalone, derivative claim that permits a spouse to recover for “a loss of services,

society, and conjugal affection of one’s spouse” in certain cases. Shuker v. Smith &

Nephew, PLC, 885 F.3d 760, 777-78 (3d Cir. 2018) (citing Darr Constr. Co. v.

Workmen’s Comp. Appeal Bd., 715 A.2d 1075, 1079-80 (Pa. 1998)). Stated

differently, a plaintiff asserting a loss of consortium claim can recover injuries to

one’s marital expectations. See Darr, 715 A.2d at 1079-80 (citing Anchorstar v. Mack

Trucks, Inc., 620 A.2d 1120, 1121-22 (Pa. 1993)); see also Cmiech v. Electrolux Home

Prod., Inc., No. CIV. A. 3:07-CV-1495, 2009 WL 3103786, at *3 (M.D. Pa. Sept. 24,

2009) (“In Pennsylvania, damages for loss of consortium include the ‘loss of the

company, society, cooperation, affection and aid of a spouse in every conjugal

relation.’”).

State Farm cites this inveterate standard and asks us to draw a negative

inference: because punitive damages are not identified in the oft-used standard,

they are legally unrecoverable. It does not, however, cite any decision holding that

punitive damages are unavailable as a matter of law in a case such as this one.

Given State Farm’s lack of on-point authority, and this early procedural juncture,

we decline to dismiss or strike Green’s punitive damages request. It may of course

be revisited in a later motion.

IV. Conclusion

We will grant in part and deny in part State Farm’s motion (Doc. 4) to

dismiss. An appropriate order shall issue.

/S/ CHRISTOPHER C. CONNER

Christopher C. Conner

United States District Judge

Middle District of Pennsylvania

Dated: May 17, 2021