STEWART v. GEICO INSURANCE

IN THE UNITED STATES DISTRICT COURT

FOR THE WESTERN DISTRICT OF PENNSYLVANIA

PITTSBURGH

ADAM STEWART,

) 2:18-CV-00791-MJH

Plaintiff,

vs. )

)

GEICO INSURANCE, GEICO

CASUALTY COMPANY, GEICO

GENERAL INSURANCE COMPANY,

GEICO INDEMNITY COMPANY,

GOVERNMENT EMPLOYEES

INSURANCE COMPANY, GEICO

CORPORATION,

Defendants,

OPINION

Plaintiff, Adam Stewart (“Dr. Stewart”), brings the within action against Defendants,

GEICO Insurance, GEICO Casualty Company, GEICO General Insurance Company, GEICO

Indemnity Company, Government Employees Insurance Company, GEICO Corporation,

(“GEICO”) for claims of Breach of Contract and Bad Faith pursuant to 42 Pa.C.S. § 8371 arising

from an underinsured motorist (UIM) claim for injuries and damages sustained in a motor

vehicle/pedestrian accident. GEICO moves for partial summary judgment pursuant to Fed. R.

Civ. P. 56 seeking dismissal of the Bad Faith claim only. (ECF No. 29). The parties provided

briefs, appendices, and concise statements of material facts, (ECF Nos. 30, 31, 32, 33, 34, and

35). The matter is now ripe for decision.

For the following reasons, GEICO’s Motion for Partial Summary Judgment will be

granted, and the Bad Faith claim (Count I) will be dismissed.

L. Factual Background

On September 6, 2013, Dr. Stewart was struck by a motor vehicle while he was a

pedestrian crossing an intersection. (ECF No. 31 at 1). Asa result of the accident, Dr. Stewart

alleged that he suffered a concussion, post-concussion syndrome, L5-S1 disc bulge, L4-5 disc

bulge, low back pain, lumbar radiculopathy, trauma induced disc degeneration, upper back pain,

anxiety, depression, post-traumatic stress disorder, convergence insufficiency, right wrist pain,

loss of sensation in the right wrist and forearm, cervicalgia, cervical radiculopathy, cervical

strain, neck pain, foraminal narrowing at C5-C6, post-traumatic fibromyalgia, change in gait,

difficulty focusing, and headaches. (ECF No. 1-2 at § 17(a)-(w)).

On March 18, 2014, GEICO received notice of Dr. Stewart’s claim for Underinsured

Motorist (UIM) benefits. (ECF No. 34 at § 19). GEICO assigned the claim to senior claims

examiner, Danielle Pelletier. /d. at 13. For the next fifteen months, at nearly monthly intervals,

Ms. Pelletier contacted Plaintiff's counsel for updates. (ECF No. 33-3 at pp. 83-167). As of

February 17, 2015, Dr. Stewart’s counsel had not provided GEICO with proof of the tortfeasor’s

liability limits. Jd. at p. 93. On April 19, 2016, GEICO received an economic loss report,

authored by Daniel Sloppy, regarding Dr. Stewart’s past and future wage loss. Therein, Mr.

Sloppy assumed Dr. Stewart was permanently disabled from returning to his pre-accident

neuroscience research career and opined that Dr. Stewart’s past and future economic losses

totaled $ 2,005,298.94. (ECF No. 34 at § 25). On April 19, 2016, Ms. Pelletier called plaintiffs

counsel and requested proof for when Dr. Stewart stopped working. (ECF No. 33-3 at pp. 96-

97). On June 8, 2016, Ms. Pelletier received additional medical records. /d. at p. 98. On July

29, 2016, GEICO received confirmation of the tortfeasor’s limits of liability coverage. Jd. at p.

99.

On September 30, 2016, Ms. Pelletier determined that GEICO needed a sworn statement

from Dr. Stewart and an independent medical examination (IME). Jd. She believed that a

medical examination was necessary because the records reflected no head injury in the ER, a

history of depression, Dr. Stewart continued to work until his grant ended in 2014, he had no

medical treatment between 5/29/14 and 12/8/14, and Dr. Stewart was claiming past and future

lost wages. (ECF No. 34 at 37). Further, the EMS records indicated that Dr. Stewart denied

striking his head or losing consciousness and that the neurological exam indicated “no abnormal

findings.” (ECF No. 33-5). Likewise, the Emergency Department records indicated no head

injury or loss of consciousness and a negative head CT scan. (ECF No. 33-6). At an October 3,

2013 visit, the treatment note for Dr. Stewart by Candice Ebbert indicated that he was still

working and had a history of depression. (ECF No. 33-8). At Dr. Stewart’s October 21, 2013

treatment visit with Alicia Puskar, Ph.D., she recommended that Dr. Stewart remain out of work

for three weeks because he was symptomatic of a concussion and not functioning at an

appropriate cognitive level. (ECF No. 33-10). Following a November 5, 2013 post-concussion

medication management visit, treating physician Dr. Anderson noted in her records that Dr.

Stewart had a past medical history of OCD and Tourette’s syndrome. (ECF No. 33-11). On

December 12, 2013, Dr. Puskar recommended that Dr. Stewart return to work on January 2,

2014. (ECF No. 33-14). At an April 29, 2014 visit with his family physician, Dr. Smuckler, for

back pain follow-up, Dr. Stewart reported that he lost his job due to his physical symptoms.

(ECF No. 33-16). Ata March 3, 2015 visit with Dr. Adelsheimer for back pain follow-up, Dr.

Stewart reported normal activities of daily living and exercising. (ECF No. 33-19). On

November 9, 2015, Dr. Stewart underwent a neuropsychological evaluation where he attained

high average and superior range scores on the Wechsler Adult Intelligence Scale-IV, average

scores for working memory, no impairment of speech and language, no impairment of perceptual

and spatial ability, and no impairment of executive function. (ECF No. 33-24). All of these

medical records supported Ms. Pelletier’s September 2016 request for an IME.

Thereafter, as regards litigation concerning the accident at issue, on December 28, 2016,

Dr. Stewart settled with the third-party tortfeasor’s carrier for the tortfeasor’s liability limits of

$100,000. (ECF No. 1-2 at { 25). GEICO received the transcript of Dr. Stewart’s testimony in

the third-party case sometime in January 2017. (ECF No. 33-3 at pp. 156-158)

On April 25, 2017, GEICO retained James D. Petrick, Ph.D. to conduct a

neuropsychological examination of Dr. Stewart. Dr. Petrick was asked to specifically address

the nature of any injuries Dr. Stewart suffered in the accident and to determine whether medical

treatment for Dr. Stewart was reasonable and appropriate. (ECF No. 31-1 at p. 14). Inhis

report, Dr. Petrick noted a “complicated premorbid psychiatric history” with psychosis, agitation,

depression, severe anxiety, Tourette’s syndrome, attention deficit hyperactivity disorder, possible

autism spectrum disorder, and Asperger’s. (ECF No. 31-1 at p. 14-15). After his examination,

Dr. Petrick opined that Dr. Stewart suffered a concussion as a direct result of the accident;

however, Dr. Petrick noted no ongoing “sequela,” such as a residual neurocognitive deficit,

psychiatric disorders, or post-traumatic stress disorder, attributable to the concussion. Jd. at p.

18. Dr. Petrick further opined, that while Dr. Stewart's treatment prior to April 2017 was both

reasonable and necessary, Dr. Stewart had made a complete recovery with no further treatment

necessary. Jd. With regard to Dr. Stewart’s capacity to work, Dr. Petrick found no limitations.

Td. .

Defense counsel received Dr. Petrick’s report on July 14, 2017 and provided it to Dr.

Stewart’s counsel on July 28, 2017. (ECF No. 31 at 7-8). On August 25, 2017, Plaintiff’ s

counsel communicated that Dr. Stewart’s UIM claim was based more so upon musculoskeletal

pain rather than upon his head injury. Id. at 9. Following that representation, GEICO retained

Charles J. Burke, M.D. to evaluate Dr. Stewart’s musculoskeletal pain through an independent

medical examination. /d. at§ 10. On November 6, 2017, Dr. Burke conducted the IME. Jd.

In his report, Dr. Burke opined that, while Dr. Stewart sustained a soft tissue injury at the time of

the accident, he found no evidence that related any significant injury or treatment to the accident.

(ECF No. 31-1 at p. 27). In March 2018, GEICO extended an offer of $25,000 to settle Dr.

Stewart’s UIM claim. (ECF No. 34 at § 39).

U. Standard of Review

Summary judgment may only be granted where the moving party shows that there is no

genuine dispute about any material fact, and that judgment as a matter of law is warranted. Fed.

R. Civ. P. 56(a). Pursuant to Federal Rule of Civil Procedure 56, the court must enter summary

judgment against a party who fails to make a showing sufficient to establish an element essential

to his or her case, and on which he or she will bear the burden of proof at trial. Celotex Corp. v.

Catrett, 477 U.S. 317, 322 (1986). In evaluating the evidence, the court must interpret the facts in

the light most favorable to the nonmoving party, drawing all reasonable inferences in his or her

favor. Watson v. Abington Twp., 478 F.3d 144, 147 (3d Cir. 2007).

In ruling on a motion for summary judgment, the court’s function is not to weigh the

evidence, make credibility determinations, or determine the truth of the matter; rather, its

function is to determine whether the evidence of record is such that a reasonable jury could

return a verdict for the nonmoving party. Reeves v. Sanderson Plumbing Prods., Inc., 530 U.S.

133, 150-51 (2000) (citing decisions); Anderson v. Liberty Lobby, 477 U.S. 242, 248-49 (1986);

Simpson v. Kay Jewelers, Div. of Sterling, Inc., 142 F.3d 639, 643 n. 3 (3d Cir. 1998). The mere _

existence of a factual dispute, however, will not necessarily defeat a motion for summary

judgment. Only a dispute over a material fact—that is, a fact that would affect the outcome of

the suit under the governing substantive law—will preclude the entry of summary judgment.

Liberty Lobby, 477 US: at 248.

I. Discussion

Dr. Stewart brings a statutory bad faith action against GEICO under 42 Pa.C.S.A. § 8371

for GEICO’s handling of his underinsured motorist (UIM) claim. Specifically, he contends his

claim for bad faith arises from GEICO’s a) unreasonably low settlement offer; b) improper

reserve for his claim; c) failure to adequately investigate Dr. Stewart’s claim; and d) unnecessary

delay in investigating his UIM claim. (ECF No. 32 at p. 2).

The Pennsylvania bad faith statute provides in its entirety:

In an action arising under an insurance policy, if the court finds that the insurer has acted

in bad faith toward the insured, the court may take all of the following actions:

(1) Award interest on the amount of the claim from the date the claim was made by the

insured in an amount equal to the prime rate of interest plus 3%.

(2) Award punitive damages against the insurer.

(3) Assess court costs and attorney fees against the insurer.

42 Pa.C.S.A. § 8371. To succeed on a bad faith claim, a plaintiff-insured must prove, by clear

and convincing evidence: “(1) that the insurer did not have a reasonable basis for denying

benefits under the policy; and (2) that the insurer knew of or recklessly disregarded its lack of a

reasonable basis in denying the claim.” Nw. Mut. Life Ins. Co. v. Babayan, 430 F.3d 121, 137 3d

Cir.2005); Terletsky v. Prudential Prop. & Cas. Ins. Co., 437 Pa.Super. 108, 649 A.2d 680, 688

(1994). Although the term “bad faith” is not defined in the statute, courts have subsequently

determined that a variety of carrier actions can constitute bad faith, including “a frivolous or

unfounded refusal to pay, lack of investigation into the facts, or a failure to communicate with

the insured.” Frog, Switch & Mfg. Co., Inc. v. Travelers Ins. Co., 193 F.3d 742, 751 n. 9 3d Cir.

1999); see also Terletsky, 649 A.2d at 688. “The ‘clear and convincing’ standard requires that the

plaintiff show 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.” J.C.

Penney Life Ins. Co. y. Pilosi, 393 F.3d 356, 367 (3d Cir. 2004) (quoting Bostick v. ITT Hartford

Group, Inc., 56 F.Supp.2d 580, 587 (E.D.Pa. 1999)) (quotations omitted). “Thus, the plaintiff's

burden in opposing a summary judgment motion is commensurately high in light of the

substantive evidentiary burden at trial.” Pilosi, 393 F.3d at 367 (citing Kosierowski v, Allstate

Co., 51 F.Supp.2d 583, 588 (E.D.Pa. 1999)); see also Anderson, 477 U.S. 242, 248, 106

S.Ct. 2505 (1986) (“we conclude that the determination of whether a given factual dispute

requires submission to a jury must be guided by the substantive evidentiary standards that apply

to the case. This is true at both the directed verdict and summary judgment stages.”).

a. Unreasonably Low Settlement Offer.

GEICO contends that it cannot be liable for bad faith in a UIM claim where there is a □

bona fide value dispute. Dr. Stewart argues that the $25,000 offer from GEICO was an

unreasonable valuation of his claim, considering his injuries, noneconomic losses, and $2 million

economic loss claim. “Generally, Pennsylvania law does not treat as bad faith an insurer’s low

but reasonable estimate of an insured’s losses.” Seto v. State Farm Ins. Co., 855 F. Supp. 2d 424,

430 (W.D. Pa. 2012) (citing Brown v. Progressive Ins. Co., 860 A.2d 493, 501 (Pa. Super. Ct.

2004)). However, “low-ball offers which bear no reasonable relationship to an insured’s actual

losses can constitute bad faith within the meaning of § 8371.” Seto, 855 F. Supp. 2d at 430

(citing Brown, 860 A.2d at 501). In examining alleged bad faith conduct, “[c]ourts have

routinely found that it is reasonable for an insurance company to rely on expert opinion in its

investigation into claims and accidents.” Walter v. Travelers Pers. Ins. Co., No. 4:12-CV-346,

2016 WL 6962620, at *7 (M.D. Pa. Nov. 29, 2016). Specifically, “[a]n insurer can rely on IMEs

of qualified health professionals who examine claimants in a usual and customary manner.”

Seidman vy. Minnesota Mutual Life Ins. Co., 40 F.Supp.2d 590, 594 (E.D.Pa.1997).

Here, GEICO’s offer of $25,000, which equated to a claim value at $125,000,' was

reasonable and supported by the record and expert opinions. At the time, Ms. Pelletier,

GEICO’s adjuster, decided to request and secure an IME in September 2016, she had received

medical records that signaled the need for a further claim investigation. Her claim notes, as

supported by claim documentation, indicated “no head injury in the ER. History of Depression.

Continued to work. Lost Grant in 2014. No treatment from 5/29/14 until 12/8/14. Claims past

and future lost wages.” (ECF No. 34 at p. 36). As discussed earlier, Ms. Pelletier’s notes are

fully supported by the totality of Dr. Stewart’s medical records. Thus, Ms. Pelletier had a

reasonable basis to request and secure independent medical examinations in GEICO’s

investigation of the UIM claim.

As regards economic loss assessment, Dr. Stewart expected GEICO to accept and rely

upon his expert, Daniel Sloppy’s report. Dr. Sloppy’s report and the documents he references

supported GEICO’s decision to seek further investigation. The report, which projected

economic wage loss damages in excess of $2 million, assumed Dr. Stewart was permanently

disabled. However, as Mr. Sloppy indicated in his report, the Social Security Administration

denied Dr. Stewart’s disability claim. Furthermore, Mr. Sloppy references one medical

narrative from Aaron Smuckler, M.D., Dr. Stewart’s family physician. Dr. Smuckler’s narrative

UIM claims, the carrier is permitted a credit of the tortfeasor’s policy limits when

evaluating the claim. Boyle v. Erie Ins. Co., 656 A.2d 941, 943 (Pa. Super. Ct. 1995). Here, the

tortfeasor had a $100,000 liability policy.

was authored on July 16, 2015, eight months before Mr. Sloppy’s report. Dr. Smuckler’s last

office visit with Dr. Stewart had occurred on December 2, 2013. Dr. Smuckler’s narrative

generally discusses Dr. Stewart’s prognoses and treatment as gleaned from other providers;

however, he provides no specific references to the sources of such information. Reliability aside,

even Dr. Smuckler noted continued improvement in Dr. Stewart’s condition. Dr. Smuckler’s

report, combined with the IME reports from Dr. Petrick and Dr. Burke, support that Ms. Pelletier

had a reasonable basis to question Mr. Sloppy’s critical assumption that Dr. Stewart was

permanently disabled. Thus, with no other evidence to establish Dr. Stewart’s economic losses

other than Mr. Sloppy’s report that assumes total disability, no reasonable juror could find bad

faith by clear and convincing evidence from GEICO’s $25,000 settlement offer to Dr. Stewart.

b. Improper Reserves for Plaintiffs Claim

Dr. Stewart also claims bad faith by virtue of GEICO’s low reserves for this UIM claim. □

Dr. Stewart asserts that the reserve was not reasonable in light of his damages. In addition, Dr.

Stewart argues that that GEICO should have offered him the full reserve amount of $55,000,

rather than just $25,000. GEICO contends that it placed a reasonable value on Dr. Stewart’s

UIM claim. An insurance reserve is money set aside “to satisfy obligations that may arise under

a claim.” Peco Energy Co. v. Insurance. Co. of N. America, 852 A.2d 1230, 1232 n.3 (Pa. Super.

Ct. 2004). Pennsylvania law requires an insurance company to set reserves aside when they are

placed on notice of a possible loss arising under its policy. See Keefer v. Erie Ins. Exchange, No.

13-1938, 2014 WL 201123, at *3 (M.D. Pa. Mar. 7, 2014) (quoting Fidelity & Deposit Co. of

Ma. v. McCulloch, 168 F.R.D. 516, 525 (E.D. Pa. 1996)). However, the failure of a carrier to

offer its full settlement authority does not constitute bad faith. Zappile v. Amex Assur. Co., 928

A.2d 251, 262 (Pa. Super. Ct. 2007). Again, Dr. Stewart’s burden of proof standard is clear and

convincing evidence. See J.C. Penney Life Ins. Co., 393 F.3d at 367. Here, it follows that,

because the Court finds no sufficient evidence of bad faith as to the $25,000 settlement offer,

there is likewise no bad faith in GEICO’s reserve for this UIM claim. ,

c. Failure to Adequately Investigate

Dr. Stewart further claims bad faith, asserting that GEICO conducted an inadequate

investigation. Dr. Stewart contends that GEICO adjuster, Ms. Pelletier, conducted no

independent investigation until she referred the claim for an IME. GEICO contends that Dr.

Stewart cannot explain how any additional investigation would have altered its evaluation.

Where a plaintiff asserts a bad faith claim based upon a failure to investigate, “Tal plaintiff [...]

must show that the outcome of the case would have been different if the insurer had done what

the insured wanted done.” Blaylock v. Allstate Ins. Co., 2008 WL 80056, *13 (M.D.Pa. Jan.7,

2008) (citing Zappile v. AMEX Assurance Co., 928 A.2d 251, 262 (Pa.Super.2007) ). Here, Dr.

Stewart has failed to demonstrate that GEICO would have drawn a different conclusion had it

conducted any additional independent investigation. Even if GEICO had conducted its

investigation in a manner described by Dr. Stewart, ie. reviewing the economic loss report with

experts, seeking medical authorizations, speaking to treating physicians, or speaking with the

tortfeasor’s defense counsel, (ECF No. 32 at pp. 7-8), it would have still reasonably led to the

IME opinions of Drs. Petrick and Burke, who both concluded that Dr. Stewart’s injuries had

resolved. These opinions establish a reasonable basis for GEICO to contest the value of Dr.

Stewart’s UIM claim. Therefore, Dr. Stewart cannot meet his burden to show that a reasonable

juror could find by clear and convincing evidence that GEICO would have evaluated Dr.

Stewart’s claim differently had it conducted an earlier or different investigation as argued by

plaintiff's counsel. As such, Dr. Stewart’s bad faith claim, in this regard, fails.

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d. Unnecessary Delay in Investigation

Dr. Stewart argues that GEICO acted in bad faith by delaying its handling of Dr.

Stewart’s UIM claim. GEICO argues that it remained proactive after it received notice of Dr.

Stewart’s UIM claim. In order for an insured to recover for bad faith from delay, an insured

must demonstrate that “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).

As set forth in the factual background, above, much delay was attributable to actions and

inactions on Dr. Stewart’s behalf. Dr. Stewart’s counsel was slow to respond to GEICO’s

requests for information, records and documentation to confirm Dr. Stewart’s injuries and the

tortfeasor’s limits of liability, to produce third-party depositions, and to produce updates to Dr.

Stewart’s medical records. Further, Dr. Stewart changed the theory for his damage claims from

neurological head injuries to musculoskeletal injuries. Such change caused delays in claim

evaluation and decisions to secure relevant IME assessments. As such, no reasonable juror could

conclude by clear and convincing evidence that GEICO acted in bad faith in the timeline of its

investigation of Dr. Stewart’s UIM claim. Thus, Dr. Stewart’s claim for bad faith, in this regard,

fails.

_ In addition to the above analyses and in consideration of the totality of the circumstances,

no reasonable jury could find by clear and convincing evidence that GEICO acted in bad faith in

its timeline for claim processing, in its claim evaluation, and in its offer for claim disposition and

resolution. As such, Dr. Stewart's claim for bad faith recovery fails. .

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IV. Conclusion

Upon consideration of the foregoing, the claim for Bad Faith asserted by Dr. Stewart, in

each instance and in the totality of circumstances, fails to produce sufficient evidence for any

jury to conclude bad faith by clear and convincing evidence. As such, GEICO’s Motion for

Partial Summary Judgment is granted. Dr. Stewart’s claim for Bad Faith in Count II of his

complaint is dismissed. A separate order will follow.

BY THE COURT:

Marilyn J. Horan’:

United States District Judge

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