This report analyzes 210 insurance-related class actions filed in or removed to federal court in 2016. In many respects, the results are predictable. The greatest percentage of the insurance-related class actions involve coverage or claims handling decisions, although there were a few interesting pockets of recurring class claims, such as inflated drug prices and cost of insurance (‘‘COI’’) increases for life insurance policies. The predominant forum choices were on the American coasts, California and Florida being the preferred locations. One notable result was the frequency of voluntary dismissals by the plaintif fand individual settlements reached with the named plaintif fonly. It can only be surmised that either these cases never were intended to be consummated as class actions or that impediments arose after filing that prevented a cost-effective resolution on a class-wide basis.
It is hard to believe that Rancosky v. Washington National Ins. Co., No. 28 WAP 2016, 2017 Pa. LEXIS 2286 (Pa. Sept. 28, 2017) is the Pennsylvania Supreme Court’s first foray into the proof required for statutory insurer bad faith claims, particularly since it has been over twenty-five years since the Pennsylvania legislature created the private cause of action. 42 Pa. Cons. Stat. § 8371. It was the Pennsylvania Superior Court that first articulated the elements of statutory bad faith in Terletsky v. Prudential Property & Cas. Co., 649 A.2d 680 (Pa. Super. 1994), appeal denied, 659 A.2d 560 (Pa. 1995). Under Terletsky, a plaintiff claiming bad faith must prove by clear and convincing evidence that: 1) the insurer did not have a reasonable basis for denying policy benefits; and 2) that the insurer knew or recklessly disregarded the lack of reasonable basis for denying the benefits. 649 A.2d at 688. Continue reading The Supreme Court of Pennsylvania Shores Up Nature of Intent Required for Statutory Bad Faith Claims against Insurers
Claims against insurers under Pennsylvania’s Unfair Trade Practices and Consumer Protection Law (UTPCPL) occupy a unique place in its jurisprudence. Insurance is highly regulated, and many other recovery avenues exist in Pennsylvania for aggrieved insureds, such as breach of contract and bad faith. Usually, insurance claims are tethered to contract law, since the insured-insurer relationship and duties are governed by the insurance policy. Courts should be reluctant to ignore contractual principles when a UTPCPL claim arises out of a policy.
Generally, deceptive insurance solicitations are actionable under the UTPCPL, while post-inception policy-related claims are not. Toy v. Metropolitan Life Insurance Co. exemplifies this point. Toy involved an insurance salesman’s pre-issuance misrepresentations about the investment qualities of a life insurance policy. The insured asserted both bad faith and UTPCPL claims. The Pennsylvania Supreme Court affirmed dismissal of the statutory bad faith claim, concluding that bad faith did not cover an “insurer engaged in unfair or deceptive practices in soliciting the purchase of a policy.” By contrast, the court allowed the UTPCPL deceptive sales practices claim to proceed. Under Toy, claims that arise out of solicitation-related deception can give rise to a UTPCPL claim, such as misrepresentations during the sale of the policy, while bad faith and breach of contract theories apply following policy inception.
On January 24, 2014, the Pennsylvania Supreme Court agreed to hear an appeal from the Pennsylvania Superior Court’s Order in Babcock & Wilcox Co. v. American Nuclear Insurers, 2013 Pa. Super. LEXIS 1640 (Pa. Super. Jul. 10, 2013). The Superior Court had ruled in Babcock & Wilcox that an insured cannot seek reimbursement for a settlement negotiated without the insurer’s consent when the insured tendered and the insurer accepted coverage subject to a reservation of rights. See Thomas, C., “Whose Defense is it, Anyway – Consent to Settlement Clauses Under Babcock & Wilcox v. American Nuclear Insurers,” August 29, 2013 Duane Morris Insurance Blog. The Pennsylvania Supreme Court’s appellate review is limited to the issue of whether a policyholder forfeits coverage by settling a claim without the insurer’s consent where the insurer is defending subject to a reservation of rights and the settlement was found to be fair and reasonable.
The recent Pennsylvania Superior Court ruling in Babcock & Wilcox Co. v. American Nuclear Insurers, 2013 Pa. Super LEXIS 1630 (Jul. 10, 2013) casts a new balance between the rights of insureds to control and settle litigation and the rights of insurers to enforce consent to settlement and cooperation clauses in insurance policies. The Court ruled that an insured cannot seek reimbursement for a settlement negotiated without the insurer’s consent when the insurer has tendered and the insured has accepted coverage subject to a reservation of rights. Babcock’s rationale is embedded in the rules of contract construction and remains subject to an insurer’s fiduciary and good faith obligations. An insurer tendering a defense with a reservation of rights has not committed a material breach of the insurance policy so as to give free rein to the insured to breach the consent to settlement clause.