In Zappile v. Amex Assurance Company, 2007 WL 1651271 (Pa. Super.), the Pennsylvania Superior Court reversed the trial court's judgment entered against the insurer following a bench trial on a bad faith claim made by the insureds.
The bad faith claim arose after the insured was struck by an automobile while walking his dog. The insured settled his injury claim against the tortfeasor for the policy limits, then made a claim against his own automobile insurance policy, for first party benefits which were paid to the limits of coverage. The insured then made a claim for underinsured motorist benefits; the insured had total stacked coverage of $150,000 for three insured vehicles. The insured demanded the policy limits but was offered $32,000. The case went to arbitration and the insured was awarded $95,000.
The insured then filed a bad faith claim, and the trial court found that the insurer acted in bad faith by failing to make a partial payment for excess wage loss claims, undervaluing the claim and thereby forcing it to arbitration, and never raising the offer and telling trial counsel that the plaintiff would not accept anything less than policy limits to settle.
On appeal, the Superior Court first explained that the insured's expert's trial testimony was factually and legally incorrect, as the expert had testified on several occasions that a UIM claim is not an adversarial situation and implied that there is some form of heightened duty to a “first party” claimant as opposed to a third party adversarial claimant. The Superior Court specifically rejected the idea that there is a higher duty owed to a first party claimant and held that the duty of the insurer is the same regardless of party status.
The appeals court also held that the insurer's failure to make a partial payment of undisputed amounts was not bad faith. In making this determination, the court found that Pennsylvania law does not recognize a duty to make partial payments. The court found that, as a general rule, the failure of an insurer to cut out certain portions of a general damages claim, especially where the insurance contract makes no representation that such a procedure will be followed, does not constitute bad faith.
Finally, the insurer's desire to review medical records from a subsequent accident of the insured and other actions which caused a delay in the arbitration was not evidence of bad faith. Although the appeals court did find that the insurer undervalued the insured's claim, there was no evidence that this was done out of ill-will or that the insured's actions had no reasonable basis.