At the time, Ms. Camp's own motor vehicle was insured under a policy issued by New Jersey Manufacturers Insurance Company (“NJMIC”).

Ms. Camp submitted to NJMIC a formal demand package for coverage under the policy's underinsured motorist (“UIM”) endorsement, including medical reports and records indicating that her total lifetime cost of treatment would be $221,412.00. NJMIC subsequently advised her that it had reviewed all relevant records and would not be making a settlement offer on her claim because “it appears [Ms. Camp] had been fairly compensated by the tort carrier for the injuries she sustained in the loss.”

Ms. Camp sued NJMIC, seeking compensatory and punitive damages for breach of contract (Count I) and bad faith in violation of 42 Pa. Cons. Stat. § 8371 (Count II) arising out of NJMIC's refusal to pay UIM benefits to her.

In Count II, Ms. Camp alleged that NJMIC had acted in bad faith contrary to its statutory duty under 42 Pa. Cons. Stat. § 8371 by:

a. Failing to evaluate plaintiff's claim objectively and fairly;

b. Failing to reevaluate plaintiff's claim objectively and fairly based on new information;

c. Engaging in dilatory and abusive claims handling;

d. Failing to adopt or implement reasonable standards in evaluating plaintiff's claim;

e. Acting unreasonably and unfairly in response to plaintiff's claim;

f. Not attempting in good faith to effectuate a fair, prompt and equitable settlement of plaintiff's claim in which the defendant's liability under the policy has become reasonably clear;

g. Subordinating the interests of the insured and those entitled under its insured[']s coverage to its own financial monetary interests;

h. Failing to promptly offer reasonable payment to the plaintiff;

i. Failing reasonably and adequately to investigate plaintiff's claim;

j. Failing reasonably and adequately to evaluate or review the medical documentation in defendant's possession;

k. Violating the fiduciary duty owed to the plaintiff;

l. Acting unreasonably and unfairly by withholding underinsured motorist benefits justly due and owing to the plaintiff;

m. Failing to make an honest, intelligent, and objective settlement offer;

n. Causing plaintiff to expend money on the presentation of his [sic] claim; and

o. Causing the plaintiff to bear the stress and anxiety associated with litigation.

The insurer moved to dismiss the bad faith claim, arguing that it lacked the particularity required to state a claim under Federal Rule of Civil Procedure 9(b) because it contained only “conclusory statements alleging general conduct” and “a generic and non-specific reference to bad faith without enumerating any specific conduct of the defendant other than a disagreement over the value or amount of the claim.”

The court ruled in favor of NJMIC and dismissed Count II of Ms. Camp's complaint without prejudice. It granted her leave “to file an amended complaint identifying unreasonable conduct as [Ms. Camp] only presently pleads submitting a demand package for [UIM] coverage and [NJMIC's] denial due to earlier compensation for the alleged injuries.” Ms. Camp, the court said, had not pleaded facts other than denial and refusing to make an offer and her complaint “lack[ed] facts stating a bad faith claim.”

Ms. Camp filed an amended complaint setting forth identical allegations as those contained in her original complaint, with the exception of subsections (a) through (f) of paragraph 35. The six revised allegations alleged that NJMIC had acted in bad faith by:

a. Failing to evaluate the medical records and reports included in plaintiff's demand package clearly establishing that plaintiff will incur a total lifetime cost of $221,412.00 for medical treatment and medications related to injuries sustained in the subject motor vehicle accident. See Exhibit B.

b. Failing to make a settlement offer despite clear and uncontradicted medical records and reports establishing that plaintiff will incur a total lifetime cost of $221,412.00 for medical treatment and medications related to injuries sustained in the subject motor vehicle accident. See Exhibit B.

c. Failing to evaluate the medical records and reports included in plaintiff's demand package clearly establishing that plaintiff suffered serious and permanent injuries to her neck, right shoulder and right wrist including significant aggravations to pre-existing cervical spondylosis with broad based disc protrusion at C5-6, cervical radiculopathy at C6, right shoulder sprain and strain, and carpal tunnel syndrome requiring surgical intervention. See Exhibit B.

d. Failing to make a settlement offer despite clear and uncontradicted medical records and reports establishing that plaintiff suffered serious and permanent injuries to her neck, right shoulder and right wrist including significant aggravations to pre-existing cervical spondylosis with broad based disc protrusion at C5-6, cervical radiculopathy at C6, right shoulder sprain and strain, and carpal tunnel syndrome requiring surgical intervention. See Exhibit B.

e. Failing to evaluate the medical records and reports included in plaintiff's demand package clearly establishing that plaintiff suffered and continues to suffer from severe pain and discomfort in her neck, right shoulder and right wrist, and will require Nucynta ER, and extended release opiate analgesic, to manage her chronic pain for the foreseeable future. See Exhibit B.

f. Failing to make a settlement offer despite clear and uncontradicted medical records and reports establishing that plaintiff suffered and continues to suffer from severe pain and discomfort in her neck, right shoulder and right wrist, and will require Nucynta ER, and extended release opiate analgesic, to manage her chronic pain for the foreseeable future. See Exhibit B.

(Emphasis in original.)

NJMIC responded by filing a motion to dismiss Count II of the amended complaint, arguing that Ms. Camp's claims still contained “generic and non-specific references to alleged 'bad faith' without enumerating any specific conduct of [NJMIC] other than a disagreement over the value or amount of the claim,” which the court had already deemed insufficient to meet the Rule 12(b)(6) pleading standard.

The New Jersey Manufacturers Policy

The NJMIC policy included a UIM endorsement in which NJMIC agreed to pay:

for compensatory damages which an insured is legally entitled to recover from the owner or operator of an underinsured motor vehicle because of bodily injury (1) sustained by an insured person; and (2) caused by an accident, and arising out of the ownership, maintenance, or use of an underinsured motor vehicle. 

Pennsylvania law provides:

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 the interest plus 3%; (2) Award punitive damages against the insurer; (3) Assess court costs and attorney fees against the insurer.

42 Pa. Cons. Stat. § 8371.

The Court's Decision

The court granted NJMIC's motion to dismiss.

In its decision, the court explained that, to recover on a bad faith claim under Pennsylvania law, a claimant must show by clear and convincing evidence that (1) the insurer did not have a reasonable basis for denying the policy benefits, and (2) the insurer knew or recklessly disregarded its lack of reasonable basis when it denied the claim. Mere negligence or “bad judgment,” the court continued, was insufficient.

The court then found that Ms. Camp's bad faith claim consisted of “bald and conclusory statements.” It noted that the bad faith allegations in subsections (i) through (k) of paragraph 35 of Ms. Camp's amended complaint remained “unchanged” from Ms. Camp's original pleading. Her claims that NJMIC “engag[ed] in dilatory and abusive claims handling,” “fail[ed] to adopt or implement reasonable standards in evaluating plaintiff's claim,” and “act[ed] unreasonably and unfairly in response to plaintiff's claim” were “devoid of factual specificity as to what claims handling practices were abusive or how NJMIC acted unreasonably.”

Furthermore, the court found, none of the amendments made by Ms. Camp to her original bad faith allegations cured this defect. It noted that subsections (a), (c), and (e) of paragraph 35 of the amended complaint alleged that NJMIC “fail[ed] to evaluate the medical records and reports included in plaintiff's demand package.” The court said that this not only was a legal conclusion that the court could disregard in determining the sufficiency of the pleading, but was “plainly contradicted by the facts contained within the pleading itself.” It observed that paragraph 23 of the amended complaint alleged that in response to Ms. Camp's UIM claim, an NJMIC representative advised that the insurer had “reviewed all relevant records” in determining that it would not be approving her UIM claim.

Similarly, the court continued, although subsections (b), (d), and (f) of paragraph 35 of the amended complaint alleged that NJMIC acted in bad faith by “failing to make a settlement offer” in response to Ms. Camp's claim, the failure of an insurer to “immediately accede to a demand for the policy limit” did not, without more, amount to bad faith.

Thus, the court found, other than the “conclusory allegation” that NJMIC failed to make a settlement offer, Ms. Camp posited “no additional factual averments from which it could be found that NJMIC's failure to make an offer was in bad faith.”

Accordingly, the court concluded that Ms. Camp's bad faith claim was insufficient to state a claim upon which relief could be granted.

The case is Camp v. New Jersey Manufacturers Ins. Co., No. 16-1087 (E.D. Penn. June 8, 2016).

FC&S Legal Comment

It is worth pointing out that the court rejected NJMIC's contention that insurance bad faith claims were “essentially claims of fraud” and, therefore, that allegations of bad faith had to be pleaded under the heightened “particularity” pleading standard articulated in Federal Rule of Civil Procedure 9(b). The court reasoned that an insurer's conduct “need not be fraudulent” for the insurer to be found liable under 42 Pa. Cons. Stat. § 8371 for acting in “bad faith” toward its insured and, therefore, the heightened Rule 9(b) pleading standard did not apply.