State Farm paid only a portion of her claim and Ms. Kelley sued for breach of contract and for bad faith pursuant to 42 Pa. C.S.A. § 8371.

State Farm moved to dismiss the bad faith claim, asserting that it failed to allege specific, sufficient factual support beyond “naked assertions of liability or recitations of [legal] elements.” The insurer also argued that the bad faith claim merely reiterated Ms. Kelley's claim for breach of contract without alleging any additional factual support and, therefore, that it was fundamentally flawed.

The District Court's Decision

The court granted the insurer's motion.

In its decision, the court explained that 42 Pa. C.S.A. § 8371 provides a statutory remedy for bad faith conduct by insurers in investigating and reimbursing claims under which courts may award plaintiffs interest, punitive damages, and court costs and attorneys' fees.

The court pointed to a two-prong test for determining whether a complaint asserted a facially plausible claim under Section 8371. In particular, a plaintiff had to allege that the insurer lacked a reasonable basis for denying payment, and that the insurer knew or recklessly disregarded its lack thereof.

Here, the court said, Ms. Kelley alleged that State Farm possessed “no evidence that [Ms. Kelley's] losses did not occur and were not substantiated.” The court, however, found that contention “unsupported by any factual allegations showing reckless indifference.”

The court observed that, to support her legal conclusion that State Farm had no reasonable basis for refusing reimbursement, Ms. Kelley alleged only that her damage was covered under her insurance policy and that she had complied with the policy's terms when seeking coverage, in part by sending written documentation of claimed damages.

These allegations, the court ruled, were “insufficient.” The court reasoned that Ms. Kelley essentially asked that the court infer unreasonableness from State Farm's failure to reimburse expenses for meals and lodging alone, without clarifying what expenses were submitted, when they were rejected, and whether or how State Farm responded.

The court also ruled that Ms. Kelley failed to meet the second prong of the test, which required that she allege State Farm's knowing or reckless disregard of its lack of reasonable basis. According to the court, Ms. Kelley's complaint “fail[ed] to address the issue altogether; her response to State Farm's motion allege[d] State Farm's knowledge but offer[ed] no supporting factual allegations.”

Accordingly, the court ruled that Ms. Kelley had not stated a plausible bad faith claim under Section 8371, and it dismissed the claim, albeit with leave to replead.

The case is Kelley v. State Farm Fire & Casualty Co., No. 19-0626 (E.D. Pa. June 10, 2019). Attorneys involved include: For HENRIETTA KELLEY, Plaintiff: RAYMOND M. BILY, LEAD ATTORNEY, LAW OFFICES OF RAYMOND M BILY JR., P.C., WARRINGTON, PA. For STATE FARM FIRE & CASUALTY COMPANY, Defendant: YOLANDA KONOPACKA DESIPIO, LEAD ATTORNEY, BENNETT, BRICKLIN & SALTZBURG, BLUE BELL, PA.