Richard McDonough suffered serious injuries to his neck and spine as a result of an automobile accident.  The insurer of the driver who caused the accident settled with McDonough for the driver’s full policy amount of $100,000.  However, this sum was allegedly insufficient to compensate McDonough for his losses.  McDonough then sought to collect underinsured benefits through his insurer, State Farm, up to the coverage limits of $300,000.  State Farm counter-offered with a lower amount and declined to pay McDonough the full amount of the $300,000 limit.  McDonough filed suit against State Farm asserting, among other things, claims for statutory bad faith, common law bad faith, and breach of contract.  State Farm moved to dismiss the bad faith claims (and another claim not discussed here).

In McDonough v. State Farm Fire and Casualty Company, No. 5:18-cv-02247 (E.D. Pa. Feb. 7, 2019) the court granted State Farm’s motion.  With respect to the statutory bad faith claim, the court determined that McDonough had "not stated a plausible statutory bad faith claim because his allegations are not supported by specific facts."  To succeed on a statutory bad faith claim in Pennsylvania, a "plaintiff must present 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" (quotations omitted).  Therefore, "a plaintiff must plead specific facts as evidence of bad faith and cannot rely on conclusory statements" (quotations omitted).  Here, McDonough failed to allege "factual content indicating that State Farm lacked a reasonable basis for its tendered offer or that it knew or recklessly disregarded a lack of reasonable basis for the offer."  Instead, McDonough made only "conclusory statements that State Farm unreasonably withheld the payment of underinsured motorist benefits under the policy, failed to make a reasonable offer of settlement, presented a low offer of settlement, failed to engage in good faith negotiations, presented an offer of less than the amount due in an attempt to compel him to institute litigation, and failed to perform an adequate investigation of the value of his claim for underinsured motorist benefits." These allegations were not "supported by specific facts illustrating where and how State Farm’s conduct indicated bad faith," and as a result, the court dismissed his statutory bad faith claim.

The court made short work of McDonough's common law bad faith claim because Pennsylvania law does not recognize a common law bad faith claim where, as here, the claim "is subsumed by a separately pled breach of contract claim" (quotations omitted).  Because McDonough pled both a common law bad faith claim and a breach of contract claim, both of which "stem[med] from State Farm’s refusal to pay McDonough the full amount of his policy coverage," his common law bad faith claim was "subsumed into the breach of contract claim" and the court dismissed the common law bad faith claim as well.  The court also foreclosed amendment of the common law bad faith claim, ruling that amendment "would be futile."