In the recent decision of Schifino v. GEICO General Ins. Co. et al., 2013 WL 2404115 (W.D.Pa. 2013), and for the second time in less than a year, the district court for the Western District of Pennsylvania precluded a plaintiff from offering expert testimony supporting an insurer’s alleged bad faith. The district court reasoned that expert testimony addressing the reasonableness of an insurer’s claims handling in denying a claim was unnecessary as a matter of evidence and interfered with the fact finding role of the jury.
In Schifino, an insured filed suit against various insurers, including GEICO General Insurance Company (GEICO), seeking underinsured motorist benefits (UIM) following a motor vehicle accident in which he was involved. Among other allegations, the insured alleged that GEICO breached its contractual duties and violated the Pennsylvania bad faith statute, 42 Pa.C.S. § 8371, when it failed to pay him the policy’s UIM limits despite his extensive injuries. The insured specifically alleged that Geico acted in bad faith by performing an incomplete investigation, failing to consider testimony about the severe nature of the impact, and failing to eliminate the effect of the insured’s pre-existing medical condition.
To sustain a statutory bad faith claim under Pennsylvania law, a plaintiff must prove that an insurer did not have a reasonable basis for denying benefits under a policy, and that the insurer recklessly disregarded this lack of a reasonable basis. To that end, the insured in Schifino offered the expert testimony of Stuart Setcavage (Setcavage), who was offered to testify that GEICO failed to comply with insurance statutes and regulations, improperly handled the insured’s claim, and violated industry standards. GEICO argued that the court should exclude Setcavage’s testimony because a lay person could readily determine whether GEICO acted unreasonably in handling the insured’s claim.
The district court held that Setcavage’s testimony was unnecessary and unhelpful to the jury as a matter of evidence, agreeing with GEICO that it should be excluded. Schifino reasoned that issues involving an insurer’s compliance with industry standards, claim handling procedures, and statutory requirements were within the “knowledge or understanding” of the “average layperson” because they were not too difficult to understand. The court rejected the insured’s argument that a jury could not understand the legal concept of “bad faith,” finding that “a reasonable juror certainly possesses the requisite knowledge to assess the bad-faith allegation …” Accordingly, the court opined that it was within the jury’s province to determine the reasonableness of GEICO’s claims handling.
The decision in Smith v. Allstate Insurance, 2012 WL 5463099 (W.D.Pa. 2012), which the Western District decided a few months before Schifino, reached the same conclusion. In Smith, the plaintiff filed suit against Allstate Insurance Company (Allstate) alleging that Allstate acted in bad faith when it failed to pay UIM benefits. The plaintiff offered expert testimony in support of his claim that Allstate violated its company policy, industry standards, and the Unfair Insurance Practices Act. The district court initially opined that whether an expert is permitted to testify about bad faith is within the sole discretion of the trial judge, and that testimony should not be excluded simply because it addresses the bad faith issue. The court held, however, that testimony relating to the reasonableness of an insurer’s claim practices “was neither particularly complex nor scientific.” The court further reasoned that a lay jury could understand industry standards and an insurance company’s policy, as well as any violation thereof, without the aid of expert testimony.
Schifino and Smith reflect two of the more recent Pennsylvania decisions holding that the average juror can properly evaluate an insurer’s reasonableness for purposes of determining statutory bad faith. See also Dattilo et al. v. State Farm Ins. Co., 1997 WL 644076 (E.D.Pa. 1997) (An older case reaching a similar conclusion). While Pennsylvania courts permit a trial judge to make a case-by-case determination about the admissibility of expert bad faith testimony, Schifino and Smith may reflect a growing trend toward generally disallowing such evidence. Such rulings effectively eliminate conclusive testimony that an insurer has acted unreasonably and in violation of insurance regulations and practices, instead leaving these determinations to the common sense of the jury. Whether insurers will fare better with the average jury’s determination is yet to be seen. Additionally, it has yet to be seen what the outcome will be should the insurer decide that it wants to offer expert evidence concerning its conduct.