District of Colorado Grants Summary Judgment for Insurer on Common Law (But Not Statutory) Bad Faith Claim Where No Evidence Insurer Knowingly or Recklessly Disregarded Validity of Claim But Issue of Fact Over Reasonableness of Insurer’s Actions

by Saul Ewing Arnstein & Lehr LLP

MacKinney was involved in a motor vehicle accident and sought underinsured motorist coverage from Allstate.  Allstate insured MacKinney’s vehicle under three policies.  The total UIM coverage under the policies was $150,000, which Allstate tendered to MacKinney approximately 5 months after MacKinney made a demand for UIM coverage.  MacKinney brought an action against Allstate for, among other things, common law bad faith breach of an insurance contract and statutory bad faith under Colorado’s Unreasonable Delay and Denial of Insurance Benefits statute.  After successfully moving to dismiss MacKinney’s other claims in an earlier phase of the litigation (some of which pertained to an umbrella policy MacKinney had with Allstate), Allstate moved for summary judgment on the bad faith claims involving the remaining three policies.
As the court explained, an essential “element of a common law bad faith claim is establishing that the insurer knowingly or recklessly disregarded the validity of the insured’s claim.”  Although the court determined that Allstate’s claim notes are admissible as non-hearsay, opposing party statements, it rejected MacKinney’s argument that her common law bad faith claim could survive summary judgment based on the inferences a jury could draw from the chronology of the claim notes.  The court ruled that “[s]peculation and conjecture are insufficient to create a genuine issue of material fact as to the element that Allstate ‘knowingly or recklessly disregarded the validity of the insured’s claim’ at summary judgment,” and granted summary judgment for Allstate on MacKinney’s common law bad faith claim.
Colorado’s Unreasonable Delay and Denial of Insurance Benefits statute provides that “[a] person engaged in the business of insurance shall not unreasonably delay or deny payment” to an insured person.  Allstate argued that MacKinney could not establish that it acted unreasonably because she failed to identify evidence of objective industry standards germane to the elements of her claims.  Instead, MacKinney relied on the Unfair Claims Settlements Practices Act (UCSPA), which provides a legal standard—not the relevant industry standard.  Allstate also argued that MacKinney’s claims are not within the common knowledge of everyday citizens and therefore require objective evidence.  The court disagreed and concluded that MacKinney’s statutory bad faith claim is within the common knowledge and experience of an ordinary person and that the lack of an expert is not per se fatal.  The court noted that there is no dispute that MacKinney’s claims exceeded her coverage, and that the disputes are limited to whether Allstate reasonably investigated and/or identified all UIM policies applicable to the accident, including whether Allstate unreasonably delayed payment of UIM benefits and reasonably requested the execution of releases prior to payment of benefits.  The court also concluded that the “UCSPA can provide valid, though not conclusive, evidence of the applicable standard of care,” and can “guide a jury’s consideration of Allstate’s reasonableness under the particular circumstances of this case.”  Accordingly, the court determined that the jury should determine “whether Allstate’s actions in adjusting Ms. MacKinney’s claims were reasonable,” and denied Allstate’s motion for summary judgment on MacKinney’s statutory bad faith claim.
MacKinney v. Allstate Fire and Casualty Insurance Co., No. 16-cv-01447-NYW (D. Colo. Aug. 8, 2017)

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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