Poorly Drafted Bad Faith Claim Survives 12(b)(6) Motion in District of Maryland
In Barry v. Nationwide Mut. Ins. Co., 2018 WL 724068 (D. Md. 2018), husband and wife Plaintiffs sued their uninsured motorist (“UIM”) carrier, Nationwide Mutual Insurance Company (“Nationwide”), for breach of contract and failure to act in good faith in handling their claim. In their complaint, Plaintiffs alleged that Nationwide: (1) waited over 100 days to respond to their notice of a $30,000 settlement offer from the driver’s insurer, well over the 60-day response time mandated by Maryland law; (2) countered their demand that it pay the full $100,000 policy limits with an offer of $33,924 and a statement that it “refused to negotiate further;” and (3) in fact, failed to negotiate despite not contesting the nature or cost of Mrs. Barry’s injuries. Nationwide moved to dismiss Plaintiffs’ lack of good faith claim, arguing that neither delay nor a failure to pay benefits can serve as the sole basis for such a claim under Maryland law.
The District of Maryland, despite a harsh review of the Plaintiffs’ complaint, held that Plaintiffs alleged “just enough” to withstand a 12(b)(6) motion. In so holding, the court noted that because the totality of the circumstances must be considered when assessing a claim for failure to act in good faith under Maryland law, the Plaintiffs’ allegations, perhaps not individually, but when taken together, were sufficient to survive the pleading stage.
In denying the company’s motion, the court noted that Nationwide misunderstood both the text of the Maryland “bad faith” statute and the text of Plaintiffs’ complaint. First, Nationwide’s argument that delay cannot serve as the sole basis for a lack of good faith claim incorrectly interpreted the relevant statute. Instead, the court explained, while delay will rarely serve as the sole basis for a lack of good faith claim—because procrastination, without more, is rarely egregious enough to amount to a lack of good faith—the statute only forbids a finding of lack of good faith based solely on an insurer’s delay when that delay does not extend beyond a statutory or regulatory time period. Plaintiffs’ complaint, which alleged that Nationwide failed to respond to their settlement notice letter within the 60-day timeframe mandated by the law, therefore provided sufficient grounds for a lack of good faith claim. In addition, Plaintiffs also alleged that Nationwide paid insufficient benefits without explanation and without disputing the nature or cost of Mrs. Barry’s injuries, thereby alleging multiple grounds in support of their claim. Second, the court found that Nationwide’s argument that its purported failure to pay sufficient benefits cannot serve as the sole basis for a finding of lack of good faith, while legally true, was also rooted in a “tortured reading” of the complaint. The failure to pay sufficient benefits was one of several allegations—including dilatory conduct, failure to explain its coverage offer, and failure to negotiate—supporting Plaintiffs’ claim.
While denying Nationwide’s motion, the court took care to note Plaintiffs’ “many pleading errors” and that the lack of good faith claim was certainly not “expertly pleaded,” even if sufficient at the early stage of the case.
Eastern District of Pennsylvania Finds Amended Complaint Featuring Only Minimal Factual Allegations Sufficient to Survive Motion to Dismiss
In Irving v. State Farm Mut. Auto. Ins. Co., 2018 WL 618878, the Plaintiff-insured was in a car accident that caused serious and permanent injuries to his spine, for which the responsible party’s insurer offered only $15,000 in a settlement. Plaintiff subsequently submitted a claim to State Farm Mutual Automobile Insurance Co., his UIM insurer. Despite the $100,000 policy limits, State Farm, without seeking additional documentation and without providing any explanation, offered Plaintiff $500 to resolve his claim. Plaintiff, in turn, sued State Farm for bad faith. State Farm successfully moved to dismiss Plaintiff’s initial complaint, but the Eastern District of Pennsylvania permitted Plaintiff to amend, resulting in changes to the complaint that proved sufficient to survive State Farm’s renewed motion.
In his first complaint, Plaintiff largely parroted the elements of a bad faith claim under Pennsylvania law, alleging that State Farm: (1) acted in bad faith and treated Plaintiff unreasonably with respect to the evaluation of his claim; (2) failed to advance any reason or supporting evidence for denying the full value of his claim; and (3) intentionally and/or recklessly disregarded Plaintiff’s significant injuries and the value of his claim.
Plaintiffs’ amended complaint, on the other hand, included a smattering of more specific fact allegations regarding State Farm’s alleged failure to properly investigate and evaluate Plaintiff’s claim. For example, Plaintiff alleged that State Farm did not: (1) request a statement from Plaintiff; (2) request a medical examination; (3) have Plaintiff’s medical records reviewed; (4) reduce its offer to writing or refer to any record or diagnostic review in making its offer; and (5) request current records of Plaintiff’s ongoing treatment. The court found that those additional allegations provided sufficient information to withstand State Farm’s motion dismiss. The newly pleaded allegations described a host of actions that could support a finding that a proper investigation was not part of State Farm’s claim evaluation, which could mean that State Farm did not have a sufficient factual basis upon which to make its claim determination.
