Finding the insurer's conduct so egregious that there could be no genuine issue of material fact, Judge Cohill, Senior U.S. District Judge for the Western District of Pennsylvania, on January 4, 2011, granted plaintiff's motion for summary judgment and held, as a matter of law, that American Commerce Group, Inc.'s ("ACIC") handling of plaintiff's uninsured motorist claim was in bad faith. Wisinski v. American Commerce Group, Inc., 2011 U.S. Dist. LEXIS 320 (W.D. Pa. Jan 4, 2011).
Plaintiff, Margaret Wisinski, was injured in a motor vehicle accident with an uninsured driver on December 20, 2001. In addition to seeking payment of medical benefits and lost wages, Ms. Wisinski also submitted a claim for Uninsured Motorist ("UM") benefits. Thereafter, ACIC engaged in a pattern of obfuscation and delay lasting more than four years, designed to ensure that Ms. Wisinski settled her claim for a fraction of its value.
ACIC Misrepresented Its Policy Limits.
ACIC's claims examiner incorrectly notified plaintiff that her policy provided UM benefits of $50,000. Although ACIC's Claims Manual required ACIC to verify coverage within 24 hours of receipt of a claim, two supervisors and one claims examiner, who had access to the claim file for over five years, failed to correct that error. It was not until plaintiff's counsel reviewed a copy of the policy that plaintiff learned she was actually entitled to $100,000 in UM coverage. Plaintiff's counsel informed ACIC of its error, but even after ACIC's outside counsel confirmed plaintiff's interpretation, ACIC delayed relaying this information to plaintiff's counsel. Focusing on ACIC's violation of its own Claims Manual, the court noted that an insurance company is in the best position to accurately determine the correct policy limit. Thus an insurance company that possesses the information to allow them to accurately determine the policy limit but fails to inform the insured does so either intentionally or recklessly.
Here, ACIC either knew or should have known the correct policy limit, failed to accurately report it to the insured, and when confronted with the insured's understanding that ACIC had quoted the wrong policy limit, held off confirming the correct policy limit for nearly four months. Wisinski v. American Commerce Group, Inc., 2011 U.S. Dist. LEXIS 320, *37-38 (W.D.Pa. January 4, 2011).
ACIC's Reliance on Advice of Counsel Did Not Excuse Its Refusal to Abide by the Arbitration Provisions of the Policy.
Frustrated by ACIC's low-ball settlement offers, in December 2005, plaintiff's counsel wrote to ACIC requesting arbitration of the UM claim. ACIC asked its outside counsel for his opinion, but provided counsel with an outdated policy that did not include the current UM endorsement requiring arbitration if requested by either party. Not only did ACIC oppose plaintiff's motion to compel arbitration, but it also sought reconsideration of the court's order compelling arbitration. In finding that ACIC's refusal to arbitrate was in bad faith, Judge Cohill rejected ACIC's defense of reliance on advice of counsel, noting that it was ACIC who provided counsel with the incorrect policy and specifically directed counsel to the outdated policy language. Interestingly, the court also questioned ACIC's selection of out-of-town counsel, only five percent of whose practice consisted of Pennsylvania auto insurance claims. "Given that ACIC told outside counsel, who had minimal experience with Pennsylvania auto insurance claims, that it did not want to arbitrate Ms. Wisinski's claim and then failed to provide him with accurate policy information, it is no surprise that outside counsel told ACIC what it wanted to hear. We find, that under these circumstances, it was unreasonable for ACIC to rely on the advice of counsel when it did not provide him with the correct policy." Id. at*42-43.
ACIC Acted in Bad Faith in Settlement Negotiations.
Judge Cohill determined that by February 8, 2006, when plaintiff prevailed on her motion to compel arbitration, ACIC was aware that its own policy required arbitration, that Ms. Wisinski's policy limit was actually $100,000, that ACIC would inevitably lose the arbitration, and that any award would be at or above policy limits. Notwithstanding this awareness, however, ACIC "unreasonably and falsely threatened that it would appeal an arbitration award in order to induce Ms. Wisinski to accept a lower settlement offer," in violation of Section (a)(10)(xi) of the Pennsylvania Unfair Insurance Practices Act. Id. at *44.
ACIC's counsel also made a series of what the court deemed "low-ball offers," continually increasing its offers, despite the lack of any new information, as arbitration loomed. After initially offering only seven percent of the value of the claim, finally, after five years, ACIC increased its offer to the full $100,000 policy limits. Even after Ms. Wisinski accepted the offer, however, ACIC's bad faith conduct continued. First, it insisted that Medicare be named as a payee on the settlement check, contrary to industry practice and despite plaintiff's and her counsel's agreement to indemnify ACIC, causing months of delay. Next, ACIC tried to condition payment of the UM limits on Ms. Wisinski's release of her claims for lost wages and bad faith. The court observed that "an insurance carrier that attempts to coerce a [policyholder] to release her bad faith claim when the policy limit was offered as settlement constitutes bad faith ... and it clearly indicates ill will towards Ms. Wisinski." Id. at *49.
Nearly one year after a settlement was reached and more than five years after Ms. Wisinski's accident, ACIC finally disbursed the UM limits, leading the court to conclude that "in light of ACIC's entire course of conduct ... ACIC acted [as a matter of law] in bad faith with regard to Ms. Wisinski's uninsured motorist claim." Id. at *50.