In a recent decision in Slupski v. Nationwide Insurance Company, 2023 WL 3477828 (3d Cir. May 16, 2023)(not for publication), the United States Court of Appeals for the Third Circuit, considered the question of whether an insured’s claim that his insurer had no reasonable basis for denying his claim must fail at the summary judgment stage when its claim denial is “based on a reasonable legal position in an unsettled area of the law.” The Third Circuit also considered whether the insurer’s actions or inaction in its investigation of the claim was sufficient to defeat a claim of statutory bad faith.
In Slupski, the Plaintiff occupied a vehicle owned by a customer of his employer and insured under a commercial garage policy with Nationwide that provided liability coverage to any auto but UIM coverage only to autos owned by the employer. After Slupski’s claim for UIM benefits was denied on the basis that the vehicle he occupied was not owned by his employer, he filed suit arguing that a plain reading of 75 Pa.C.S. § 1731 requires UIM benefits be provided to all vehicles insured for liability coverage absent a statutory rejection form, which was not secured by the insurer. The Third Circuit squarely decided the coverage issue in Slupski’s favor in a March 2020 decision and remanded the case back to the trial court for discovery and resolution of the damages and remaining statutory bad faith claim per 42 Pa. Stat. Ann. § 8371. Nationwide initially offered to settle Plaintiff’s claims for $500,000 contingent on the release of all bad faith and class action claims, later increasing the offer to $1,000,000 whilst filing a motion for summary judgment on the bad faith claims. The trial court granted the motion as to the bad faith claim under 42 Pa. Stat. Ann. § 8371 but denied it as to the common law bad faith claim. Slupski in turn appealed.
The Third Circuit did not address the common law bad faith claim but agreed that Nationwide’s pre-suit denial did not meet the stringent 42 Pa. Stat. Ann. § 8371 standard for the purposes of avoiding summary judgment. The Circuit Court stated: “all that is needed to defeat a claim of bad faith under § 8371 is evidence of a reasonable basis for the insurer’s actions or inaction” and that said reasonable basis existed by virtue of the denial being “based on a reasonable legal position in an unsettled area of the law.” The Court further summarily dismissed claims that Nationwide’s post-litigation conduct and negotiating terms and tactics amounted to bad faith because Nationwide’s initial offer was at the lower end of a settlement range. The Third Circuit agreed with the trial court’s description of the ten-month delay in making the offer being “well under” periods of time that have been deemed acceptable for statutory bad faith purposes.
Finally, the Third Circuit rejected the claimant’s emotional distress garnering bad faith exposure, finding that Nationwide’s failure to immediately accept Slupski’s claim was not “particularly likely” to result in “serious emotional disturbance.” The Third Circuit affirmed the trial court decision, accordingly.
The Slupski decision can be found Here
For additional questions, please contact Martin Beck, Esq, Glen Shikunov, Esq. and/or Scott Tredwell, Esq.
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