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HomeMy WebLinkAbout99-4844 civilSANDRA M. REAKA, EXECUTRIX OF THE ESTATE OF KENNETH E. REAKA, DECEASED, Plaintiff Vo AMERICAN TRAVELERS LIFE INSURANCE CO., Defendant · IN THE COURT OF COMMON PLEAS OF · CUMBERLAND COUNTY, PENNSYLVANIA · NO. 99-4844 CIVIL TERM · · CIVIL ACTION- LAW · · IN RE: DEFENDANT'S PRELIMINARY OBJECTIONS - IN THE NATURE OF A DEMURRER BEFORE BAYLEY, GUIDO, JJ. AND NOW, this ORDER OF COURT '~ day of FEBRUARY, 2000, plaintiff's claim for punitive damages in Count 2 of the amended complaint is STRICKEN. Defendant's demurrer to Count 3 is GRANTED. In all other respects, defendant's preliminary objections are DENIED. By the Edward E. Guido, J. William C. Kollas, Esquire James W. Kollas, Esquire For the Plaintiff Mark H. Scoblionko, Esquire For the Defendant 'sld S AND RAM. REAKA, EXECUTRIX OF THE ESTATE OF KENNETH E. REAKA, DECEASED, Plaintiff go ' IN THE COURT OF COMMON PLEAS OF · CUMBERLAND COUNTY, PENNSYLVANIA · · NO. 99-4844 CIVIL TERM · · AMERICAN TRAVELERS · CIVIL ACTION- LAW LIFE INSURANCE CO., ' Defendant ' · 1N RE: DEFENDANT'S PRELIMINARY OBJECTIONS IN THE NATURE OF A DEMURRER BEFORE BAYLEY, GUIDO, JJ. OPINION AND ORDER OF COURT This action was commenced by the filing of a six count complaint on August 11, 1999. Defendant filed preliminary objections to which plaintiff responded by filing an amended complaint. Defendant filed preliminary objections to the amended complaint. Those preliminary objections are currently before us. The parties have briefed and argued their respective positions. This matter is now ready for disposition. FACTUAL BACKGROUND Plaintiff's decedent died on October 25, 1997 and letters testamentary were issued to plaintiff on February 4, 1998.~ In August of 1989 plaintiff's decedent purchased a "Supplemental Nursing Home and Home Health Care Policy" (hereinafter "policy") from Complaint paragraphs 3, 4. 99-4844 CIVIL TERM defendant.2 Beginning in May of 1994, and for various periods until his death in October of 1997, plaintiff's decedent incurred substantial expenses which would qualify for reimbursement under the terms of the policy.3 As a result of a loss of memory, plaintiff's decedent was unable to advise his agents that the policy existed and that his expenses could be recovered.4 During the course of gathering the estate assets, plaintiff discovered the policy.5 In January of 1998, she gave verbal notice of the claim to defendant.6 In response, defendant sent her claim forms to fill out and return.7 Defendant did not advise plaintiff of the applicable time frames within which the completed claim forms had to be submitted.8 In fact, defendant concealed the time frames.9 Plaintiff completed the forms and submitted her written claim on November 12, 1998.~° On December 15, 1998, defendant denied payment of the claim on the basis that timely written proof of loss was not received in accordance with the policy~ DISCUSSION Plaintiff's amended complaint contains six counts. Count 1 is a cause of action based upon an alleged breach of contract. Count 2 alleges a breach of the covenant of good faith and fair dealing. Counts 3 & 4 are based upon alleged misrepresentations by defendant. Count 5 alleges a violation of the Unfair Trade Practices and Consumer Amended Complaint paragraph 6, Exhibit. A. Amended Complaint paragraphs 11-31. Amended Complaint paragraph 32. Amended Complaint paragraph 33. Amended Complaint paragraph 34. Amended Complaint paragraph 35. Amended Complaint paragraph 35. Amended Complaint paragraph 66. l0 Amended Complaint paragraph 36. ~ Amended Complaint paragraph 37 and Exhibit C. 99-4844 CIVIL TERM Protection Law (hereinafter UTCPL).12 Count 6 is a cause of action for bad faith under 42 Pa.C.S.A. § 8371. Defendant has demurred to all counts of the amended complaint except the breach of contract claim contained in Count 1. For the reasons hereinafter set forth, we will grant the demurrer as to some counts and deny it as to others. The standard to be applied to preliminary objections in the nature of a demurrer was succinctly stated by our Supreme Court as follows: A demurrer can only be sustained where the complaint is clearly insufficient to establish the pleader's fight to relief. For the purpose of testing the legal sufficiency of the challenged pleading a preliminary objection in the nature of a demurrer admits as tree all well-pleaded, material, relevant facts, and every inference fairly deducible from those facts. · · o Since the sustaining of a demurrer results in a denial of the pleader's claim or a dismissal of his suit, a preliminary objection in the nature of a demurrer should be sustained only in cases that clearly and without a doubt fail to state a claim for which relief may be granted. Allegheny County. v. Commonwealth, 507 Pa. 360, 372 490 A.2d 402, 408 (1985) (citations omitted). We will examine each of plaintiff's claims in light of the above standard. Breach Of Covenant Of Good Faith And Fair Dealing. Defendant argues that there is no common law claim for breach of an insurer's covenant of good faith and fair dealing. Therefore, it asks that Count 2 be dismissed. We agree that our Commonwealth does not recognize a common law tort action for bad faith on the part of an insurer. D'Ambr9$io v. Pennsylvania Nat'l Mut, Casualty. Ins. Co., 494 Pa. 501, 431 A.2d 966 (1981). However, we do not agree that this necessarily means that Count 2 should be dismissed. ~2 73 P.S. § 201-1 et seq. 99-4844 CIVIL TER3/I Pennsylvania Courts have long recognized that an insurance company owes its insured a duty of good faith and fair dealing. Dercoli v, Pennsylvania Nat. Mut, Ins. Co., 520 Pa. 471,554 A.2d 906 (1989); Fedas v, Insurance Company of State of Pennsylvania, 300 Pa. 555, 155 A. 285 (1930). The duty includes the obligation to fairly and objectively investigate and to reject claims only where good cause exists. Diamon v... Penn Mut, Fire Ins, Co., 247 Pa. Super. 534, 372 A.2d 1218 (1977). It also "includes the duty of full and complete disclosure as to all benefits and every coverage that is provided by the applicable policy or policies along with.all requirements, including any time limitations for making a claim." Dercoli, supra, 520 Pa. at 478, 554 A.2d at 909 (emphasis added). In view of the above, we cannot state with certainty that the allegations in Count 2 of the complaint fail to state a cause of action for which relief can be granted. However, we can state with certainty that any cause of action is grounded in contract not in tort. Therefore, while we will not grant the demurrer, we will strike the claim for punitive damages contained in Count 2. Misrepresentation. Counts 3 and 4 of the amended complaint are claims based upon alleged misrepresentations made by defendant. Specifically, in Count 3 plaintiff alleges that defendant made "false representations concerning coverage in the policy.''~4 In Count 4 ~3 "The insurer's duty of good faith, therefore, is contractual and arises because the insurance company assumes a fiduciary status by virtue of the policy's provisions which give the insurer the right to handle claims and control settlement." Roman0 v, Nationwide Mut, Fire Ins. Co., 435_Pa. Super. 545,551,646 A.2d 1228, 1231 (1994) (citations omitted). 14 Amended Complaint paragraph 59. 99-4844 CIVIL TERM plaintiff alleges that the defendant made false representations by "failing to disclose time restraints applicable to plaintiff's claim, concealing time restraints applicable to plaintiff's claims and/or otherwise misleading plaintiff as to the merits of plaintiff's claims.''~5 In each count the plaintiff alleges that defendant's misrepresentations were made with knowledge of their falsity and that defendant knew the misrepresentations would be relied upon, which they were, to the detriment of plaintiff. 16 The law with regard to misrepresentation was succinctly stated by our Superior Court as follows: The elements of a cause of action for fraud or misrepresentation are: (1) a misrepresentation; (2) a fraudulent utterance thereof; (3) an intention by the maker that the recipient will act; (4) justifiable reliance by the recipient upon the misrepresentation; and (5) damages to the recipient as the proximate result. The deliberate nondisclosure of a material fact is the same as culpable misrepresentation. McClellan v, Health Maintenance Org. of Pennsylvania., 413 Pa. Super. 128, 142, 604 A.2d 1053, 1060 (1992) (citations omitted). Applying the above law to the case before us, we are satisfied that the demurrer must be denied as to Count 4. However, Count 3 is another matter entirely. The gravamen of Count 3 is that since defendant has denied plaintiff's valid claim under the policy, its representations in the policy that it would provide the coverages contained therein must have been false. In other words it is plaintiff's position that defendant's failure to pay plaintiff's claim is proof that defendant knew at the time the policy was issued that it would not pay valid claims made on the policy. We are not impressed with this argument. Therefore, we will grant the demurrer as to Count 3. ~5 Amended Complaint paragraph 66. 16 Amended COmplaint paragraphs 60-63, 67-70. 99-4844 CIVIL TERM Claim Under The UTPCL. It is well established that an insured may bring a cause of action against his insurer under the UTPCPL. Hardy v. Pennock Inc. Agency, Inc., 365 Pa. Super. 206, 529 A.2d 471 (1987). However, in order to pursue a claim under the UTPCL the alleged conduct must be one of misfeasance. Gordon v. Pennsylvania Blue Shield, 378 Pa. Super. 256, 548 A.2d 600 (1988). Allegations which amount only to nonfeasance are insufficient to sustain a cause of action under the UTPCL. Id. The Gordon Court defined misfeasance as the "improper performance of a contracted obligation" and nonfeasance as "the mere failure to perform." Id. at 264, 548 A.2d at 604 quoting from Raab v. Keystone Ins. Co:, 271 Pa. Super. 185, 187, 412 A.2d 638, 639 (1979). It specifically held that failure to pay a claim under an insurance policy is nonfeasance and, therefore, insufficient to sustain a cause of action under the UTPCL. If defendant's failure to pay the claim was the only basis for Count 5, we would be required to grant the demurrer. However, the amended complaint contains several allegations of misfeasance as defined by the Gordon Court.~7 Therefore, the demurrer must be denied. Bad Faith Claim Under 42 Pa.C.S.A. § 8371. In the case of D'Ambr0$i0 v. Pennsylvania National, supra, our Supreme Court refused to create a common law tort remedy for an insurer's bad faith. The legislature responded with the enactment of section {} 8371 of the Judicial Code which provides: 17 The allegations of misfeasance are contained in paragraph 74 and include misrepresenting pertinent facts, failing to conduct a reasonable investigation and failing to implement reasonable standards for prompt investigation of claims. 99-4844 CIVIL TERM § 8371. Actions on insurance policies In an action arising under an insurance policy, if the court finds that the insurer has acted in bad faith toward the insured, the court may take all of the following actions' (1) Award interest on the amount of the claim from the date the claim was made by the insured in an amount equal to the prime rate of interest plus 3%. (2) Award punitive damages against the insurer. (3) Assess court costs and attorney fees against the insurer. 42 Pa.C.S.A. § 8371. The Superior Court has defined "bad faith" as follows' any frivolous or unfounded refusal to pay proceeds of a policy; it is not necessary that such refusal be fraudulent. For purposes of an action against an insurer for failure to pay a claim, such conduct imports a dishonest purpose and means a breach of a known duty (i.e., good faith and fair dealing), through some motive of self-interest or ill will; mere negligence or bad judgment is not bad faith. Ramano v. Nationwide, supra, 435 Pa. Super. at 554, 646 A.2d at 1232. In the instant case, there are sufficient allegations in the complaint upon which to base a claim for bad faith under Section 8371. Plaintiff asserts that defendant concealed the time restraints applicable to her claims under the policy.~8 She further alleges that the 19 The defendant then raised defendant misled her as to the merits of her claims. plaintiff's failure to act as a defense to payment under the policy. Under these circumstances, it would not be appropriate to sustain a demurrer to Count 6.20 For the reasons set forth above, we will enter the order that follows. x8 Amended Complaint paragraph 66. ~9Id' 20 D--efendant has also raised a preliminary objection to plaintiff's claim for attomey fees. Clearly attorney fees are recoverable in some courts and not in others. However, this is a question of damages which can be properly handled by the trial judge. 99-4844 CIVIL TERM ORDER OF COURT AND NOW, this ! 0TM day of FEBRUARY, 2000, plaintiff's claim for punitive damages in Count 2 of the amended complaint is STRICKEN. Defendant's demurrer to Count 3 is GRANTED. In all other respects, defendant's preliminary objections are DENIED. By the Court, /$/Edward E. Ouido William C. Kollas, Esquire James W. Kollas, Esquire For the Plaintiff Mark H. Scoblionko, Esquire :sld