¶ 1 Appellants, Progressive Insurance Company ("Progressive") and Mountain Laurel Assurance Company ("Mountain Laurel"), appeal from the judgment dated August 14, 2003, in favor of Plaintiff/Appellee, John Lee Brown, administrator of the estate of Michael P. Brown. We vacate the judgment and remand for entry of judgment notwithstanding the verdict (jnov) in favor of Appellants.
¶ 2 The factual and procedural history of the case is as follows. Michael Brown was injured in an auto accident on January 13, 1996. All parties agreed that the other driver was solely liable for the accident. Brown retained an attorney and filed claims against both his own insurance carrier (Progressive)
¶ 3 On June 20, 1996, Brown's attorney requested documentation from Progressive that would show that his client had requested the UM/UIM coverages shown on the declarations page. There was disputed testimony at trial as to whether or not Progressive responded to this request.
¶ 4 On December 31, 1997, Brown died of causes unrelated to the accident. Brown's attorney forwarded documentation of his accident-related medical treatment to Progressive on January 10, 1998. Shortly thereafter, Brown's attorney indicated that he planned to pursue a UIM claim against Progressive. Progressive valued the claim at $35,000.00 to $40,000.00, an amount which was less than the $50,000.00 BI limit of the tortfeasor's policy. Therefore, Progressive did not settle the claim or make an offer at that point.
¶ 5 At this time, the insured's claim included lost wages from the date of the accident until Brown's death. Brown was employed by a family business, which continued to pay him after the accident. Brown contended that these payments were not wages, but an advance against his inheritance. Progressive requested additional tax and wage information to value this part of the claim. This information was never received.
¶ 6 In September of 1998, Brown entered into an agreement to settle the BI claim with Nationwide for $25,000.00. Progressive agreed to this settlement, and waived its subrogation rights. For the pending UIM claim, the parties agreed that Progressive would have a credit in the amount of $50,000.00, the limits of the tortfeasor's policy.
¶ 7 At this time, Brown's attorney repeated his request for information concerning Brown's coverage, i.e., the sign-down of UM/UIM coverage and the waiver
¶ 8 In the October 1998 letter from Progressive to Brown's attorney agreeing to the Nationwide settlement, Progressive stated that arbitration would be necessary to settle the UIM claim due to the divergent opinions as to the value of the underlying claim. Progressive placed the total value of the claim at $35,000.00 to $40,000.00; Brown's attorney believed it to be worth $60,000.00 to $75,000.00.
¶ 9 The parties selected arbitrators in December 1998 and January 1999. The neutral arbitrator was appointed in March 1999. A hearing was set for May 6, 1999. Progressive's outside counsel requested a delay in the proceedings to conduct further discovery. On May 14, 1999, Brown's attorney informed Progressive that no claim for lost wages would be presented, eliminating the need for further discovery on that issue. The arbitration was rescheduled for August 5, 1999.
¶ 10 On August 4, 1999, Progressive's attorney was informed that Brown intended to argue that the sign-down and rejection of stacking on his UIM coverage were insufficient as a matter of law. Progressive's attorney requested a postponement of the hearing to allow him to prepare to argue these issues. The arbitration was rescheduled. The claim settled for $25,000.00 on September 2, 1999, on the eve of the rescheduled arbitration date.
¶ 11 On January 24, 2000, Brown filed a bad faith claim against Progressive under 42 Pa.C.S.A. § 8371. On November 21, 2001, the trial court granted Brown's motion to add Mountain Laurel as an additional defendant. The Honorable C. Gus Kwidis held a non-jury trial on August 30, 2002.
¶ 12 Almost four months later, on December 24, 2002, the trial court issued an opinion and order. The court found that Progressive acted in bad faith. The court entered a "punitive damages verdict" of $100,000.00 against Progressive. On January 3, 2003, the court molded the verdict to add interest and costs, and to indicate that Mountain Laurel was liable as well. On the same day, Progressive and Mountain Laurel filed motions for post-trial relief, seeking jnov or a new trial. The trial court denied these motions in an order dated July 18, 2003. This order was docketed on July 22, 2003. On August 14, 2003, the court entered judgment against Progressive and Mountain Laurel. This timely appeal followed.
¶ 13 Appellants raise the following issues on appeal:
Appellants' Brief at 5.
¶ 14 In this appeal, Appellants seek jnov.
Van Zandt v. Holy Redeemer Hosp., 806 A.2d 879, 886 (Pa.Super.2002) (citation omitted), appeal denied, 573 Pa. 686, 823 A.2d 145 (2003).
¶ 15 We review the decision of a trial court in a non-jury case to determine "whether the findings of the trial court are supported by competent evidence, and whether the trial court committed error in the application of law." Bonenberger v. Nationwide Mut. Ins. Co., 791 A.2d 378, 380 (2002). We also note that the factfinder's conclusions must be based upon competent evidence and reasonable inferences therefrom:
Van Zandt, 806 A.2d at 886 (citations omitted).
¶ 16 First, Appellants argue that the court erred in denying Progressive's motion for jnov, because Progressive was not a party to the insurance contract. Specifically, Appellants argue that Mountain Laurel was the insurer because: (1) Mountain Laurel's name and address are listed on the declarations page of the policy; (2) the "Pennsylvania Family Car Policy" issued to Brown allegedly lists the insurer as Mountain Laurel Assurance Company; and (3) Brown's application for insurance and his sign-down of UM/UIM benefits contains the Mountain Laurel name. Appellants' Brief at 19-20.
¶ 17 As Appellants correctly point out, an action for bad faith under 42 Pa.C.S.A. § 8371 can only be brought against an "insurer." The Judicial Code does not define "insurer." SEPTA v. Holmes, 835 A.2d 851, 856 (Pa.Commw.2003), appeal denied, 577 Pa. 738, 848 A.2d 930 (2004). The Insurance Department Act of 1921, as amended, 40 P.S. § 221.3, defines "insurer" as "any person who is doing, has done, purports to do, or is licensed to do an insurance business, and is or has been subject to the authority of, or to liquidation, rehabilitation, reorganization or conservation by any insurance commissioner." Id. at 856-857.
¶ 18 Unfortunately, that does not answer the more relevant question, which is: how should courts decide which of two related insurance companies is the "insurer" for purposes of the bad faith statute? This question appears to be one of first impression among Pennsylvania state courts.
¶ 19 There is no simple rule for determining who is the insurer for purposes of the bad faith statute.
¶ 20 With respect to the first factor, we note the following. The "Definitions" section of Brown's policy states that the word "We" refers to "the Company providing this insurance." Yet the policy does not define the word "Company." Indeed, the policy does not provide any guidance on how to determine who is the insurer (e.g., "look to the upper left corner of the declarations page.")
¶ 21 The declarations page does list Mountain Laurel's name and address in the upper left hand corner. Mountain Laurel is not specifically labeled as the "insurer" or the "company providing this insurance." In the upper right hand corner of the declarations page, in more prominent type, is the phrase "Progressive Companies," followed by the telephone numbers for "24-hour policy service," "24-hour claims service," and "billing inquiries."
¶ 22 The front page of the "Pennsylvania Family Car Policy" at issue contains the word "PROGRESSIVE," standing alone in large, bolded, italicized type at the top. Farther down the page, in much smaller type, are listed "Progressive Casualty Insurance Company" and "Mountain Laurel Assurance Company," with no further elaboration. The application for insurance contains the words "Mountain Laurel Assurance Company," but again the word "Progressive" is adjacent to Mountain Laurel's name in even more prominent type.
¶ 23 Thus, the record reflects that wherever Mountain Laurel is listed, Progressive is also listed, at least as prominently (if not more so). These facts, combined with a total lack of guidance in the policy itself as to who is the insurer, supports the trial court's finding that Progressive was an appropriate party to this action.
¶ 24 Progressive relies on Lockhart to support its claim that it is not the insurer. We agree with the trial court that the instant case is factually distinguishable from Lockhart. In Lockhart, the policy clearly identified the insurer as Federal Insurance Company. The plaintiff brought suit against Chubb & Son, Inc., Federal's corporate parent. While the Chubb name appeared with Federal's name on some documents, the court found that "Chubb is mentioned nowhere in the substantive terms of the contract." Moreover, the policy in Lockhart specifically defined "We" as "the insurance company named in the Coverage Summary." Federal, not Chubb, was listed in the Coverage Summary. Chubb's name appeared only in a copyright notation at the bottom of the page. Therefore, the court found that "one cannot reasonably conclude that defendant Chubb was a party to the insurance policy [.]" Lockhart, 1998 WL 151019, At *2, 1998 U.S. Dist. Lexis 4046 at *7.
¶ 25 In contrast, in the instant case, there is no clear statement in the policy and supporting documentation as to the identity of the insurer. Unlike Lockhart, the Progressive name appears on all of the documents setting forth the terms of the contract. The trial court thus found that Progressive Insurance Company was the appropriate defendant in this action. Review of the application for insurance, declarations page, and policy entered into evidence in this case leaves no room for doubt that there is competent evidence to support the trial court's finding of fact that Progressive was Brown's insurer, and thus an appropriate party to this bad faith action.
¶ 26 The second factor to consider is the extent to which Progressive acted as Brown's insurer, particularly with respect to the types of activity that may give rise
¶ 27 As noted at length infra, Progressive handled the medical payments and lost wages claim, approved the third party settlement, waived its subrogation rights, and handled all aspects of the UIM claim. In this respect, the record overwhelmingly establishes that Progressive was Brown's insurer. To hold otherwise would create a situation where insurers are judged not on their actions, but on their corporate structures. The record supports the trial court's factual finding that Progressive was Brown's "insurer."
¶ 28 Next, Appellants argue that the trial court erred in failing to grant jnov, because the evidence was insufficient to show that Appellants acted in bad faith toward Brown.
¶ 29 The Pennsylvania Legislature has created a statutory remedy for an insurer's bad faith conduct.
42 Pa.C.S.A. § 8371.
¶ 30 Initially, we note that the bad faith statute extends to the handling of UIM claims. "An individual making a UIM claim is making a first party claim, however the valuation of that claim may follow traditional third party claimant concepts.... and whether a UIM is handled much like a third party claim for valuation purposes, the insurer remains committed to engage in good faith with its insured." Bonenberger, 791 A.2d at 380.
¶ 31 Bad faith encompasses a wide variety of objectionable conduct. For example, bad faith exists where "the insurer did not have a reasonable basis for denying benefits under the policy and that the insurer knew of or recklessly disregarded its
¶ 32 Recently, in Hollock v. Erie Ins. Exch., 842 A.2d 409 (Pa.Super.2004) (en banc), this Court upheld a trial court's finding of bad faith where well-documented evidence at trial established that the insurer misrepresented the amount of coverage, arbitrarily refused to accept evidence of causation, secretly placed the insured under surveillance, acted in a dilatory manner, and forced the insured into arbitration by presenting an arbitrary "low-ball" offer which bore no reasonable relationship to the insured's reasonable medical expenses, and which proved to be 29 times lower than the eventual arbitration award.
¶ 33 On the other hand, our Courts have not recognized bad faith where the insurer makes a low but reasonable estimate of the insured's losses, or where the insurer made a reasonable legal conclusion based on an area of the law that is uncertain or in flux. Terletsky, 649 A.2d at 688-689; see also, O'Donnell, 734 A.2d at 910 (in the absence of evidence of a dishonest purpose or ill-will, it is not bad faith to take a stand with a reasonable basis or to "aggressively investigate and protect its interests" in the normal course of litigation).
¶ 34 To constitute bad faith, it is not necessary that the insurer's conduct be fraudulent. Adamski v. Allstate Ins. Co., 738 A.2d 1033, 1036 (Pa.Super.1999) appeal denied, 563 Pa. 655, 759 A.2d 381 (Pa.2000). However, mere negligence or bad judgment is not bad faith. Id. To support a finding of bad faith, the insurer's conduct must be such as to "import a dishonest purpose." Id. In other words, the plaintiff must show that the insurer breached its duty of good faith through some motive of self-interest or ill will. Id. Bad faith must be shown by clear and convincing evidence. O'Donnell; Adamski.
¶ 35 With these principles in mind, we now turn to the facts of the instant case. In its initial memorandum Opinion and Order dated December 24, 2002, the trial court explained its finding of bad faith as follows:
Trial Court Opinion, 12/24/2002, at 7-8.
¶ 36 The trial court based its legal conclusions on a number of factual findings, which may be summarized as follows. First, Progressive failed to properly evaluate the true value of Brown's claim. Second, on January 20, 1998, Brown's counsel delivered a settlement package to Progressive with a demand for $100,000.00. Third, Progressive responded to Brown's counsel by indicating that the case had little to no value over and above the $25,000.00 that Nationwide already paid on the BI claim. Fourth, Progressive knew or strongly suspected that it had a "problem" with the sign-down of UIM coverage and waiver of stacking, such that Progressive's UIM exposure could be $150,000.00 rather than $25,000.00, based on this Court's then-binding decision in Winslow-Quattlebaum v. Maryland Cas. Co., 723 A.2d 681 (Pa.Super.1998). Fifth, Progressive chose not to discuss this coverage "problem" with Brown's counsel until the eve of arbitration, when Brown's counsel indicated that he intended to argue that the sign-down was invalid. Finally, Progressive knew that its own attorney was unprepared to properly argue the coverage issue, so Progressive settled the case for $25,000.00. Trial Court Opinion, 12/24/2002, at 2-6 (findings of fact # 13, # 6, # 7, # 9, and # 14).
¶ 37 After a thorough review of the record, we are constrained to conclude that these critical factual findings are either unsupported by the record or do not rise to the level of bad faith. A full discussion follows.
¶ 38 First, the record does not support the trial court's factual finding that Progressive failed to adequately evaluate Brown's claim. We must bear in mind that: Progressive would not be liable for any UIM claim unless the total value of that claim exceeded $50,000.00 (i.e., the limits of Nationwide's BI policy). In other words, Progressive was liable only for the amount which exceeded $50,000.00.
¶ 40 Next, the record does not support the trial court's factual finding that Brown's counsel delivered to Progressive a written "settlement package" demanding $100,000.00, or that Progressive responded to this "settlement package" by stating that it believed the case would be worth less than $50,000.00. These facts are simply
¶ 41 The trial court places significant emphasis on Progressive's internal debate over the validity of Brown's stacking waiver and sign-down of UIM limits. The court quotes from a claim note dated November 5, 1998, which states: "...The U.M./U.I.M. forms are on one page-however actual U.M./U.I.M. coverage was not rejected as it was in Lucas. The issue here is the stacking rejection and these are signed/dated but on one page. We have never been tested on this issue so we are unsure if this is a problem." Trial Court Opinion, 12/24/2002, at 4 (finding of fact 13).
¶ 42 Essentially, the trial court faults Progressive for failing to discuss these issues in a timely manner with Brown's counsel, and for settling the case only after it believed that it might lose a legal argument that the waiver and sign-down were valid.
¶ 43 Under the facts presented in this case, we again fail to see how this evidence, even if true, represents clear and convincing evidence of bad faith on Progressive's part. The record reflects the following. Under the "best case scenario" for Progressive, Brown's policy limit was $25,000.00 (i.e., a valid sign-down of UIM limits from $50,000.00 to $25,000.00, and a valid rejection of stacking). Under the "worst case scenario" for Progressive, Brown's policy limit was $150,000.00 (i.e., $50,000.00 UIM limits stacked on three cars). Progressive and Brown's counsel
¶ 44 The record also reflects that both sides were aware of a pending legal argument over the validity of the sign-down and the stacking waiver. The law in this area was far from clear at the time of settlement.
¶ 45 Before concluding, we note that the trial court's Rule 1925 opinion proffers one additional reason for its finding of bad faith. Specifically, the court reasoned that Progressive "unreasonably delayed" payment of Brown's UIM claim for an unreasonable amount of time and for an improper purpose. The trial court explained its reasoning as follows:
Trial Court Opinion, 11/10/2003, at 6-7.
¶ 46 Again, we note that the record does not support certain key factual findings. For example, the trial court found that Brown's attorney's letter of September 3, 1998 was "requesting a response" to his June 20, 1996 letter. Id. at 6. The June 20, 1996 letter reads in pertinent part as follows:
Plaintiff's Trial Exhibit 6.
¶ 47 The September 3, 1998 letter reads in pertinent part as follows:
Plaintiff's Trial Exhibit 31.
¶ 48 Upon review of the September 3, 1998 letter, we note that there is no reasonable
N.T., 8/30/2002, at 48. Thus, the record does not reflect that Progressive engaged in the type of stalling tactics that may be indicative of bad faith.
¶ 49 The trial court also reasoned that Progressive knowingly took an erroneous or disingenuous position on the validity of Brown's sign-down and stacking waiver, in light of this Court's then-binding decision in Winslow-Quattlebaum. The court reasoned that based on Winslow-Quattlebaum, Brown's waiver of UIM stacking was definitely invalid.
¶ 50 Again, we disagree. As noted in footnote 14, supra, this Court's decision in Winslow-Quattlebaum involved complete rejection of UIM benefits. The instant case involved a sign-down of UIM benefits and a rejection of UIM stacking. These issues were not present in Winslow-Quattlebaum; thus, the state of the law in this area was at best unclear. Indeed, Progressive's November 5, 1998 claim notes accurately identified the distinctions between the instant case and prior case law. The record does not support the court's finding that Progressive knowingly took an erroneous or disingenuous legal position on these issues. At best, the record reflects that Progressive held an internal debate on whether the sign-down and waiver of stacking would be found valid or invalid.
¶ 51 The record further reflects that internally, Progressive took the position that it was entitled to a $50,000.00 credit for the BI claim, and that Brown's claim would not likely exceed this limit. See, e.g., Progressive's March 1, 1999 claim notes. Because the record reflects that Progressive took a reasonable position on these unresolved legal issues and valuation issues, we cannot agree that Brown presented clear and convincing evidence of bad faith conduct. See, Terletsky, supra.
¶ 52 Finally, the trial court seems to blame all of the delay in settling this case on Progressive. The record again does not support this conclusion. For example, the record reflects that as late as May 14, 1999, Brown's attorney dropped his wage loss claim and apologized for failing to respond to Progressive's request for tax records. After Brown's death, the information as to whether Brown was still going to proceed with his wage loss claim was relevant for Progressive's evaluation of the claim. During the time period from the accident until Brown's death, Brown was still receiving income from the family
¶ 53 The case settled less than four months later, on September 2, 1999. Thus, the record reflects that the value of the claim was in flux until approximately four months before settlement. We cannot agree that Progressive "unreasonably delayed" settlement under these facts, or that Progressive's actions from May 14, 1999 to the date of settlement constituted clear and convincing evidence of bad faith. Compare, Wood v. Allstate Ins. Co., 1997 WL 602796, 1997 U.S. Dist. Lexis 14663 (E.D.Pa.1997) (finding bad faith in handling plaintiff's UIM claim where adjuster took no action on the claim for almost two years, claiming an inability to value the claim, where the evidence established that the claim could have easily been valued earlier); Kraeger v. Nationwide Mut. Ins. Co., 1996 WL 547207, 1996 U.S. Dist. Lexis 18373 (E.D.Pa.1996) (denying insurer's motion for summary judgment on plaintiff's bad faith claim where insurer made no attempt to independently evaluate plaintiff's claim, ignored settlement offers, offered an arbitrarily low settlement figure many months later, and finally settled for policy limits after almost one year).
¶ 54 Progressive ultimately settled a claim for $25,000.00 that it reasonably believed to be worth nothing. Cases may settle for any number of reasons, including reasons which are unrelated to the true value of the claim.
¶ 55 For the reasons set forth above, we conclude that the trial court's finding of bad faith was unsupported by sufficient facts in the record. To the extent that the court's factual findings were supported by the record, we conclude that they were insufficient as a matter of law to provide clear and convincing evidence of bad faith. Accordingly, we are constrained to vacate the judgment and remand for entry of jnov in favor of Appellants. As a result of our disposition, we need not address Appellants' remaining issues.
¶ 56 Judgment vacated. Remanded for entry of jnov in favor of Appellants. Jurisdiction relinquished.
In addition to the claim notes, Progressive's claims adjuster Colleen Rotunno testified at trial that she had reviewed all of the information pertinent to Brown's claim. She testified at length that she reviewed the medical records, including the initial accident injuries as well as subsequent injuries related to the accident, and the effect of the injuries on Brown's life. N.T., 8/30/2002, at 130-144. She testified that in her opinion, the claim was worth approximately $35,000.00. Id. at 143. This opinion was then reviewed by her supervisor. Id.
The evidence only indicates that the letter of January 20, 1998 contained medical records and a wage loss letter to Ms. Rotunno. Brown's attorney testified that the January 20, 1998 letter was a follow up to a conversation with Rotunno, and it contained medical records that he felt were relevant, along with the letter from Brown's employer. N.T., 8/30/1998, at 46-47. While Brown's attorney did at one point orally communicate to Progressive his opinion that the claim was worth $100,000.00, he later revised that assessment to $60,000.00 to $75,000.00 after Brown's death. Id. at 52-53.
We observe that the bolded language is not contained within the Progressive claim records dated September 16, 1998. Although Progressive did make the unbolded entry on September 16, 1998, Progressive, throughout the record, indicates that its claim people were unsure if this was actually a problem. There is no clear indication that Progressive felt that this stacking waiver was improper.
In Lucas, this Court held that rejection of UIM coverage may not be on the same page as rejection of UM coverage. Again, however, the instant case did not concern rejection of UM/UIM coverage, but rather a sign-down to lower limits. That issue was unresolved until this Court decided Lewis v. Erie Ins. Exch., 753 A.2d 839 (Pa.Super.2000). Lewis was decided in May 2000, about eight months after Brown and Progressive settled their case in September 1999.