185 F. Supp. 2d 436

Huda ATIYEH v. LIBERTY MUTUAL FIRE INSURANCE COMPANY.

No. 00-CV-2661.

United States District Court, E.D. Pennsylvania.

Jan. 8, 2002.

*437Edith C. Rysdyk, Scherline & Associates, Allentown, PA, for plaintiff.

William C. Foster, Steven Chung, Kelly, McLaughlin & Foster, Philadelphia, PA, for defendant.

MEMORANDUM AND ORDER

KAUFFMAN, District Judge.

This is an action alleging breach of contract (Count I) and bad faith pursuant to 42 Pa.C.S.A. § 8371 (Count II) based upon Defendant’s denial of Plaintiffs claim for wage loss benefits. Now before the Court is Defendant’s Motion for Partial Summary Judgment on Count II (bad faith). For the reasons set forth below, the Court will deny the Motion.

BACKGROUND

On March 19, 1999, Plaintiff Huda Ati-yeh sustained personal injuries following an automobile accident. (Compl.f 9.) At the time, Plaintiff was insured under an automobile insurance policy issued by Defendant Liberty Mutual Fire Insurance Company that provided wage loss benefits with a policy limit of fifty thousand dollars ($50,000). (Comply 4.) On March 25,1999, Plaintiff submitted a claim for wage loss and personal injury protection benefits. (Def.’s Mot. ¶ 5.) Defendant processed Plaintiffs claim and paid wage loss benefits in the amount of twenty three thousand eight hundred three dollars and eighty-nine cents ($23,803.89) for the time period following the date of the accident until January 2000. (Def.’s Mot. ¶¶ 6-7.)

After the accident, Plaintiff sought medical treatment from Dr. Ghodrat Daneshd-oost. In a report dated April 8, 1999, Dr. Daneshdoost opined that Plaintiff suffered from a disc herniation in her spinal cord and issued a Disability Certificate for her for the period from March to November 1999. (Def.’s Mot. ¶ 12, Ex. D; Pl.’s Resp. Ex. 4.)

In November 1999, Susan Koval, who was employed by Defendant as a Claims Representative Supervisor, decided to request an Independent Medical Examination (“IME”) for Plaintiff. Based upon a review of the file, the fact that Plaintiff had been out of work since March, “her employment position based on the medical documentation received and her ongoing disability,” Ms. Koval sought an IME to address Plaintiffs disability status. (Pl.’s Resp.Ex. 1 at 37.) To that end, Ms. Koval gave Plaintiffs file to a representative from Concentra Medical Examinations (“Concentra”), one of the vendors that Defendant worked with to schedule IMEs. (Def.’s Reply Ex. S. at 51.)1

*438Dr. M. Barry Lipson, the doctor that Concentra selected to conduct the IME, subsequently received from Concentra a file on Plaintiff that included four photographs of Plaintiffs automobile following the accident. (Def.’s Reply Ex. S. at 59-61, 64.) Dr. Lipson also received a Con-centra referral letter, which presented specific inquiries for the doctor to pursue. This referral included the following statements: “Claimant is not working. Address return to work issues. Restrictions. Anticipated duration of any restrictions. Timeframes for reasonable full and partial disability status. Please see enclosed pictures of claimant’s car depicting very minimal damage! Claimant has been out on disability for 9 months now! ...” (Pl.’s Resp.Ex. 3.) A notation on the bottom of this referral indicates that Ms. Koval also received a copy. (Id.)

On December 21, 1999, Dr. Lipson conducted an IME of Plaintiff. In a report dated January 18, 2000, Dr. Lipson opined that Plaintiff “is not in any way impaired or disabled or requires any treatment, as a result of the motor vehicle accident. She is capable of performing the same activities and job requirements that she was able to carry out, as of 3/19/99.” (Def.’s Mot.Ex. E at 8.)

In January 2000, Defendant discontinued Plaintiffs wage loss benefits, and Plaintiff submitted to a Functional Capacity Evaluation (“FCE”), which was conducted by Mr. Don Evans. In a report dated January 19, 2000, Mr. Evans opined that Plaintiff “currently demonstrates physical ability for performing forward and overhead reached activities for up to 3 hours on an occasional basis. Seated tolerance reveals that she would be able to sit up to 4 hours on a frequent basis with periodic rest breaks.” (Def.’s Mot.Ex. G at 8.) Mr. Evans recommended that a “return to work would be initially for 4 hours out of an 8 hour work day, with periodic rest breaks” and other accommodations. (Id.)

Plaintiff returned to Dr. Daneshdoost for treatment on several occasions following the accident. In a report dated February 11, 2000, Dr. Daneshdoost opined that Plaintiff was “neurologically intact,” that he “could not find evidence of spinal cord impingement,” and that there was “no clinical evidence of spinal cord or nerve root entrapment.” (Def.’s Mot.Ex. H.) In an addendum to this report, Dr. Daneshdoost further opined that Plaintiff could return to light duty sedentary work on a part-time basis. (Def.’s Mot.Ex. I.)

STANDARD FOR REVIEWING A SUMMARY JUDGMENT MOTION UNDER FEDERAL RULE OF CIVIL PROCEDURE 56

When the Court decides a motion for summary judgment under Federal Rule of Civil Procedure 56, “the test is whether there is a genuine issue of material fact and, if not, whether the moving party is entitled to judgment as a matter of law.” Med. Protective Co. v. Watkins, 198 F.3d 100, 103 (3d Cir.1999) (citing Armbruster v. Unisys Corp., 32 F.3d 768, 777 (3d Cir.1994)). “Summary judgment will not lie if the dispute about a material fact is ‘genuine,’ that is, if the evidence is such that a reasonable jury could return a verdict for the nonmoving party.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). The Court must examine the evidence in the light most favorable to the non-moving party, and resolve all reasonable inter-*439enees in that party’s favor. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986). “[T]he plain language of Rule 56(c) mandates the entry of summary judgment, after adequate time for discovery and upon motion, against a party who fails to make a showing sufficient to establish the existence of an element essential to that party’s case, and on which that party will bear the burden of proof at trial. In such a situation, there can be ‘no genuine issue as to any material fact,’ since a complete failure of proof concerning an essential element of the nonmoving party’s case necessarily renders all other facts immaterial.” Celotex Corp. v. Catrett, 477 U.S. 317, 322-23, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986).

ANALYSIS

1. Bad Faith Standard

Under Pennsylvania law, an insured party may bring a cause of action against its insurer for acting in bad faith.2 Bad faith by an insurer has been defined as “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.” Williams v. Hartford Cas. Ins. Co., 83 F.Supp.2d 567, 570-71 (E.D.Pa.2000), aff'd, 261 F.3d 495 (3d Cir.2001) (citing Terletsky v. Prudential Property and Cas. Ins. Co., 437 Pa.Super, 108, 649 A.2d 680, 688 (1994)).

A plaintiff must establish bad faith by clear and convincing evidence. Polselli v. Nationwide Mut. Fire Ins. Co., 23 F.3d 747, 750 (3d Cir.1994). To recover on a bad faith claim, the plaintiff must show both: 1) that the insurer lacked a reasonable basis for denying benefits; and 2) that the insurer knew or recklessly disregarded its lack of reasonable basis. Klinger v. State Farm Mut. Auto. Ins. Co., 115 F.3d 230, 233 (3d Cir.1997) (citing Terletsky, 649 A.2d at 688). Accordingly, in order to defeat a motion for summary judgment, the plaintiff must show that a reasonable jury could find by clear and convincing evidence that the insurer lacked a reasonable basis for its handling of the claim and that it recklessly disregarded its unreasonableness. Williams, 83 F.Supp.2d at 571; McCabe v. State Farm Mut. Auto. Ins. Co., 36 F.Supp.2d 666, 671 (E.D.Pa.1999); Jung v. Nationwide Mut. Fire Ins. Co., 949 F.Supp. 353, 356 (E.D.Pa.1997).

II. Determining Whether Defendant Acted in Bad Faith

A. Defendant’s Conduct With Respect to the IME

Defendant claims that it had a reasonable basis for discontinuing Plaintiffs wage loss benefits.3 Ms. Koval stated at her deposition that the decision to terminate Plaintiffs wage loss benefits was made on the basis of the IME (Def.’s *440Reply Ex. S. at 120-22), in which Dr. Lipson opined that Plaintiff “is not in any way impaired or disabled or requires any treatment, as a result of the motor vehicle accident. She is capable of performing the same activities and job requirements that she was able to carry out, as of 3/19/99.” (Def.’s Mot.Ex. E at 8). Plaintiff, however, asserts that Defendant acted in bad faith with respect to the IME, in that the Concentra referral letter4 “suggests to the doctor what the desired opinion should state.” (Pl.’s Resp. ¶ 22.)5 Plaintiff has demonstrated that a genuine issue of material fact exists as to whether the IME was a reasonable basis for Defendant to discontinue Plaintiffs wage loss benefits, because Dr. Lipson may have been unduly influenced by the statements on the Con-centra referral letter. In light of the fact that Ms. Koval apparently received a copy of the allegedly suggestive letter, there is also a genuine issue of material fact as to whether Defendant knew or recklessly disregarded the risk that the IME did not constitute a reasonable basis for Defendant’s decision.

B. Defendant’s Conduct With Respect to Partial Wage Loss Benefits

Although Ms. Koval testified that the decision to terminate Plaintiffs wage loss benefits was based on the IME, in moving for summary judgment, Defendant presents several additional grounds to support its claim that it had a reasonable basis for discontinuing benefits. In addition to the IME, Defendant proffers the following facts: in the FCE report dated January 19, 2000, Mr. Evans opined that Plaintiff could return to work initially for four hours out of an eight hour work day (Def.’s Mot.Ex. G at 8); in the addendum to his February 11, 2000 report, Dr. Daneshd-oost opined that Plaintiff “can return to work doing a light duty sedentary type of job on a part-time basis” (Def.’s Mot.Ex. I); Plaintiff sought a second opinion from Dr. Susan Hemley in March 2000, and Dr. Hemley opined in reports dated March 29, 2000 and August 30, 2000 that the MRI of Plaintiffs spine did not show any significant disc herniation or nerve root impingement, and that Plaintiff was suffering from soft tissue injuries only (Def.’s Mot.Ex. K; Ex. L); Plaintiff sought treatment from *441Dr. Charles Court, a pain management specialist, in April, September, and October 2000, and Dr. Court opined in reports dated September 18, 2000 and October 17, 2000 that although Plaintiff did have persistent neck pain, she suffered other somatic complaints that were not clearly attributable to the accident, and that there was a “significant non-organic component to [Plaintiffs] pain syndrome” (Def.’s Mot. Ex. N; Ex. O); and Plaintiff testified in her deposition that she had been assisting for two years as a volunteer with the Food Bank at her church for approximately two hours every other week (Def.’s Mot.Ex. P. at 135-37).6

Defendant argues that the FCE by Mr. Evans, the addendum to Dr. Daneshd-oost’s report, and Plaintiffs deposition, among other things, provide a reasonable basis for Defendant’s decision to terminate Plaintiffs wage loss benefits because they demonstrate that Plaintiff was capable of working. The reports and deposition, however, indicate only that Plaintiff may have been able to work on a part-time basis. Ms. Koval admitted that if a claimant has coverage for wage loss benefits and a doctor indicates that the claimant can only work part time, Defendant pays partial benefits. (Def.’s Reply Ex. S. at 123.) Ms. Koval further admitted that, following the decision to terminate benefits, she never revisited -the issue as to whether Defendant should have reinstated wage loss benefits — whether full or partial — to Plaintiff based on upon medical records. (Def.’s Reply Ex. S. at 124-25; 157.) See Klinger, 895 F.Supp. at 714 (commenting that reckless behavior can constitute bad faith when an insurer deliberately acts in conscious disregard of, or with indifference to, the rights of the insured). A reasonable jury could find that Defendant knew or recklessly disregarded its lack of a reasonable basis for not paying partial wage loss benefits, particularly if, as Defendant argues in its summary judgment motion, Defendant’s decision to discontinue benefits was supported by reports indicating that Plaintiff was capable of returning to work on a part-time basis. There is a genuine issue of material fact, therefore, as to whether Defendant’s failure to pay at least partial wage loss benefits constituted bad faith.

III. Conclusion

There exists a genuine issue of material fact as to whether Defendant lacked a *442reasonable basis for the denial of wage loss benefits and whether it knew or recklessly disregarded its lack of a reasonable basis. Accordingly, the Court will deny Defendant’s motion for partial summary judgment.

An appropriate Order follows.

ORDER

AND NOW, this 8th day of January, 2002, upon consideration of Defendant’s Motion for Partial Summary Judgment (docket no. 17), Plaintiffs Response thereto (docket no. 18), Plaintiffs Memorandum of Law Contra the Motion for Partial Summary Judgment (docket no. 19), and Defendant’s Reply (docket no. 22), IT IS ORDERED that Defendant’s Motion is DENIED.

Atiyeh v. Liberty Mutual Fire Insurance
185 F. Supp. 2d 436

Case Details

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Atiyeh v. Liberty Mutual Fire Insurance
Decision Date
Jan 8, 2002
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185 F. Supp. 2d 436

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United States

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