Antitrust Law Daily Wrap Up, STATE UNFAIR TRADE PRACTICES—M.D.N.C.: Issues of material fact precluded summary judgment of insurance policy dispute, (Oct 22, 2013)

By Jody Coultas, J.D.

The federal district court in Winston-Salem granted partial motions for summary judgment to an insured and insurance company in a North Carolina Unfair and Deceptive Trade Practices Act (UDTPA) claim between the parties concerning the coverage of an automobile liability insurance policy issued by the insurance company to the insured’s employer (Guessford v. Pennsylvania National Mutual Casualty Insurance Company, October 18, 2013, Beaty, J.).

After the insured was involved in a car accident in a vehicle owned by his employer, the insured alleged that the insurance company: (1) failed to acknowledge and act promptly upon communications with respect to claims arising under insurance policies; (2) refused to pay claims without having conducted a reasonable investigation based upon all available information; (3) did not attempt in good faith to effectuate prompt, fair, and equitable settlements of claims in which liability has become reasonably clear; (4) compelled the insured to institute litigation to recover amounts due under an insurance policy by offering substantially less than the amounts ultimately recovered in actions brought by such insured; and (5) failed to promptly provide a reasonable explanation for denial of a claim or for the offer of a compromise settlement.

When an insurance company engages in an act or practice violating the unfair claim settlement practices provision of the UDTPA, N.C. General Statute § 58-63-15(11), it also engages in conduct that embodies the broader standards of UDTPA, the court held.

Genuine issues of fact precluded summary judgment on the insured’s first three claims, according to the court. The insurance company failed to explain its delay in naming an arbitrator or in acknowledging and acting on communications sent from the insured. There was also a dispute as to whether the insurance company communicated to the insured that it would take the lead on gathering the additional documentation required for resolution of the claim, and whether the insured’s counsel understood that more medical records were necessary before the claim could be resolved. Also, whether the insured’s activities unrelated to the accident provided a reasonable basis for the delay of the resolution of the claim involved disputes of material fact. There was also a dispute about what information the insured took into account in calculating its one settlement offer that was made prior to arbitration.

The court granted the insured summary judgment on the basis that the insurance company failed to promptly provide a reasonable explanation of the basis in the insurance policy in relation to the facts or applicable law for denial of a claim or for the offer of a compromise settlement. The insured may be able to recover treble damages if he can show that he suffered actual injury that was proximately caused by this conduct, the court noted. However, the issue of damages was best left for a fact finder.

The insured was denied summary judgment of the insurance company’s affirmative defense of advice of counsel by the court. The insured argued that the insurance company may not rely on advice of counsel as a defense because it had a non-delegable duty to evaluate the insured’s claim. The insured also argued that delegation of that duty violated the insurance company’s duties under N.C. Gen. Stat. § 58-63-15(11) and, thus, the insurance company may not use that same conduct as a shield to punitive damages. The affirmative defense of advice of counsel was not applicable to the UDTPA claim because good faith is not a defense to a UDTPA claim. However, the insured failed to support its argument that the insurance company’s non-delegable duty to evaluate the insurance claim precluded this defense in the punitive damages context.

The court granted the insurance company’s motion for partial summary judgment in so far as the insured may not include a $900,000 policy limit as part of his actual injury under a UDTPA claim. The insurance company argued that the insured was attempting to inflate his damages by including the $900,000 policy limit that the insurance company has already paid as an element of the compensatory damages that would be trebled for the UDTPA claim. Courts incorporate amounts due under contracts into trebled UDTPA damages when those damages were part of the respective plaintiffs’ actual injury under the UDTPA that had not yet been paid. Here, the insurance company already paid the $900,000 policy limit.

The case is No. 1:12CV260.

Attorneys: Kathryn C. Setzer (Doran Shelby Pethel & Hudson, PA) for Lawrence D. Guessford, Jr. John R. Fonda (Bailey and Thomas) for Pennsylvania National Mutual Casualty Insurance Company.

Companies: Pennsylvania National Mutual Casualty Insurance Company

Cases: StateUnfairTradePractices NorthCarolinaNews