Legal News

Federal Western District Court Dismisses Bad Faith Case on Statute of Limitations Grounds

By Brian Harris

The U.S. District Court for the Western District of Pennsylvania has recently ruled that the two-year statute of limitations applicable to first-party bad faith actions under 42 Pa.C.S.A. § 8371 barred claims by bad faith plaintiffs bringing a claim more than two years after the claim was denied.  In Sicora v. State Farm Insurance Co., District Judge Joy Flowers Conti granted summary judgment in favor of State Farm Insurance in a bad faith case premised upon the handling of an underlying underinsured motor vehicle claim.

The underlying claim was filed by the insureds on Sept. 12, 2005. The plaintiffs admitted that State Farm notified the insureds that coverage was denied under the policy on Dec. 27, 2005.  On June 23, 2008, more than two years and six months following State Farm?s denial, plaintiffs initiated suit in the Court of Common Pleas in Allegheny County. The suit was removed, and State Farm filed a motion for summary judgment on the statute of limitations issue pursuant to Federal Rule of Civil Procedure 56(c).

Conti affirmed some rather important principles with respect to the statute of limitations in bad faith cases. First, he confirmed that the statute of limitations for §8371 actions is two years.  More importantly, he ruled that the bad faith claim ?begins accrue ?when the insurer first provides definite notice of a refusal to indemnify or defend.?? From there, it was a simple math exercise for the court to conclude that the claim was filed too late. 

Conti went further, addressing and dismissing plaintiff?s argument that a subsequent denial letter issued by State Farm less than a year before the plaintiff filed suit, did not constitute a new denial and new act of bad faith.  Conti observed that ?courts have consistently rejected this argument with respect to the accrual of a claim pursuant to the bad faith statute.? Conti also pointed out that this rule obtained even where the may actively seek information before issue the second denial letter. 

Conti?s decision in Sicora appears to be in line with controlling 3rd Circuit precedent.  It is a decision that is equally important to insurers and insureds in that it clearly delineates when a cause of action under § 8371 begins to accrue, and thus, when a cause of action expires.  It also demises any argument that an insured can make ?continuous trigger? or ?new trigger? argument regarding subsequent denials of the claim in an effort to avoid dismissal of untimely filed case.

Full post as published by The Legal Intelligencer Blog on August 17, 2009 (boomark / email).