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Ross v. Erie Insurance Property

United States District Court, N.D. West Virginia

July 1, 2019

MANUELA M. ROSS and DAVID A. ROSS, Plaintiffs,
v.
ERIE INSURANCE PROPERTY AND CASUALTY COMPANY, Defendant.

          MEMORANDUM OPINION AND ORDER GRANTING IN PART AND DENYING IN PART DEFENDANT'S MOTION FOR SUMMARY JUDGMENT

          FREDERICK P. STAMP, JR. UNITED STATES DISTRICT JUDGE.

         I. Background

         This is a bad faith action arising out of an underlying claim for uninsured motorist benefits. The plaintiffs, Manuela M. Ross and David A. Ross (“plaintiffs”), originally filed this civil action in the Circuit Court of Marshall County, West Virginia. The defendant, Erie Insurance Property and Casualty Company (“Erie”), removed the case to this Court citing diversity of citizenship. ECF No. 1. Plaintiffs allege repeated violations of the West Virginia Unfair Trade Practices Act (“UTPA”) and the West Virginia Insurance Commissioner's Regulations in handling plaintiffs' claims, including their uninsured motorist claim (“UM”) under the Erie policy which provided up to $100, 000.00 in uninsured motorist coverage. ECF No. 1-1 at 8. ECF No. 26-2. Plaintiffs further allege in Count II that defendant engaged in common law insurance bad faith. ECF No. 1-1 at 9. Plaintiffs allege they are entitled to recover both compensatory and punitive damages against defendant. ECF No. 1-1 at 10. In Count I of their complaint (ECF No. 1-1), plaintiffs allege repeated violations of the West Virginia Unfair Trade Practices Act and the West Virginia Insurance Commissioner's Regulations in handling plaintiffs' and other insureds' claims. ECF No. 1-1 at 8. Plaintiffs further allege in Count II that defendant engaged in common law insurance bad faith. ECF No. 1-1 at 9. In Counts III and IV, plaintiffs allege they are entitled to recover both compensatory and punitive damages against defendant. ECF No. 1-1 at 10.

         II. Facts

         On September 15, 2014, plaintiff Manuela Ross was involved in a motor vehicle accident with an uninsured driver, Kevin Strope. ECF No. 26-1 at 2 (Ex. A at ¶ 1). On September 23, 2014, Erie representative and medical claims handler, Diane Lapinski, sent medical authorizations to plaintiff to obtain medical insurance or employment information. ECF No. 26-1 at 3 (Ex. A at ¶ 10). On October 3, 2014, plaintiff signed the authorization to obtain medical, insurance, and/or employment information (ECF No. 28-7) (Ex. G at 000328) and Erie received the signed medical authorization and provider list from Manuela Ross on October 16, 2014. ECF No. 26-1 at 4 (Ex. A at ¶ 13). On November 18, 2014, Erie's representative, Eric Paugh, left a message for Manuela Ross explaining that uninsured motorist coverage will apply in the underlying accident (ECF No. 26-1 at 4) (Ex. A at ¶ 16), and Erie opened a claim for UM benefits on plaintiff's behalf. ECF No. 26-3 at 70 (Ex. C at 001866). The next day, Erie representative, liability specialist Eric Paugh, wrote to plaintiff Manuela Ross and requested information regarding plaintiff's injury and treatment status. ECF No. 26-4 at 42 (Ex. D at 001429). On November 25, 2014, Eric Paugh spoke with plaintiff Manuela Ross by telephone call and plaintiff told Eric Paugh that she was not ready to discuss settlement of her claim as she was continuing with her medical treatment. ECF No. 26-1 at 5. (Ex. A at ¶ 20). During this time, from November 2014 through January 2015, Erie's representative Diane Lapinski, also received and reviewed medical bills from Anthony Ricci and from Wano Chiropractic (ECF No. 26-1) (Ex. A), and issued partial payment and an exhaustion letter indicating that the bills from Wano Chiropractic exceeded the remaining Medpay limit. ECF No. 26-1 at 6 (Ex. A at ¶ 25). On December 27, 2014, Erie's initial adjuster Eric Paugh noted in the claim file “Kevin Strope is 100% negligent in this loss.” ECF No. 28-23 (Ex. W at 001499). On December 29, 2014, Erie's representative, Eric Paugh, wrote a letter to Manuela Ross asking her to provide injury/treatment status. ECF No. 26-1 at 5 (Ex. A at ¶ 22).

         On February 2, 2015, Erie's representative, Eric Paugh, wrote to Manuela Ross requesting that Mrs. Ross provide “a status of [her] injury and medical treatment.” ECF No. 26-1 at 6 (Ex. A at ¶ 26). Two days later, Erie was notified, through representative Eric Paugh, that plaintiffs had retained counsel, attorney Brittani Hassen at the Kontos Mengine Law Group, to represent them with regard to their UM claim. ECF No. 26-1 at 6 (Ex. A at ¶ 28), ECF No. 26-3 at 44 (Ex. C at 001840). Thereafter, Erie's representative, Eric Paugh, called Manuela Ross's attorney, Brittani Hassen of Kontos Mengine, to acknowledge and discuss counsel's letter of representation and plaintiffs' counsel Brittani Hassen indicated that she would send materials “in support of Mrs. Ross's damages” when Mrs. Ross is ready to settle her uninsured motorist claim. ECF No. 26-1 at 6 (Ex. A at ¶¶ 29, 30). On March 11, 2015, Eric Paugh wrote to plaintiffs' counsel and requested information regarding plaintiff's injury and treatment status. ECF No. 26-4 at 41 (Ex. D at 001400).

         On April 16, 2015, Erie's representative, Eric Paugh, received a voice mail from attorney Ronald Wm. Kasserman of Kasserman Law Offices, indicating that he would be representing Manuela Ross. ECF No. 26-1 at 7 (Ex. A at ¶ 32). On April 21, 2015, new counsel for plaintiffs, attorney Ron Kasserman, sent a letter to Eric Paugh stating that he was “gathering the medicals and specials, along with developing the lost wages so that we may work on trying to resolve this claim without litigation.” ECF No. 26-4 at 32 (Ex. D at 000329). After receiving correspondence from attorney Kasserman advising he was sole counsel for Manuela and David Ross, (ECF No. 26-1 at 7) (Ex. A at ¶ 33), Eric Paugh wrote to plaintiffs' counsel and requested information regarding plaintiff Manuela Ross's injury and treatment status. ECF No. 26-4 at 40, 29 (Ex. D at 001398, 000273). On June 3, 2015, plaintiffs' counsel wrote to Eric Paugh stating that he is agreeable to waive receipt of status letters and adding “when [Manuela Ross] has reached her maximum degree of medical improvement, I will provide you with all of her medical records and bills so that we can attempt to amicably resolve the claim without litigation.” ECF No. 26-4 at 33 (Ex. D at 000366). On October 29, 2015, Erie's representative, Diane Lapinski, received correspondence from attorney Kasserman requesting copies of all chiropractic bills and records Erie had on file, whether paid or unpaid. ECF No. 26-1 at 7 (Ex. A at ¶ 35). On May 18, 2016, attorney Kasserman contacted Erie's representative, Eric Paugh, via correspondence to indicate that Manuela Ross continued to seek treatment and sent a Medical Specials Index to bodily injury adjuster Eric Paugh. ECF No. 26-1 at 7 (Ex. A at ¶ 37); ECF No. 28-26 at 1-4 (Ex. W at 001997-002000). On June 10, 2016, Erie's representative, Eric Paugh, indicated via correspondence that Erie was awaiting the “damage supports from [Mrs. Ross] when [Mrs. Ross is] ready to discuss settlement of [her] bodily injury claim.” ECF No. 26-1 at 8 (Ex. A at ¶ 39). Thereafter, on July 5, 2016, Manuela and David Ross filed suit against Kevin L. Strope and Erie Insurance in the Circuit Court of Marshall County, West Virginia. ECF No. 26-1 at 8 (Ex. A at ¶ 41). As of the date Erie first received notice of the suit against it and Kevin L. Strope filed in the Circuit Court of Marshall County, West Virginia, counsel for David and Manuela Ross had not provided Erie a demand or demand packet. ECF No. 26-1 at 9 (Ex. A at ¶ 48). After the underlying suit was filed, on February 14, 2017, plaintiffs' counsel provided defense counsel in the underlying claim with plaintiff's first settlement request by letter stating: “We respectfully request that to settle this case, Erie Insurance Company pay its uninsured motorists policy limits of $100, 000.00.” ECF No. 26-1 at 10 (Ex. A at ¶¶ 51, 52) (See ECF No. 26-4 at 35, Ex. D at 000403). On March 1, 2017, counsel for Erie wrote to plaintiffs' counsel that Erie had received plaintiffs' demand and was reviewing the information that had been provided and would be in touch within the next couple of weeks following the review. ECF No. 26-4 at 31. (Ex. D at 000307). On April 19, 2017, counsel for Erie wrote to plaintiffs' counsel regarding record collection and depositions in order to assist with a response to plaintiffs' demand. ECF No. 26-4 at 39 (Ex. D at 001391). Thereafter, on May 25, 2017, mediation was scheduled to occur before September 29, 2017. ECF No. 26-4 at 9 (Ex. D at 000198). On September 22, 2017, in anticipation of mediation, plaintiffs' counsel made a settlement proposal of approximately $135, 383.33. ECF No. 26-1 at 11 (Ex. A at ¶ 58). On September 25, 2017, plaintiffs' counsel provided Erie's counsel an email containing plaintiff Manuela Ross's updated medical special damages totaling over $43, 000.00. ECF No. 26-1 at 11 (Ex. A at ¶ 55). On September 26, 2017, plaintiffs agreed to settle the underlying uninsured motorist claim for $75, 000.00. ECF No. 26-1 at 11 (Ex. A at ¶ 59) (See Ex. I, ECF No. 26-9).

         Thereafter, on December 20, 2017, a bench trial was held before David W. Hummel, Jr., Judge of the Circuit Court of Marshall County, West Virginia, as to the open claim remaining against uninsured tortfeasor Kevin Strope. The Court found that plaintiffs' total damages were $449, 287.63, including $368, 663.73 in future medical expenses, and after giving Kevin L. Strope a deduction for the $75, 000.00 settlement with Erie Insurance, Judge Hummel awarded judgment to plaintiffs against Kevin L. Strope for $374, 287.63.[1] ECF No. 28-1 (Ex. A, J. Order). Thereafter, on May 17, 2018, Manuela and David Ross instituted a bad faith lawsuit against Erie in the Circuit Court of Marshall County, West Virginia (ECF No. 26-1 at 12) (Ex. A at ¶ 61) (See ECF No. 1-1), and that civil action was removed to this Court on June 15, 2018. ECF No. 1.

         III. Contentions of the Parties

         Erie filed a motion for summary judgment pursuant to Federal Rule of Civil Procedure 56. ECF No. 24. In support, defendant also filed a concise statement of facts. ECF No. 26. In its memorandum in support of summary judgment (ECF No. 25), defendant contends that “[i]n a bad faith action arising out of an underlying claim for uninsured motorist (“UM”) benefits where the insureds neither provided any documentation of their claim nor provided a demand before filing a lawsuit - despite their repeated promises to do so - Erie is entitled to summary judgment as the insured did not ‘substantially prevail' on the UM claim and Erie did not otherwise engage in bad faith.” ECF No. 25 at 1.

         Defendant asserts that Erie opened a claim for UM benefits on plaintiffs behalf on November 18, 2014, after learning that the other driver involved in the September 15, 2014 accident did not have any automobile insurance which provided liability coverage. ECF No. 25 at 2. Defendant further states that at no time prior to November 18, 2014 did plaintiffs request that an UM claim be opened. Id. Defendant further states that plaintiffs' counsel promised to provide information for Erie's evaluation when plaintiffs were ready to discuss settlement without litigation, but did not provide any documentation regarding their UM claim before filing the instant lawsuit. ECF No. 25 at 4. Erie asserts that once plaintiffs' UM claim was evaluated, it was resolved for substantially less than plaintiffs' demand. ECF No. 25 at 5. Defendant contends that plaintiffs cannot establish that “but for” the attorney's services they would not have received payment of the insurance proceeds, nor can they establish that the filing of the lawsuit was necessary. Rather, defendant asserts that the record is clear that plaintiffs retained counsel and filed a lawsuit against Erie before providing any documentation to Erie to support their claim - despite the fact that they and their counsel had informed Erie that they were not prepared to discuss settlement while plaintiff was treating and that they would seek to “amicably resolve the claim without litigation.” Thus, defendant contends, plaintiffs cannot be said to have “substantially prevailed.” Further, defendant states that there is no evidence to support a claim that Erie violated the UTPA in this case, much less a general business practice. ECF No. 25 at 13. Lastly, defendant asserts that Erie is entitled to summary judgment with respect to plaintiffs' claim for punitive damages because plaintiffs cannot establish the existence of malice. ECF No. 25 at 16. Accordingly, defendant Erie requests that this Court grant summary judgment in its favor.

         Plaintiffs filed a response in opposition to defendant's motion for summary judgment. ECF No. 28. Plaintiffs state their own counter-statement of material facts regarding the common law bad faith claim and contend that they have substantially prevailed in the underlying unisured motorists claim and that they have carried their burden of showing a general business practice of violations of the UTPA, done willfully as Erie knew the claim was valid assessing 100% liability to the uninsured tortfeasor on December 27, 2014, then ignoring its affirmative statutory duties to offer a prompt, fair, reasonable settlement. ECF No. 28 at 22.

         Defendant filed a reply to plaintiffs' response in opposition to its motion for summary judgment (ECF No. 29) and again asserts that plaintiffs did not provide documentation of their UM claim to Erie before filing the lawsuit. ECF No. 29 at 1. Defendant states that it is implausible to now suggest that plaintiffs “substantially prevailed” or that Erie acted in bad faith by not making any offers prior to the filing of the lawsuit based solely on the information that it obtained for purposes of the medical payment benefit claim. ECF No. 29 at 3. Defendant again contends that plaintiffs did not substantially prevail in the litigation and that Erie's conduct was reasonable. Id. Defendant states that Erie moved promptly to investigate and process the plaintiffs' UM claim once plaintiffs ultimately provided information in November 2016 and February 2017. ECF No. 29 at 4. Lastly, defendant again asserts that there is no evidence to support a claim that Erie violated the UTPA in this case, much less as a general business practice. ECF No. 29 at 5.

         This Court ordered supplemental briefing by the parties to be filed simultaneously on June 3, 2019 on the issue of determining whether or not plaintiffs “substantially prevailed” is an issue for the Court to decide as a matter of law or whether the issue can be, in certain instances, a question for the jury to decide. ECF No. 51 ...


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