On October 21, 2008, Judge Stanton Wettick of the Court of Common Pleas of Allegheny County, Pennsylvania dismissed a cause of action against an insurer based on alleged violations of Pennsylvania's Unfair Trade Practices and Consumer Protection Law, 73 P.S. §201-1 et seq. (the "Consumer Protection Act").
In Bodnar v. State Farm Mutual Insurance Company, the plaintiff insured filed a number of claims against her insurer, including a count alleging violations of the Consumer Protection Act, arising out of the insurer's conduct in handling the insured's claim. Other counts alleged breach of contract and bad faith. Specifically, plaintiff alleged that the carrier had violated the Consumer Protection Act by failing to promptly make payment under the policy for her wage loss, failing to objectively and fairly evaluate and investigate her claim, asserting defenses without reasonable basis, unreasonably compelling litigation and improperly withholding policy benefits. Judge Wettick sustained the carrier's preliminary objections, and dismissed plaintiff's Consumer Protection Act claim.
The Court's Memorandum and Order cites to prior Pennsylvania precedent in making clear that while alleged claims handling issues are subject to a claim for bad faith pursuant to Pennsylvania's bad faith statute, 42 Pa.C.S. §8371, they are not actionable as violations of the Consumer Protection Act. Specifically, Judge Wettick cited to Knox v. Worldwide Insurance Group, where he had previously held that since the bad faith laws specifically addressed insurance companies, any conduct that might arguably violate the more general Consumer Protection Act would only be actionable under the more specific bad faith legislation. The Court also cited to Toy v. Metropolitan Life Insurance Company, and noted a legislative distinction between misconduct relating to the sale of an insurance policy, which is governed by the Consumer Protection Act, and misconduct in the handling of an insurance claim, which is subject to the bad faith statute.
Judge Wettick also cited to Gordon v. Pennsylvania Blue Shield, in which the Superior Court explained that a carrier's mishandling of a claim could only lead to a Consumer Protection Act claim where a tort or malfeasance had occurred, as opposed to a breach of contract, or nonfeasance. In so doing, however, Judge Wettick rejected the malfeasance/nonfeasance distinction, noting that under existing case law, whether a cause of action is grounded in tort or contract is analyzed under the gist of the action doctrine. As the gist of a cause of action for failure to pay a claim is grounded in contract, rather than tort, Judge Wettick held that a tort claim could not be pursued. Under Gordon, therefore, no viable Consumer Protection Act claim could be made.
The Bodnar case is important because it reinforces Pennsylvania precedent that no claims may be brought under the Consumer Protection Act alleging an insurer's bad faith handling of insurance Claims.
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