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Court Rules Possible Bad Faith Allowed For Removing Arbitration Clause From PolicyThe District Court for the Middle District of Pennsylvania held inBukofski v. USAA Casualty Insurance Company, 3:08cv1779 (Munley, J. M.D. Pa. June 9, 2009) that an insurance company may be liable for bad faith under Section 8371 for removing a arbitration clause for underinsured or uninsured motorist coverage from the insurance policy. This case is mainly an underinsured motorist case and the insured filed suit against USAA. Among the allegations made in the complaint were that the company USAA unilaterally removed the underinsured arbitration provision despite the fact that arbitration was a material benefit under the policy which provided the insured with a cost effective and expedited means of resolving underinsured motorist disputes. Also alleged was that USAA failed to provide the insured with the ramifications of the change to the policy which ramifications include "significant increased expense for Plaintiff to pursue a UIM claim.....and increased delay for Plaintiff to adjudicate a UIM claim." Also asserted was that the insurance company took the action of removing arbitration to delay payment of benefits and attempt settlement leverage by necessitating protracted expensive litigation. The Court denies the USAA Motion to Dismiss and notes "the presence of an arbitration clause deals directly with the defendant's contractual obligations and clearly arise from the insurance policy. If, as the plaintiff asserts, the Defendant removed the clause without notification to the plaintiff in order to force favorable settlements of UIM claims, then a statutory bad faith claim might be established."
Scott B. Cooper
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