Opinion
CIVIL ACTION No. 03-4459
December 30, 2003
ORDER-MEMORANDUM
AND NOW, this 30th day of December, 2003, "Defendant's Motion to Dismiss Pursuant to Fed.R.Civ.P. 12(b)(6) and to Strike Pursuant to Fed.R.Civ.P. 12(f)" is granted. Count II of the complaint alleging violations of the Pennsylvania Unfair Trade Practices and Consumer Protection Law, 73 P.S. § 201 et seq., is dismissed. Averments as to settlement offers made by defendant Jefferson-Pilot Life Insurance Co. are stricken.
Under Fed.R.Civ.P. 12(b)(6), all material allegations in the complaint are accepted as true and viewed most favorably to plaintiff, and dismissal is appropriate only if it appears that no set of alleged facts that would entitle relief. Brown v. Philip Morris, Inc., 250 F.3d 789, 796 (3d Cir. 2001). Fed.R.Civ.P. 12(f) states that "the court may order stricken from any pleading any insufficient defense or any redundant, immaterial, impertinent, or scandalous matter."
In 1996, plaintiff Leonard Bergman purchased a disability insurance policy from defendant Jefferson-Pilot. On June 30, 2000, while operating a motor vehicle, he sustained serious injuries and was disabled as defined by the policy's terms. From approximately July 30, 2000 through June 30, 2002, the insurer paid him total disability benefits. At about that time, the amount was reduced to reflect his receipt of Social Security disability benefits. On July 11, 2002, Jefferson-Pilot ceased all payments. When, after demand, the benefits were not reinstated, Bergman filed this action alleging violations of the UTPCPL and Pennsylvania's bad faith statute, 42 Pa.C.S.A. § 8371, together with breach of the contract of insurance.
The benefits were reinstated for three (3) months beginning on December 13, 2002, possibly reflecting a temporary disability resulting from a broken wrist on July 17, 2003 resulting from a fall down a flight of stairs. It is unclear whether these payments relate to the original disability or the disability resulting from the broken wrist.
The gist of these claims is Jefferson-Pilot's refusal to pay disability benefits under circumstances that violate the UTPCPL. See Complaint, ¶ 38. Under Pennsylvania law, however, the failure by itself to pay insurance benefits constitutes nonfeasance, not malfeasance. See Leo v. State Farm Mut. Auto Ins. Co., 939 F. Supp. 1186, 1193 (E.D. Pa. 1996), citing Klinger v. State Farm Mut. Auto. Ins. Co., 895 F. Supp. 709, 718 (M.D. Pa. 1995). "Only malfeasance, the improper performance of a contractual obligation, is actionable under the UTPCPL." Cantor v. The Equitable Life Assur. Soc. of the United States, 1999 WL 219786, at *4, citing Horowitz v. Federal Kemper Life Assur. Co., 57 F.3d 300, 307 (3d Cir. 1995). In Cantor, plaintiffs complaint regarding the defendant's "failure to continue to pay disability benefits . . .[was held to be] nonfeasance, not malfeasance . . . and not actionable under the UTPCPL"Cantor, 1999 WL 219786, at *4. Here, too, plaintiff's UTPCPL claim, because of nonpayment of disability benefits, without more, is not actionable, and must be dismissed. Jefferson-Pilot's motion to strike the allegation that "[d]efendant has offered a substantial settlement to Plaintiff with the condition that plaintiff (sic) must relinquish the policy," (Complaint, ¶ 29), will also be granted. F. R. E. 408 explicitly bars "evidence of conduct or statements made in compromise negotiations" to prove liability. Under Fed.R.Civ.P. 12(1), this allegation is incompetent and, therefore, immaterial.
Plaintiff asserts that his UTPCPL claim is based upon Jefferson-Pilot's offer to settle this claim on the condition that plaintiff surrender his policy; but this argument is not borne out by the allegations in the complaint. See Count II. Even assuming it were, plaintiff cites no case holding that an "unfair" settlement offer is actionable as malfeasance under the UTPCPL. Furthermore, as pleaded, no element of fraud or deception inheres in the settlement offer.
The language of § 2-201 sounds in deception, misrepresentation, confusion, disparagement, and fraud. The statute does contain a "catchall" provision that includes, in its definition of `unfair' `[e]ngaging in any other fraudulent conduct which creates a likelihood of confusion or of misunderstanding. . . . This provision, however, applies only to fraudulent conduct.Yeager's Fuel v. Pennsylvania Power Light, 953 F. Supp. 617, 668 (E.D. Pa. 1997) (citations omitted). In short, "an insurer may be held liable under the CPL only if there are fraudulent misrepresentations in order to sell a policy." Pekular v. Eich, 513 A.2d 427, 428 (Pa.Super. 1986). Lacking fraud or deception, Jefferson-Pilot's settlement offer is not actionable under the UTPCPL.
The argument that evidence of the settlement negotiations is proof of malfeasance by Jefferson-Pilot is unavailing for the reasons set forth in note 3, supra.