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Thomas Paschos and Assoc P.C.


I.  INSURANCE ISSUES

Pennsylvania’s Bad Faith Statute Does Not Apply To Post-Judgment Or Post-Settlement Conduct By Insurer. Cont'd...

Person Giving Driving Directions Is Not A “User” Of Automobile. Cont'd...

II.  EMPLOYMENT ISSUES

U.S. Supreme Court Holds That Plaintiff Need Only Present Short And Plain Statement Of The Claim In Employment Discrimination Complaint. Cont'd...

Plaintiff’s Subjective Feelings Of Sexual Harassment Is Insufficient To Sustain A Cause Of Action For Hostile Work Environment. Cont'd...

Plaintiff Fired Eleven Months After Giving Birth Could Not Bring Action Based On Pregnancy Discrimination.   Cont'd...

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INSURANCE ISSUES...

Pennsylvania's Bad Faith Statute Does Not Apply To Post-Judgment Or Post-Settlement Conduct By Insurer .

The Pennsylvania Superior Court has recently held that the Pennsylvania “Bad Faith” Statute, Pa. C.S.A. § 8371 does not apply to post-settlement or post- judgment conduct by an insurance company. In Ridgeway v. U.S. Life Credit Insurance Co., 2002 WL 288341 (2-28-02), plaintiff was the executrix of the estate of her late husband, who filed a breach of contract and bad faith action against U.S. Life Credit Life Insurance Company. The insurance company had issued a policy of mortgage life insurance under which plaintiff’s husband was the insured, a mortgagee was the first beneficiary, and the plaintiff was the second beneficiary. When the plaintiff’s husband died, the insurance company refused to pay the policy benefits. Following the initiation of the lawsuit, the insurance company made a payment directly to the mortgagee without the plaintiff’s knowledge or consent. At the time set for trial, the insurance company agreed to pay the plaintiff all damages arising out of the breach of contract claim ($18,964.00), and the case went to trial on the bad faith claim alone. After a bench trial without a jury, the judge entered a verdict in the amount $95,000.00 in favor of the plaintiff and against the insurance company.

The plaintiff then filed another complaint against the insurance company, setting forth a chronology of a series of dilatory tactics and steps taken by the insurance company to avoid payment of the settlement and the verdict. The insurance company finally paid the settlement amount more than one year after the agreement was reached, and then paid the verdict amount approximately one week after the plaintiff filed the second bad faith action.

The insurance company filed preliminary objections to the  plaintiff’s  second  complaint,  arguing that a plaintiff may not maintain a second bad faith action for the insurer’s failure to pay a judgment in a previous bad faith action pursuant to 42 Pa. CSA § 8371.

The Pennsylvania Bad Faith Statute allows a court to award interest, punitive damages, court costs and attorney’s fees against the insurer in an action “arising under an insurance policy”, if the court finds that the insurer acted in bad faith toward the insured. The Pennsylvania Superior Court examined the dictionary definitions of “arise” and “policy of insurance”, and found that the plaintiff was bringing an action as a judgment creditor in the second action, and not as a claimant under an insurance policy. The court also examined the purpose of the Pennsylvania statute, which is “to provide a statutory remedy to an insured when the insurer denied benefits in bad faith. Upon review of the express language and purpose of § 8371, it appears clear that the Pennsylvania legislature intended this section to protect an insured from bad faith denials of coverage.” Although the scope of this statute has been extended by the Pennsylvania courts to the investigatory practices of insurers during litigation initiated by the insured to obtain the proceeds of a policy, the Pennsylvania Superior Court refused to extend the language of the Bad Faith Statute to apply to an insured suing to obtain payment on a settlement and judgment. The court stated that “[o]nce settlement has been reached or a judgment has been entered against the insurer, the insurer’s fiduciary duty as insurer is extinguished.”

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Person Giving Driving Directions Is Not A "User" Of Automobile.
In Belser v. Rockwood Casualty Insurance Co., 2002 WL 181716 (2-6-02), the Pennsylvania Superior Court held that the person giving driving directions to the driver of a dump truck that came into contact with high tension power lines was not a “user” of the truck under the insurance policy. In this case, a dump truck operator died after his truck  came into contact with power lines on a construction site. Another employee at the construction site, who was not actually in the truck, was giving directions to the dump truck operator so he could dump his load safely.

The construction company filed a declaratory judgment action against the insurance company seeking a declaration that the insurer had a duty to defend and indemnify the construction company because it was a “user” of the dump truck, and therefore, an insured. The construction company argued that by directing the driver’s actions, the company was “using” the dump truck.

Although the policy did not define the term “use”, the court found that the Pennsylvania Supreme Court has recognized that the term “use” has “broad but not unlimited applications”. The court stated that only the person physically operating the vehicle is considered the “user”. The court therefore held that the insurance company had no duty to defend or indemnify the construction company because the person giving the directions was not a “user” of the truck.

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EMPLOYMENT ISSUES...

U.S. Supreme Court Holds That Plaintiff Need Only Present Short And Plain Statement Of The Claim In Employment Discrimination Complaint.

In Swierkiewicz v. Sorema N.A., 2002 WL 261807, the U.S. Supreme Court examined the issue of whether a complaint in an employment discrimination lawsuit must contain specific facts establishing a prima facie case of discrimination under the framework developed in McDonnell Douglas Corp. v. Green. In the McDonnell Douglas case, which was decided in 1973, the Court stated that in an employment discrimination case, the plaintiff must show the following: (1) membership in a protected group; (2) qualification for the job in question; (3) an adverse employment action; and (4) circumstances that support an inference of discrimination.

In this case, the plaintiff filed a lawsuit alleging that he had been terminated on account of his national origin, under Title VII of the Civil Act of 1964, and on account of his age, in violation of the Age Discrimination In Employment Act of 1967.  The plaintiff did not specifically allege the McDonnell Douglas criteria in his complaint, and both the U.S. District Court for the Southern District of New York and the U.S. Court of Appeals for the Second Circuit dismissed the plaintiff’s complaint, holding that a plaintiff in an employment discrimination case must allege specific facts in his complaint to show a prima facie case of discrimination under the McDonnell Douglas framework.

However, the Supreme Court disagreed, and held that the requirements for establishing a prima facie discrimination case under McDonnell Douglas do not apply to the pleading standard that plaintiffs must satisfy in order to survive a motion to dismiss. The Court stated that the “prima facie case under McDonnell Douglas… is an evidentiary standard, not a pleading requirement.” The Court held that as long as the complaint gives the defendant fair notice of the basis for the plaintiff’s claim, the complaint will survive a motion to dismiss.

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Plaintiff’s Subjective Feelings Of Sexual Harassment Is Insufficient To Sustain A Cause Of Action For Hostile Work Environment .

In a February 13, 2002 decision, the Appellate Division of the New Jersey Superior Court held that a female refinery employee could not prove a hostile work environment absent proof that the conduct complained of would not have occurred but for her gender.

In Herman v. The Coastal Corporation, 2002 WL 215485, a female refinery employee brought an action against her employer and several of the company’s employees, alleging sexual harassment and sexual discrimination against her based on marital status and pregnancy, breach of her employment agreement, and hostile work environment in violation of the New Jersey Law Against Discrimination (LAD), N.J.S.A. 10:5-1 et seq. Plaintiff alleged that one co-employee laughed at her and made an offensive remark about her appearance. The plaintiff also alleged that another co-worker made unwanted sexual advances towards her, but she never reported these to management.

Under New Jersey Law, an employer may be liable for sexual harassment under the LAD for hostile work environment “when an employer or fellow employees harass an employee because of his or her sex to the point at which the working environment becomes hostile.” To state a claim for hostile work environment sexual harassment, the plaintiff must establish that the complained of conduct: (1) would not have occurred but for the employee’s gender; and it was (2) severe or pervasive enough to make a (3) reasonable woman believe that (4) the conditions of employment are altered and the work environment is hostile or abusive. The defining element in hostile working environment cases is not that the conduct was sexual in nature, but that the harassment occured because of the employee’s gender. A claim for hostile work environment may be considered on the basis of the totality of the circumstances, but the complained of conduct must be sufficiently severe and pervasive to alter the conditions of the victim’s employment and create an abusive environment.

In this case, the New Jersey court held that plaintiff’s attempt to “lump random incidents and disagreements with co-workers” was ineffective in meeting the standard of “an abusive working environment”. The court stated that although a person is legally entitled to a work environment free of hostility, “she is not entitled to a perfect work place, free of annoyances and colleagues she finds disagreeable. In short, what is illegal is a hostile work environment, not an annoying work environment.”

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Plaintiff Fired Eleven Months After Giving Birth Could Not Bring Action Based On Pregnancy Discrimination.

The U.S. District Court for the Eastern District of Pennsylvania has recently held that a woman who was not pregnant at or near the time that she was terminated from her employment could not maintain a case under Title VII of the Civil Rights Act of 1964 or the Pennsylvania Human Relations Act. In Solomen v. Redwood Advisory Co., 2002 WL 138207 (1-31-02), the plaintiff alleged that she was terminated from her job due to a 1997 pregnancy. The plaintiff gave birth in June of 1997, took maternity leave for three months, and returned to her job in September of 1997. She continued to work for her employer until May 21, 1998, when she was terminated.
The plaintiff brought a pregnancy discrimination action under both Title VII of the Civil Rights Act of 1964 and the Pennsylvania Human Relations Act. Under both statutes, it is unlawful for an employer to discharge or otherwise discriminate against any individual on the basis of “race, color, religion, sex or national origin.” In 1978, Congress amended Title VII by enacting the Pregnancy Discrimination Act (PDA), which “brought discrimination on the basis of pregnancy within the existing statutory framework prohibiting sex-based discrimination.” A pregnancy discrimination case is evaluated under the same framework as other intentional sex discrimination cases under Title VII.

In proving a case of employment discrimination under Title VII, a plaintiff may present either direct or indirect evidence of discrimination. However, pregnancy discrimination claims differ from other types of unlawful discrimination because the plaintiff’s pregnancy “varies, both temporally and as between different affected individuals.” The court stated that pregnancy also differs from most other protected personal attributes, in that, its effects are temporary. “While some effects of pregnancy linger beyond the act of giving birth, at some point the female employee is no longer affected by pregnancy, childbirth or related medical conditions for purposes of the PDA”.

In the Solomen case, the court stated that when an employee is not pregnant at or around the time that she suffers the alleged adverse employment action, her membership in the protected class is less clear. The court held that the plaintiff in this matter must present evidence that she was still affected by pregnancy, childbirth or related medical conditions at the time of her termination, and that the plaintiff could do this by presenting evidence that harassment or discriminatory statements by plaintiff’s supervisors began during her pregnancy or maternity leave, and continued with some regularity until the adverse employment action occurred. However, in this case, the plaintiff could not present sufficient evidence that she was affected by the pregnancy or near the time of her termination, and the court held that she could not sustain her claim of pregnancy discrimination.

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Last updated 29.7.2002