Plaintiffs Only Get One Bite at the Apple

No Plaintiff is Allowed to Split Causes of Action

Sedgwick Claims Management Services, Inc. and Lowe’s Home Centers, Inc. (hereinafter collectively “Sedgwick”) sought summary judgment in an insurance bad faith suit. Sedgwick argues that Plaintiff Pamela Ford’s suit should be dismissed because it violates the rule against claim splitting. Ms. Ford had previously filed a suit seeking unpaid bills, interest, and attorneys’ fees. She settled that claim one year after she filed it. Approximately three weeks later, she filed a bad faith action based on the same facts.

In Pamela Ford v.  Sedgwick Claims Management Services, Inc., and Lowe’s Home Centers, Inc., C.A. No. K19C-12-030 JJC, Superior Court of The State Of Delaware In and for Kent County (May 20, 2020) the Delaware Court was asked to dismiss the bad faith suit because it repeated the allegations of her first suit and only asked for a different kind of resolution.

PROCEDURAL BACKGROUND AND FACTS OF RECORD

Ms. Ford suffered a work-related injury on May 26, 2015 at Lowe’s. Sedgwick’s role relevant to this action included the processing and payment of medical expenses related to her injury. On April 11, 2017, Ms. Ford filed a petition seeking outstanding medical expenses from Sedgwick. On September 26, 2017, the parties settled that claim. In the agreement, Sedgwick accepted responsibility for the medical expenses. Notwithstanding the settlement, Sedgwick did not pay them for more than two years.

The parties then settled the claims in her suit and on November 21, 2019, Ms. Ford signed the release. The court then dismissed that case with prejudice on December 6, 2019. Approximately three weeks later, Ms. Ford filed the current bad faith suit. In it, she claims that because Sedgwick failed to pay the medical expenses it acted in bad faith. Specifically, the new suit focuses on an alleged lack of reasonable justification for Sedgwick’s “prolonged and repeated failure” to pay the same medical expenses that were at issue in the previous claim.

ARGUMENTS

Sedgwick argues that Ms. Ford’s failure to raise the bad faith claim in her first suit precludes her from raising it in her second pursuant to the rule against claim splitting. Namely, Sedgwick argues that she could have—and should have— raised any bad faith claims in the first action.

In response, Ms. Ford argues that the first action and the present action do not arise out of the same transaction. Instead, she argues that for transactional purposes the first suit arises directly out of the initial workplace injury. On the other hand, she argued that a bad faith claim arises out of subsequent claims handling by the insurer. Given this difference, she argues that they are separate and distinct actions and need not be included in the same suit.

CLAIM SPLITTING AND THE DOCTRINE OF CLAIM PRECLUSION

The rule against claim splitting is a subset of the doctrine of claim preclusion. Delaware applies the transactional approach. This approach considers a second lawsuit precluded if it arises from the same transaction as a previous adjudication. Two claims that come from a common nucleus of facts arise from the same transaction. Under the transactional approach, resolving the first suit may bar a claim in the second, even if the plaintiff pursues a different substantive theory of recovery than in the first.

To bar a plaintiff’s second claim under the transactional approach, a defendant must establish two elements. First, the same transaction must form the basis for the prior and subsequent actions. Second, the plaintiff must have not raised a claim in the first action that he or she should have, in fairness, raised. If the defendant establishes these two elements, then the claim is barred unless the plaintiff demonstrates a legal impediment to bringing the claim in the first instance.

BOTH CLAIMS INVOLVED THE SAME TRANSACTION

Ms. Ford’s initial suit and bad faith claims relate in time, space, origin, and motivation. They center on Sedgwick’s handling of the same claim. Moreover, the time-frames applicable to the two claims align exactly. Finally, and most telling, Ms. Ford’s bad faith complaint alleges no additional bad faith after the settlement of the same claims addressed in the original action.

Specifically, both suits have substantially similar motivations in that they both seek penalties because Sedgwick wrongfully withheld the same benefits.

There is significant, if not complete, overlap between the two claims. The entire relevant universe of facts for both claims fell within the same clearly defined time. If Ms. Ford wanted to sue Sedgwick for bad faith for its conduct during this time, she (1) should have raised it in her first complaint, or (2) sought to amend the first complaint to include it before settling the first action. Ms. Ford’s 2018 suit and bad faith claim arise out of the same transaction.

The court stated that “Ms. Ford should have, in fairness, included her bad faith claim in the first suit. When viewing the facts in the light most favorable to Ms. Ford, and recognizing that there are no genuine issues of material fact regarding whether the same transaction forms the basis for both the 2018 litigation and the present action, summary judgment on behalf of Defendant Sedgwick Claims Management Services, Inc., and Lowe’s Home Centers Inc.” was granted.

ZALMA OPINION

Claims based on poor claims handling – failure to pay medical expenses – allow a plaintiff to sue to get the damages paid and to seek bad faith damages for that failure. However, the plaintiff is not entitled to sue the defendant twice for the same wrongful conduct. Since, Ms. Ford’s bad faith complaint alleges no additional bad faith after the settlement of the same claims addressed in the original action nor any actions different than her first suit. She settled her first suit and then attempted to get more in a second suit for the same basic wrongful conduct. Once was enough. Twice is not allowed.


© 2020 – Barry Zalma

Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant  specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He also serves as an arbitrator or mediator for insurance related disputes. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 52 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com.

Mr. Zalma is the first recipient of the first annual Claims Magazine/ACE Legend Award.

Over the last 52 years Barry Zalma has dedicated his life to insurance, insurance claims and the need to defeat insurance fraud. He has created the following library of books and other materials to make it possible for insurers and their claims staff to become insurance claims professionals.

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