J-A29009-14

                              2015 PA Super 113

TIMOTHY A. MOHNEY,                      : IN THE SUPERIOR COURT OF
                                        :      PENNSYLVANIA
                 Appellant              :
                                        :
           v.                           :
                                        :
AMERICAN GENERAL LIFE INSURANCE         :
COMPANY,   AS   SUCCESSOR    BY         :
MERGER TO AMERICAN GENERAL              :
ASSURANCE     COMPANY,       AS         :
SUCCESSOR IN INTEREST TO U.S.           :
LIFE  CREDIT   LIFE   INSURANCE         :
COMPANY,                                :
                                        :
                 Appellee               : No. 2030 WDA 2013

           Appeal from the Judgment entered December 4, 2013,
               Court of Common Pleas, Armstrong County,
                    Civil Division at No. 1995-0764-Civil


TIMOTHY A. MOHNEY,                      : IN THE SUPERIOR COURT OF
                                        :      PENNSYLVANIA
                 Appellee               :
                                        :
           v.                           :
                                        :
AMERICAN GENERAL LIFE INSURANCE         :
COMPANY,   AS   SUCCESSOR    BY         :
MERGER TO AMERICAN GENERAL              :
ASSURANCE     COMPANY,       AS         :
SUCCESSOR IN INTEREST TO U.S.           :
LIFE  CREDIT   LIFE   INSURANCE         :
COMPANY,                                :
                                        :
                 Appellants             : No. 2046 WDA 2013

           Appeal from the Judgment entered December 4, 2013,
               Court of Common Pleas, Armstrong County,
                    Civil Division at No. 1995-0764-Civil

BEFORE: DONOHUE, ALLEN and STRASSBURGER*, JJ.



*Retired Senior Judge assigned to the Superior Court.
J-A29009-14


OPINION BY DONOHUE, J.:                                  FILED MAY 8, 2015

      Appellant, Timothy A. Mohney (“Mohney”), appeals from the judgment

entered on December 4, 2013 by the Armstrong County Court of Common

Pleas, following the trial court’s non-jury verdict entered against Mohney on

October 18, 2013.     Appellee, American General Life Insurance Company

(“American General”), as successor-in-interest to U.S. Life Credit Life

Insurance Company (“U.S. Life”),1 cross-appeals from the October 18, 2013

verdict.   For the reasons set forth herein, we vacate the judgment and

remand the case for a new trial.

      In October 1991, Mohney, then a coal miner, purchased disability and

life insurance on an automobile loan from U.S. Life.      In September 1992,

Mohney also purchased disability and life insurance from U.S. Life in

connection with a home mortgage.       These policies provided, inter alia, for

the payment of benefits on these debts in the event that Mohney became

totally disabled. The 1991 policy defined “Total Disability” as follows:

            “Total Disability”, as used in this Certificate means
            complete inability of the Insured Debtor to perform
            any and every duty of his occupation during the
            initial twelve month period of any disability covered
            by this Certificate and, thereafter, inability of the
            Debtor to engage in any occupation for wage, gain or
            profit for which he is qualified by reason of
            education, training or experience.



1
  Because U.S. Life was the original insurer at the time of the events in
question in this case, we will refer to “U.S. Life” herein throughout, although
American General is now the appellant in interest.


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N.T., 4/16/2013, Exhibit 3. The definition in the 1992 policy differed only

slightly, and imparted the same understanding that after the first twelve

months, “disability means you are unable to perform any occupation that

you are fitted for by means of your education, training or experience.” Id.,

Exhibit 4.

      In October 1992, Mohney suffered a back injury in a traffic accident

and was unable to continue work as a coal miner.                   Pursuant to the two

insurance    policies,   U.S.        Life   began   making     payments    on   Mohney’s

automobile loan and his mortgage. U.S. Life initially sent Mohney monthly

continuation claims reports for his doctor to verify his disability, but in or

around July 1993 he was placed on automatic status and monthly reports

were no longer necessary.

      U.S. Life did not contact Mohney again until October 1994, at which

time it sent questionnaires to Mohney and Edward Miller, M.D. (“Dr. Miller”),

Mohney’s treating physician, requesting information about the status of

Mohney’s current condition and ability to work.                    In response to the

questionnaire    directed       to     him    by    Lawrence    Carroll   (“Carroll”),   an

“Investigative Specialist” in U.S. Life’s claims department, Mohney advised

that he had been diagnosed with a rheumatic disease called Ankylosing

Spondylitis that had worsened his back injury. N.T., 4/16/2013, Exhibit 12.

Mohney stated that while he could take care of himself, his ability to walk,

drive, bend, and reach were “limited.” Id. Mohney indicated that he did not



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expect to return to work, either part-time or fulltime, and further advised

that   he   was   receiving   disability   benefits   from   the   Social   Security

Administration. Id.

       In Dr. Miller’s response to the initial questionnaire, he provided

Mohney’s medical records, advised that he saw Mohney every six months,

and described Mohney’s progress as “unchanged.”              Id., Exhibit 13.    Dr.

Miller identified Mohney’s “current limitations and restrictions” as “no heavy

lifting or bending.” Id. In response to a question asking if he expected “the

patient’s condition to improve sufficiently in the future for him or her to

return to work,” Dr. Miller answered “No.” Id. Regarding his prognosis “for

this patient returning to work in this or some other occupation,” Dr. Miller

wrote “unlikely as a coalminer possibly in a light duty position.” Id.

       On January 19, 1995, Carroll then sent a second questionnaire to Dr.

Miller that began as follows:

            Thank you for responding to our medical
            questionnaire dated 1-5-95 regarding your above
            named patient.

            After reviewing this questionnaire you state that your
            patients [sic] current restrictions are no heavy lifting
            or bending. You also stated that he could a light
            duty position [sic].

            Mr. Mahoney [sic] responded to an occupational [sic]
            and stated that he could walk, drive, bend and
            reach. He also has 12 years of education and skills
            in assembly and as a laborer.




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Id., Exhibit 14. Carroll then asked Dr. Miller if Mohney could perform the

duties of a security guard, automobile salesperson, or an automobile self-

service station attendant. Id. In his response dated January 26, 1995, Dr.

Miller indicated “yes” to each of these jobs, but then qualified his answers

with the following statement:

              It is important that the patient be able to sit or stand
              (alternating) as needed. Some of these jobs require
              the patient to climb in and out of the car or bend
              over the hood of the car, etc. which could be
              problematic.      A trial employment should be
              attempted first on a part time basis before
              proceeding to full time light duty employment.

Id.

      On February 7, 1995, Carroll sent Mohney a letter terminating benefits

under the two insurance policies. Carroll’s letter set forth the definition of

total disability under the insurance policies and then stated in relevant part

as follows:

              Records obtained from Dr. Edward Miller, your
              treating physician, indicated your current restrictions
              were no heavy lifting or bending. He also stated you
              could perform sedentary or light duty occupations
              such as a security guard, an automobile salesperson
              and an automobile self service station attendant.

              On an occupational questionnaire you completed,
              you stated you could walk, drive, bend and reach.
              You also stated you have 12 years of education and
              skills in assembly and as a laborer.

              Based on all the information and medical records
              contained in our file, it does not appear that you
              meet the covered criteria for total disability as stated
              in your certificates. Although you may not be able to


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J-A29009-14


            perform the regular duties of your profession, our
            information does indicate that you are able to
            perform the regular duties of an occupation for which
            you are qualified by education, training or
            experience. Such occupations you appear to be
            qualified for, but not limited to, are stated above.
            Therefore, no additional benefits are payable at this
            time.

            Your account will be paid through March 27, 1995. I
            trust the above sufficiently explains our position in
            this matter but if you feel we have not been given
            the proper understanding, we will be glad to review
            any additional information you may wish to submit.

Id.

      On June 23, 1995, Mohney filed a praecipe for a writ of summons, and

on June 20, 1997, Mohney filed a complaint alleging causes of action for

fraud, breach of contract, violation of the Unfair Trade Practices and

Consumer Protection Law (“UTPCPL”), and bad faith insurance practices.

U.S. Life filed preliminary objections, which the trial court granted.     On

December 1, 1997, Mohney filed an amended complaint adding new breach

of contract claims.   U.S. Life again filed preliminary objections, which the

trial court granted in part.   On October 28, 1998, Mohney filed a second

amended complaint, to which U.S. Life filed an answer and new matter in

the form of a demurrer and a request for attorney’s fees. On July 19, 2001,

U.S. Life filed a motion for summary judgment, which the trial court granted

in part (on the bad faith claim). On July 15, 2003, the day scheduled for

trial to begin, the trial court conducted a hearing out of the presence of the

jury to determine whether Mohney could present a prima facie case with


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J-A29009-14


regard to his fraud, breach of oral promise, and UTPCPL claims.         At the

conclusion of the hearing, the trial court entered summary judgment in U.S.

Life’s favor on all of Mohney’s claims except for breach of contract. The trial

court also certified the case for immediate appeal pursuant to Rule 341(c) of

the Pennsylvania Rules of Appellate Procedure, but on appeal, this Court

concluded that no extraordinary circumstances were present to justify an

immediate appeal and quashed.

      On December 27, 2006, the trial court (hereinafter, the “Breach of

Contract Trial Court”) issued an opinion and adjudication on the issue of

whether Mohney was “totally disabled under the terms of the insurance

contract.”   Breach of Contract Trial Court Order, 6/12/06.     The Breach of

Contract Trial Court determined that Mohney proved “that he was totally

disabled within the meaning of the two insurance policies he purchased from

[U.S. Life].”   Breach of Contract Trial Court Opinion and Adjudication,

12/27/06, at 10.    As a result, the Breach of Contract Trial Court entered

judgment against U.S. Life and in favor of Mohney on his breach of contract

claim in the amount of $20,772.58.       U.S. Life filed a notice of appeal and

Mohney filed a notice of cross-appeal.

      On appeal, this Court affirmed the trial court’s ruling on the breach of

contract claim and affirmed the dismissal of the claim under the UTPCPL.

This Court reversed the trial court’s award of summary judgment to U.S. Life

on the bad faith claim, however, concluding as follows:



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J-A29009-14


            Due to its equivocal nature, Dr. Miller’s opinion did
            not establish whether [Mohney] was unable to
            engage or perform any occupation. Viewed in the
            proper light, the opinion expressed by Dr. Miller, at
            best, suggested that [Mohney] may be able to
            perform the three jobs listed by [Carroll] but that
            such a suggestion should be tested by a trial, part-
            time employment.      Thus, that opinion could not
            serve as a reasonable basis for denying [Mohney]
            benefits.

Mohney v. U.S. Credit Life Ins. Co., 917 WDA 2007, 18 (Pa. Super. July

1, 2008) (unpublished memorandum) (emphasis in original).

      On remand, the sole question for the trial court (hereinafter, the “Bad

Faith Trial Court”) was whether U.S. Life had acted in bad faith. On April 12,

2013, Mohney requested leave to file a third amended complaint, which the

Bad Faith Trial Court denied. The Bad Faith Trial Court then held a bench

trial on April 15-16, 2013. On October 17, 2013, the Bad Faith Trial Court

issued its decision, ruling in favor of U.S. Life. In particular, the Bad Faith

Trial Court found that U.S. Life’s investigation of Mohney’s claim, “although

ultimately leading to an incorrect conclusion, was reasonably thorough and

sufficient to provide it with a reasonable basis to find [Mohney] to be not

“totally disabled” under the terms of the policy certificates.” Bad Faith Trial

Court Findings and Adjudication, 10/17/2013, at 21.       The Bad Faith Trial

Court further found that Mohney had presented “no evidence whatsoever

showing that U.S. Life willfully or recklessly came to an unreasonable

conclusion regarding [Mohney’s] benefits. Id. at 26.




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      On December 4, 2013, the Bad Faith Trial Court denied Mohney’s post-

trial motions for judgment notwithstanding the verdict or for a new trial and

entered judgment in favor of U.S. Life.         On appeal, Mohney raises the

following issues for our consideration and determination:

              1. Did the Bad Faith Trial Court err by failing to
              follow this Court’s holdings made previously in this
              case that Dr. Miller’s “opinion” was equivocal and
              could not be reasonably relied upon to terminate the
              disability benefits?

              2. Did the Bad Faith Trial Court ma[k]e factual
              findings and conclusions of law inconsistent with and
              contradictory to those made by the Breach of
              Contract Trial Court?

              3. Did the Bad Faith Trial Court fail to properly apply
              the standards for finding bad faith to the conduct of
              U.S. Life in the investigation of the law and facts
              applicable to the termination of benefits decision?

              4. Did the Bad Faith Trial Court err by permitting
              evidence of the insured and his legal counsel’s
              conduct in deciding whether insurance bad faith
              occurred?

              5. Did the Bad Faith Trial Court err in failing to
              permit [Mohney] to amend his complaint to include
              allegations of bad faith litigation misconduct?

              6. Did the Bad Faith Trial Court err in failing to
              permit [Mohney’s] proposed expert from testifying?

Mohney’s Brief at 4-5. In its cross appeal, U.S. Life raises a single issue for

our review:

              If and only if the [Bad Faith] Trial Court’s decisions
              are reversed and the case is remanded on other
              grounds, should the [Bad Faith] Trial Court’s
              exclusion of [U.S. Life’s] experts be reversed as


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J-A29009-14


             unduly prejudicial to [U.S. Life’s] fair defense of the
             case?

U.S. Life’s Brief at 3.

      Our standard of review provides:

             Our review in a nonjury case is limited to whether
             the findings of the trial court are supported by
             competent evidence and whether the trial court
             committed error in the application of law. We must
             grant the court's findings of fact the same weight
             and effect as the verdict of a jury and, accordingly,
             may disturb the nonjury verdict only if the court's
             findings are unsupported by competent evidence or
             the court committed legal error that affected the
             outcome of the trial.      It is not the role of an
             appellate court to pass on the credibility of
             witnesses; hence we will not substitute our judgment
             for that of the factfinder. Thus, the test we apply is
             not whether we would have reached the same result
             on the evidence presented, but rather, after due
             consideration of the evidence which the trial court
             found credible, whether the trial court could have
             reasonably reached its conclusion.

Hollock v. Erie Insurance Exchange, 842 A.2d 409, 413-14 (Pa. Super.

2004) (en banc) (citations omitted), appeal denied, 903 A.2d 1185 (Pa.

2006).

      Mohney’s first three issues on appeal challenge the Bad Faith Trial

Court’s determination that U.S. Life did not act in bad faith.         Bad faith

actions are governed by 42 Pa.C.S.A. § 8371:

             In an action arising under an insurance policy, if the
             court finds that the insurer has acted in bad faith
             toward the insured, the court may take all of the
             following actions:




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J-A29009-14


           (1) Award interest on the amount of the claim from
           the date the claim was made by the insured in an
           amount equal to the prime rate of interest plus 3%.

           (2) Award punitive damages against the insurer.

           (3) Assess court costs and attorney fees against the
           insurer.

42 Pa.C.S.A. § 8371.

     This Court has explained that “[a]lthough the bad faith statute does

not include a definition of ‘bad faith,’ the term encompasses a wide variety

of objectionable conduct.” Condio v. Erie Ins. Exchange, 899 A.2d 1136,

1142 (Pa. Super. 2006), appeal denied, 912 A.2d 838 (Pa. 2006).

           For example, bad faith exists where “the insurer did
           not have a reasonable basis for denying benefits
           under the policy and that the insurer knew of or
           recklessly disregarded its lack of reasonable basis in
           denying the claim.” O'Donnell v. Allstate Ins. Co.,
           734 A.2d 901, 906 (Pa. Super. 1999) ...; see also
           Terletsky v. Prudential Prop. And Cas. Ins. Co.,
           649 A.2d 680, 688 (Pa. Super. 1994) (bad faith is a
           frivolous or unfounded refusal to pay the proceeds of
           a policy done with dishonest purpose, motivated by
           self-interest or ill will).   Bad faith conduct also
           includes “lack of good faith investigation into facts,
           and failure to communicate with the claimant.”
           [Romano v. Nationwide Mut. Fire Ins. Co., 646
           A.2d 1228, 1232 (Pa. Super. 1994)]; see also The
           Birth Center v. The St. Paul Cos., 787 A.2d 376,
           378 (Pa. 2001) (upholding a finding of bad faith
           where the insurer intransigently refused to settle a
           claim that could have been settled within policy
           limits, where the insurer lacked a bona fide belief
           that it had a good possibility of winning at trial, thus
           resulting in a large damage award at trial);
           O'Donnell, 734 A.2d at 906 (bad faith “may also
           extend to the insurer's investigative practices”).



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J-A29009-14


                               *     *        *

            To constitute bad faith, it is not necessary that the
            insurer's conduct be fraudulent.        However, mere
            negligence or bad judgment is not bad faith. To
            support a finding of bad faith, the insurer's conduct
            must be such as to “import a dishonest purpose.” In
            other words, the plaintiff must show that the insurer
            breached its duty of good faith through some motive
            of self-interest or ill-will. Bad faith must be shown
            by clear and convincing evidence.

Id. (quoting Brown v. Progressive Insurance Co., 860 A.2d 493, 497

(Pa. Super. 2004), appeal denied, 872 A.2d 1197 (Pa. 2006)).

      To succeed in a bad faith claim, the insured must present clear and

convincing evidence to satisfy a two part test: (1) the insurer did not have a

reasonable basis for denying benefits under the policy, and (2) the insurer

knew of or recklessly disregarded its lack of reasonable basis in denying the

claim.” 2 O'Donnell, 734 A.2d at 906. Bad faith claims are fact specific and

depend on the conduct of the insurer vis à vis the insured.          Rhodes v.

USAA Cas. Ins. Co., 21 A.3d 1253, 1261 (Pa. Super. 2011) (quoting

Condio, 899 A.2d at 1143).

      With regard to the first prong, the Bad Faith Trial Court concluded that

Dr. Miller’s responses to the two questionnaires, “taken together with the


2
   In Nordi v. Keystone Health Plan West Inc., 989 A.2d 376, 385 (Pa.
Super. 2010), this Court clarified that “the ‘motive of self-interest or ill will’
level of culpability is not a third element required for a finding for bad faith,
but is probative of the second element, i.e., ‘the insurer knew or recklessly
disregarded its lack of reasonable basis in denying the claim.’” Id. at 385
(quoting Greene v. United Services Auto. Ass’n, 936 A.2d 1178, 1190
(Pa. Super. 2007), appeal denied, 954 A.2d 577 (Pa. 2008)).


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totality of the evidence presented at trial, including the live and very credible

testimony of the claims handler, Lawrence Carroll (“Carroll”), could form a

reasonable (even if incorrect) basis for discontinuing coverage.” Bad Faith

Trial Court’s 1925(a) Opinion, 2/12/14, at 2. For the reasons that follow, we

conclude that the trial court erred in this determination as a matter of law.

      After its review of the relevant documents, including Dr. Miller’s

responses to the two questionnaires, the Breach of Contract Trial Court

summarily rejected U.S. Life’s contention that it had any basis for

terminating Mohney’s benefits.

            After a careful review of these documents, the
            [Breach of Contract Trial Court] is not persuaded
            that [Mohney] was the least bit less disabled at the
            time of Dr. Miller’s last two reports than he was prior
            to that time.     Dr. Miller’s reports indicated that
            [Mohney’s] condition was ‘unchanged’ and that he
            ‘might’ be able to engage in certain light duty work
            so long as he could observe various limitations
            relating to heavy lifting, sitting, standing, bending,
            and climbing in and out of vehicles. This is certainly
            not the same thing as saying that [Mohney] was in
            fact able to engage in any of these three jobs
            discussed above, or that “in March, 1995 Timothy
            Mohney was able to complete all of the tasks
            normally associated with the job of an automobile
            salesman, security guard or gas station attendant,”
            as U.S. Life claimed in its trial brief.

Opinion and Adjudication, 12/27/06, at 10 (emphasis in original).

      On appeal, this Court agreed with this assessment of Dr. Miller’s

responses, stating that because of their equivocal nature, Dr. Miller’s

opinions “did not establish whether [Mohney] was unable to engage or



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perform any occupation.” Mohney, 917 WDA 2007 at 18. To the contrary,

we emphasized that Dr. Miller’s opinions “at best, suggested that [Mohney]

may be able to perform the three jobs listed by [Carroll] but that such a

suggestion should be tested by a trial, part-time employment.”            Id.

(emphasis in original). Accordingly, we ruled that Dr. Miller’s responses to

U.S. Life’s questionnaires “could not serve as a reasonable basis” for denying

Mohney benefits. Id.

      Mohney now contends that the Bad Faith Trial Court violated the law of

the case doctrine when it concluded that Dr. Miller’s responses to U.S. Life’s

questionnaires could serve as a reasonable basis for denying Mohney

benefits. The law of the case doctrine holds, inter alia, that a lower court

should not reopen questions decided by a higher court in an earlier phase of

the same case. See, e.g., Ario v. Reliance Ins. Co., 980 A.2d 588, 597

(Pa. 2009); Commonwealth v. Starr, 664 A.2d 1326, 1331 (Pa. 1995).

The Bad Faith Trial Court disagreed, indicating that it applied a different

standard of proof (clear and convincing evidence) than this Court applied in

reversing the grant of summary judgment on this issue (evidence in the light

most favorable to the non-moving party). Bad Faith Trial Court Findings and

Adjudication, 10/17/2013, at 30 n.7.

      As a technical matter, we conclude that the law of the case doctrine

did not bind the Bad Faith Trial Court on this issue. In determining whether

the law of the case doctrine applies, the appellate court “looks to where the



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rulings occurred in the context of the procedural posture of the case.”

Gerrow v. Shincor Silicones, Inc., 756 A.2d 697, 701 (Pa. Super. 2000)

(citing Goldey v. Trustees of the Univ. of Pennsylvania, 675 A.2d 264,

267 (Pa. 1996)), aff'd sub nom., Gerrow v. John Royle & Sons, 813 A.2d

778 (Pa. 2002). The Bad Faith Trial Court based its decision upon the trial

record at the April 2013 trial and (as it correctly indicated) on a different

standard of review.

       Neither of these differences, however, changes our firm conclusion

that U.S. Life had no reasonable basis to terminate Mohney’s benefits. U.S.

Life now contends that Carroll reviewed and relied on the contents of

Mohney’s entire claim file.    U.S. Life’s Brief at 26.   Carroll’s testimony at

trial, however, evidences that he only relied upon three documents in

making his determination: Dr. Miller’s responses to the two questionnaires

sent to him and Mohney’s responses to his questionnaire. N.T., 4/16/13, at

260.    Although the claims file contained other documents, including the

original claim form from 1992 and continuation reports from 1993, Carroll

testified that these documents did not play any significant role in the

decision to deny benefits. Id. at 222-28 (“When we terminated the benefits,

we used the most recent medical information[... and] did not consider

reports that were two years old.”). As such, Carroll’s decision to terminate

Mohney’s benefits was based upon the same documents this Court reviewed

in making its determination.



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      Moreover,    regardless    of   the    standard   of   review,    U.S.     Life’s

investigation did not provide any reasonable basis for its decision to

terminate benefits to Mohney under the two insurance policies.                 As this

Court previously concluded, at best Dr. Miller’s responses established that

Mohney could attempt, on a trial basis, to perform the light duty jobs

identified by Carroll.   Dr. Miller never advised U.S. Life that Mohney was

actually capable of performing either of the three identified jobs (security

guard, automobile salesman, gas station attendant). As a result, U.S. Life

had no reasonable basis to terminate Mohney’s benefits on the grounds that

he was no longer “totally disabled.”

      At trial, Carroll did not testify that Mohney was actually capable of

performing any of these three jobs.         To the contrary, he testified that Dr.

Miller’s indication that Mohney could attempt to perform them was, in and

of itself, sufficient to find Mohney not totally disabled:

      Q.    He’s saying attempt to work. So you are saying that
            attempt on a part-time basis means he’s no longer
            totally disabled?

      A.    Yes. If he’s saying he can work, he can work.

      Q.    And, a part-time basis or an attempt at a part-time
            basis is sufficient under your understanding under
            the terms of the credit disability policy to mean he is
            no longer totally disabled?

      A.    From what his doctor says in this statement, that
            attempt first on a part-time basis before proceeding
            to a full-time basis, that he is not, after the period of
            time on this claim that his doctor stated that he is



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           not total,    our   definition,   that   is   not   totally
           disability.

N.T., 4/16/2013, at 245-46 (emphasis added).

     Carroll’s reference to “our definition” is striking, since nothing in the

definitions of the term “Total Disability” in the two insurance policies

provides, or even suggests, that a person is not totally disabled if a doctor

signals that the policyholder may “attempt” to work. To the contrary, as set

forth hereinabove, the two policies provide that a person is not totally

disabled if he can “engage in” or “perform” any occupation for which he is

qualified by reason of education, training or experience – and neither

definition contains any reference to mere attempts to do so.

     In addition, Carroll’s understanding of the term “total disability” is

fundamentally at odds with prior decisions of Pennsylvania appellate courts

interpreting the term.   In Cooper v. Metropolitan Life Insurance Co.,

177 A. 43 (Pa. 1935), our Supreme Court made clear that a common sense

understanding of the term precludes a finding that the person is not totally

disabled merely because he can perform basic functions:

           While the words of the policy must receive
           reasonable construction and, literally interpreted, the
           words ‘total disability’ to engage ‘in any and every
           occupation of employment for wage or profit’ would
           require that an insured be a helpless invalid before
           he would be entitled to benefits under the policy, this
           cannot be what the parties intended. It is rare that
           any man is incapacitated from doing some work;
           many a blind man weaves baskets; a man with both
           legs and one arm off can sit in a doorway and sell
           lead pencils, or act as a telegraph operator; but it


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             cannot well be argued that either is not totally
             disabled.

Id. at 44.

      Similarly, in Bundy v. Nat'l Safety Life Ins. Co., 503 A.2d 417 (Pa.

Super. 1985), this Court found that the mere ability to perform “occasional

work” does not preclude a finding of total disability:

             “Total disability” does not mean helplessness or
             complete disability, but it includes more than that
             which is partial. “Permanent disability” means that
             which is continuing as opposed to what is temporary.
             * * * The mere fact that one has done some work
             after the lapse of his policy is not of itself sufficient
             to defeat his claim of total permanent disability. He
             may have worked when really unable and at the risk
             of endangering his health or life. * * * It may be
             assumed that occasional work for short periods by
             one generally disabled by impairment of mind or
             body does not as a matter of law negative total
             permanent disability.
Id. at 422 (quoting Lumbra v. United States, 290 U.S. 551 (1934)).

      For these reasons, we conclude that U.S. Life had no reasonable basis

to find that Mohney could engage in or perform the three light duty

occupations identified by U.S. Life in the second questionnaire to Dr. Miller.

The Bad Faith Trial Court’s determination to the contrary is not supported by

any competent evidence of record and was error. However, our analysis of

Mohney’s bad faith claim cannot end here.

      In addition to proving that U.S. Life had no reasonable basis for its

denial of benefits, Mohney also had the burden to establish that U.S. Life

knowingly or     recklessly disregarded     its lack of a reasonable     basis.


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O'Donnell, 734 A.2d at 906. With regard to this second prong of the bad

faith test, the Bad Faith Trial Court determined that “even if the basis for

discontinuing benefits was unreasonable, there was no evidence before us

indicating that [U.S. Life] acted in knowing or reckless disregard of the fact

that the basis for discontinuing coverage was unreasonable.” Bad Faith Trial

Court’s 1925(a) Opinion, 2/12/14, at 2.       The Bad Faith Trial Court stated

that “[o]ur verdict dismissing [Mohney’s] bad faith claim was, and continues

to be, based on both of these grounds.” Id.

      We conclude that the Bad Faith Trial Court’s finding on this second

prong is faulty in part because its erroneous determination that U.S. Life had

a reasonable basis for its decision substantially impacted its subsequent

ruling that U.S. Life did not knowingly or recklessly disregard its lack of a

reasonable basis. The Bad Faith Trial Court recognized that “U.S. Life was

required to conduct an investigation sufficiently thorough to provide it with a

reasonable foundation for its actions.”      Bad Faith Trial Court Findings and

Adjudication, 10/17/2013, at 21; see Romano, 646 A.2d at 1232 (bad faith

conduct includes “lack of good faith investigation into facts”). Based upon

this standard, the Bad Faith Trial Court thus concluded that U.S. Life’s

investigation was “reasonably thorough and sufficient” to provide it with the

necessary reasonable basis for its termination of Mohney’s benefits.        Id.

Since we have now determined, however, that U.S. Life did not have a

reasonable basis for its actions, the corresponding finding that U.S. Life



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J-A29009-14


conducted a “reasonably thorough and sufficient” investigation is called into

serious question.

      In this regard, we note that the certified record contains substantial

evidence, largely ignored by the Bad Faith Trial Court, that U.S. Life’s

investigation   was    not   sufficiently    thorough   to   obtain   the   necessary

information regarding Mohney’s ability to work.               For example, Carroll

acknowledged at trial that he made no attempt to contact Dr. Miller to obtain

any clarifying information in response to his (at best) equivocal responses to

his second questionnaire. N.T., 4/16/2013, at 273. Carroll likewise did not

contact the Social Security Administration to inquire regarding its basis for

granting disability benefits to Mohney (as reported to Carroll in Mohney’s

responses to his questionnaire).            Id. at 275.      And Carroll terminated

Mohney’s    benefits    without    first    obtaining   an    independent     medical

examination, as permitted under the two insurance policies. Id.

      The Bad Faith Trial Court’s “no evidence” finding is also contradicted

by Carroll’s misrepresentations of facts in his February 7, 1995 letter to

Mohney advising him of the termination of benefits.             In his letter, Carroll

represented to Mohney that Dr. Miller had “stated you [Mohney] could

perform sedentary or light duty occupations such as a security guard, an

automobile salesperson and an automobile self service station attendant,”

even though (as discussed exhaustively hereinabove) Dr. Miller had made no

such affirmative representations.           N.T., 4/16/2013, Exhibit 16.      Carroll



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further represented to Mohney that “[o]n an occupational questionnaire you

completed, you stated you could walk, drive, bend and reach,” even though

Mohney had in fact indicated that his ability to perform these functions was

“limited.” Id.; N.T., 4/16/2013, Exhibit 12. These same misrepresentations

were contained in the second questionnaire Carroll sent to Dr. Miller, in

which he informed the doctor that “You also stated that he could [do] a light

duty position,” and that Mohney had “stated he could walk, drive, bend and

reach.” N.T., 4/16/2013, Exhibit 14. We cannot agree with the Bad Faith

Trial Court’s description of the February 7, 1995 letter as an “adequate and

accurate” summary of the information provided by Dr. Miller. Bad Faith Trial

Court Findings and Adjudication, 10/17/2013, at 27.

      These misrepresentations of fact by Carroll are relevant to whether

Carroll (and thus U.S. Life) knowingly or recklessly ignored its lack of a

reasonable basis in denying benefits.       An insurer has an obligation to

communicate with its insured, Brown, 860 A.2d at 497, and its investigation

must be “honest, intelligent and objective.”   See, e.g., Shearer v. Reed,

428 A.2d 635, 638 (Pa. Super. 1981).            Carroll’s misrepresentations

constitute evidence that his investigation was neither honest nor objective,

as it would appear that he focused solely on those parts of the

questionnaires’ answers that supported denial of the claim, while ignoring

the important limitations recognized by Dr. Miller and Mohney that supported

a contrary decision.



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      For these reasons, we cannot agree with the Bad Faith Trial Court that

there was “no evidence” relevant to the second prong of the bad faith test.

At the same time, however, while Carroll’s misrepresentations are evidence

of bad faith, they do not without more establish knowing or reckless

misconduct as a matter of law by clear and convincing evidence on the

record before us.

      U.S. Life’s defense of this bad faith claim has consistently been based

on the testimony of its adjuster that his only responsibility in determining

the insured’s right to disability benefits was to view the medical and other

information in the claims file in light of a common sense reading of the

definition of total disability in the policy. Thus, this practice is the focal point

of the analysis of the second prong of the bad faith test.

      In his appellate brief, Mohney does not argue that Carroll’s failure to

procure additional medical information or that the misrepresentations in his

April 7, 1995 letter provided the proof necessary to establish the second

prong of the bad faith test. Instead, Mohney argues, more indirectly, that

Carroll’s decision to disregard the important words of limitation in the

questionnaire responses was the result of his faulty understanding of the

term “total disability” in the insurance policies.      According to Mohney, this

faulty understanding was in turn the product of Carroll’s (and U.S. Life’s)

knowing or reckless failure to conduct sufficient legal research into the

interpretation   of   “total   disability”   under   Pennsylvania   appellate   law.



                                        - 22 -
J-A29009-14


Mohney’s Brief at 44.    The Bad Faith Trial Court rejected this argument,

indicating that while U.S. Life had no standard policy manual, its adjusters

(including Carroll) were “trained to read and apply policy terms in

accordance with their prior experience and common sense.” Bad Faith Trial

Court Findings and Adjudication, 10/17/2013, at 23. In this regard,

            [i]f legal questions arose, U.S. Life employed staff
            attorneys     experienced    in   insurance      policy
            interpretation to provide guidance to its adjusters.
            Mr. Carroll did not seek legal advice in this case
            because he did not believe that any additional legal
            construction of the term “total disability” was
            necessary. Instead, he applied a plain and common
            sense meaning to the certificates’ definition of “total
            disability.”

Id.

      As explained hereinabove, the definition of “total disability” that Carroll

applied in terminating Mohney’s benefits (namely, that he was not totally

disabled because Dr. Miller advised that Mohney could attempt a light duty

position) was contrary to both the policy definitions of the term and

interpretations by Pennsylvania appellate courts. Based upon the Bad Faith

Trial Court’s own factual findings, it would appear that, in the absence of a

standard policy manual or other specific guidance, it was left solely to

Carroll’s “common sense” and discretion to decide whether it was necessary

to consult with legal counsel on the proper (legal) interpretation of the policy

term at issue.     The certified record contains no evidence on industry

standards relating to the need to (1) train claims adjusters on legal



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J-A29009-14


interpretations of policy terms, or (2) provide adjusters with guidance as to

when they should seek guidance (i.e., legal research) from the available

staff attorneys.

        In his pre-trial statement, Mohney included an expert report prepared

by John W. McCandless (“McCandless”), formerly a claims attorney for

Nationwide Mutual Insurance Company.          In his expert report, McCandless

offered the following opinions regarding the standards of practice in this

area:

             It is the responsibility of every insurance company,
             manager and professional to be informed on the
             established law which they would be expected to
             apply in the course of handling claims, specifically
             including the law regarding the interpretation of
             policy provisions and definitions. In addition, it is
             the good faith obligation of every insurer and claims
             professional to investigate and properly apply that
             established    case     law    to   every    coverage
             determination.

Mohney’s Pretrial Statement, 9/24/2012. The certified record also includes

the transcript of McCandless’ deposition for use at trial, in which he testified

regarding his experience with proper claims handling, procedures for review

of applicable policy language, and the need for adjusters to be trained in the

proper application of established case law on applicable policy terms.

Deposition Transcript of John W. McCandless, 4/16/2013, at 9-49.

        At trial, the Bad Faith Trial Court, after receiving oral argument from

counsel, initially agreed to consider McCandless’ deposition testimony. N.T.,

4/16/2013, at 16. By order dated October 17, 2013, however, the Bad Faith


                                     - 24 -
J-A29009-14


Trial Court granted U.S. Life’s Motion in Limine to Exclude the Reports and

Testimony of John W. McCandless. Bad Faith Trial Court Order, 10/17/2013,

at 1.    The Bad Faith Trial Court concluded that McCandless’ report and

testimony    consisted   of   legal   conclusions   that   were   improper   and

inadmissible, the facts underlying Mohney’s bad faith claim were “readily

ascertainable by the Court without the aid of expert testimony,” and

McCandless’ testimony would not assist in the resolution of Mohney’s bad

faith claim. Id. In his sixth issue on appeal, Mohney contends this decision

was in error.

        The decision whether a witness is permitted to testify as an expert

rests within the sound discretion of the trial court.      Bergman v. United

Servs. Auto. Ass'n, 742 A.2d 1101, 1105 (Pa. Super. 1999). To constitute

reversible error, an evidentiary ruling must not only be erroneous, but also

harmful or prejudicial to the complaining party. Id. If the facts can be fully

and accurately described to the factfinder, who, without special knowledge

or training, is able to estimate the bearing of those facts on the issues in the

case, then expert testimony is unnecessary in the search for truth. Whyte

v. Robinson, 617 A.2d 380 (Pa. Super. 1992). Whether to permit expert

testimony in a bad faith insurance case depends on the complexity of the

issues in question.      Compare Bergman, 742 A.2d at 1105 (expert

testimony not permitted because it “would not contribute anything that had

not already been said”), with Bonenberger v. Nationwide Mut. Ins. Co.,



                                      - 25 -
J-A29009-14


791 A.2d 378, 382 (Pa. Super. 2002) (“The trial judge who acted as

factfinder in this matter permitted the admission of this expert to aid the

court in its ability to evaluate the bad faith claim.”).

      In our view, the decision to exclude McCandless’ expert report and

testimony in this case constituted an abuse of discretion.       The issue in

question, involving the standards in the insurance industry for the training of

claims adjusters in applying legal precedent when deciding insurance claims,

is sufficiently complex to permit the introduction of expert testimony. The

Bad Faith Trial Court’s written decision does not reflect that it had any

specific knowledge of the industry standards in this area. Instead, the Bad

Faith Trial Court merely accepted Carroll’s testimony that there was no need

to consult with staff attorneys in this case, and in the absence of expert

testimony from McCandless, Mohney had no ability to offer contradictory

evidence to rebut Carroll’s testimony.

      Because we conclude that the Bad Faith Trial Court committed errors

in the application of law and abused its discretion in deciding this case, we

must vacate the judgment and remand for a new trial. In connection with

the new trial, we will address the remaining issues raised by the parties to

this appeal.

      For his fourth issue on appeal, Mohney contends that the Bad Faith

Trial Court erred by considering his post-denial conduct. Mohney’s Brief at

52.   As a general matter, we agree with Mohney that the analysis of an



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J-A29009-14


insurance bad faith claim “is dependent on the conduct of the insurer, not its

insured.” Rhodes, 21 A.3d at 1261. The Bad Faith Trial Court posits that it

committed no error because it “imposed no burden whatsoever on [Mohney]

or [Mohney’s] counsel to take any action after the discontinuance of

coverage.” Bad Faith Trial Court’s 1925(a) Opinion, 2/12/14, at 3. We do

not agree, as the Bad Faith Trial Court specifically noted that neither Mohney

nor his counsel provided any additional information in response to Carroll’s

request that they do so in his February 7, 1995 letter terminating benefits.

Bad Faith Trial Court Findings and Adjudication, 10/17/2013, at 28.        On

remand, evidence of Mohney’s post-denial conduct should not be admitted.

      For his fifth issue on appeal, Mohney argues that the Bad Faith Trial

Court erred by failing to permit him to amend his complaint to include

allegations of bad faith litigation misconduct.3   Mohney’s Brief at 54.   We

take no issue with this decision by the Bad Faith Trial Court, as Mohney did

not request leave to amend until one business day prior to the scheduled

start of trial. Bad Faith Trial Court’s Memorandum and Order, 11/20/13, at

2. A trial court enjoys broad discretion in evaluating a motion for leave to

amend pleadings. See, e.g., Borough of Mifflinburg v. Heim, 705 A.2d

3
   Mohney’s proposed amendment identified specific instances of alleged bad
faith misconduct by U.S. Life during the pendency of this litigation. We note
that Mohney has not raised the more general issue of whether U.S. Life’s
decision to continue to litigate this claim for many years, despite the
absence of any reasonable basis in the record to support its decision to
terminate benefits, is itself bad faith. See generally Berg v. Nationwide
Mut. Ins. Co., Inc., 44 A.3d 1164 (Pa. Super. 2012), appeal denied, 65
A.3d 412 (Pa. 2013).


                                    - 27 -
J-A29009-14


456, 463 (Pa. Super. 1997), appeal denied, 794 A.2d 359 (Pa. 1999).

Based upon its determination that amendment of the pleadings on the eve of

trial would be prejudicial to U.S. Life, the Bad Faith Trial Court properly

exercised its discretion to deny Mohney’s request.

      Finally, in its cross-appeal, U.S. Life argues that if this Court remands

this case for a new trial, we should reverse the Bad Faith Trial Court’s

exclusion of its proposed expert witness (Barbara Sciotti) as a sanction for

failure to file a pretrial statement in compliance with the pre-trial order.

U.S. Life’s Brief at 55. In its March 6, 2013 sanctions order, the Bad Faith

Trial Court precluded U.S. Life from “introducing at trial any expert

testimony or reports.” Bad Faith Trial Court Order, 3/6/2013, at 1. In its

Rule 1925(a) written opinion, the Bad Faith Trial Court indicates that it did

so based upon its conclusion that Mohney “suffered actual prejudice from

[U.S. Life’s] ongoing failure to provide notice of its experts.” Bad Faith Trial

Court’s 1925(a) Opinion, 2/12/14, at 4.

      On appeal, U.S. Life requests relief from these sanctions on the

grounds that it “substantially complied” with the pretrial order, that it had a

legitimate reason for its delay (its counsel was not informed of the disclosure

date), that Mohney was not prejudiced by the delay, and that Mohney’s

counsel had “ample time to investigate the qualifications of U.S. Life’s

experts and prepare for their examination.” U.S. Life’s Brief at 56-57. U.S.

Life further indicates that the exclusion of its experts “worked a great



                                     - 28 -
J-A29009-14


prejudice on U.S. Life,” id. at 57, though it does not explain the nature of

this alleged prejudice.

      U.S. Life has not identified any basis in the certified record that would

permit this Court to grant the requested relief, as it has not directed us to

any evidence to support these unproven contentions. We will leave it to the

sound discretion of the Bad Faith Trial Court whether to lift its sanctions and

permit the requested expert testimony at the new trial on remand.

      Judgment vacated.      Case remanded for a new trial.        Jurisdiction

relinquished.



Judgment Entered.




Joseph D. Seletyn, Esq.
Prothonotary

Date: 5/8/2015




                                    - 29 -
