(1) NO BAD FAITH POSSIBLE WHERE NO COVERAGE DUE; (2) INSURER’S REASONABLE RELIANCE ON ENGINEERING EXPERT’S REPORT FOR A COVERAGE DECISION DOES NOT CONSTITUTE BAD FAITH (Western District)

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There were two bad faith claims arising out of a building’s wall collapse case. The first was over whether any coverage was due in connection with building walls that had not collapsed, for which the insured sought replacement to match restoration of the collapsed wall. The second had to do with whether the carrier owed additional damage payments for claims more directly related to the collapse.

The court determined no coverage was due for the other walls, and granted summary judgment on that coverage issue. Because no coverage was due, the court necessarily found “no basis for a bad faith claim based upon an unreasonable denial of coverage.”

Second, the court observed the parties’ experts disagreed on the scope of damages and amount due concerning the wall collapse. The court granted summary judgment on bad faith on this claim as well, finding insurer reasonably relied on its experts in determining the amount of damages it would pay.

The court stated:

As regards additional payment of damages, [the insured] argues that disagreements between the parties’ experts precludes the entry of summary judgment on the bad faith claim. Courts have held that “an insurer’s reasonable reliance on an engineering expert’s report for a coverage decision does not constitute bad faith.” Hamm v. Allstate Prop. & Cas. Ins. Co., 908 F.Supp.2d 656, 673 (W.D.Pa.2012) (citing El Bor Corp. v. Fireman’s Fund Ins. Co., 787 F.Supp.2d 341, 349 (E.D.Pa.2011) (insurance company’s reliance on engineer’s findings as a basis for denial of coverage provides reasonable grounds to deny benefits)) “Moreover, even if the expert incorrectly assessed the cause of damage, this is not evidence that his conclusions were unreasonable or that Defendant acted unreasonably in relying upon them.” Totty v. Chubb Corp., 455 F.Supp.2d 376, 390 (W.D.Pa.2006) (citing Pirino v. Allstate Ins. Co., No. 3:04CV698, 2005 U.S. Dist. LEXIS 27519, 2005 WL 2709014, at *5 (M.D.Pa. Oct. 21, 2005)).

Here, [the insured] only identifies conflicts amongst the expert’s opinions on causation and damages and not the reasonableness of [the carrier’s] expert opinions. The conflict between experts may preclude summary judgment on other claims, but not for bad faith. Based upon the reasonableness standard in the bad faith statute coupled with the high burden of proof of clear and convincing evidence, the Court concludes that a reasonable juror could not find bad faith in [the insured’s] favor. …

Date of Decision: May 14, 2019

Keyser v. State Farm Fire & Casualty Co., U. S. District Court Western District of Pennsylvania 2:18-CV-00226-MJH, 2019 U.S. Dist. LEXIS 81194 (W.D. Pa. May 14, 2019) (Horan, J.)

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