BAD FAITH CLAIM PREMATURE IN LIGHT OF ONGOING APPRAISAL PROCESS; UTPCPL DOES NOT APPLY TO CLAIM HANDLING (Philadelphia Federal)

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This case involves a first party fire loss to the insured’s home.  The insured’s public adjuster estimated damages at over $300,000. The insurer’s adjuster issued a number of reports that consecutively lowered the damage estimate. The final report was less than a ¼ of the plaintiff’s estimate. These differences resulted in the carrier invoking the appraisal process, which was pending at the time this suit was filed.

The insured sued the insurer for breach of contract, bad faith, fraud, conspiracy to commit fraud and violation of the Unfair Trade Practices and Consumer Protection Law (UTPCPL).  The last three claims also were made against the carrier’s independent adjuster.

The court dismissed the breach of contract claim because the matter was subject to the ongoing appraisal process.  Judge Padova observed that while there is some right of appeal from the completed appraisal process, the scope of appeal is limited.  Dismissal was without prejudice to pursue those limited appellate rights after the appraisal process ended.  Judge Padova rejected the insured’s argument that this was actually a coverage dispute, rather than a valuation dispute.

Next, Judge Padova stayed the bad faith claim as premature. Because the appraisal process was ongoing, the carrier had never actually denied the claim.  Judge Padova did appear to recognize, however, the insured had pleaded a potential bad faith claim. This was based on allegations concerning the insurer’s involvement in the various decreasing loss estimates, which it allegedly knew were incorrect.

The fraud and UTPCPL claims failed to allege justifiable reliance, and were dismissed.

In addition, as to the UTPCPL claims, Judge Padova states:

Moreover, we note that recent Pennsylvania caselaw has stated that “[t]he UTPCPL applies to consumer transactions, which are statutorily defined[, and] the handling of an insurance claim does not meet the statutory definition.” … Under this authority, “[t]he UTPCPL applies to the sale of an insurance policy, it does not apply to the handling of insurance claims,” and the bad faith statute, 42 Pa. Cons. Stat. § 8371, “provides the exclusive statutory remedy applicable to claims handling.” … Accordingly, for this reason as well, we conclude that Plaintiff’s UTPCPL claim, which is grounded on deceptive conduct in the handling of her insurance claim, cannot state a claim upon which relief can be granted.

Date of Decision:  June 1, 2021

Bussie v. American Security Insurance Company, U.S. District Court Eastern District of Pennsylvania No. CV 20-3519, 2021 WL 2206282 (E.D. Pa. June 1, 2021) (Padova, J.)

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