In Berko Investments, LLC v. State National Insurance Company, the insured owned a building that contained apartments and a bar/restaurant, and he had purchased commercial property insurance with the insurer.  One day, a portion of the building’s roof began to leak over the dining room area.  A general contractor was a patron in the bar the evening the leak began, and after examining the roof he observed that it had peeled back.  After making temporary repairs the next day, he told the insured that the roof was damaged by the weather and it likely needed more thorough repairs.  The contractor then contacted a roofer he had used in the past, who provided an estimate covering the cost of replacing the roof. The contractor told the insured that he should file an insurance claim, but the insured waited until after the roof was completely redone to file a claim.

After the insurer received notice of the insured’s claim, a claims adjuster toured the property, which had already been repaired.  The insured alleged that the building’s roof was damaged by wind, which was a covered loss under the insurance policy.  However, the adjuster could not determine whether the roof actually needed to be replaced because the repairs were complete.  He had to recommend that the claim be denied because the insurer’s rights were prejudiced, and the insurer proceeded to deny coverage.  The insured filed suit, asserting that the insurer breached the insurance contract and acted in bad faith.

The court determined that the temporary repairs made by the contractor would have been sufficient to protect the property and simultaneously allow the insurer’s claims adjuster to inspect the roof before it was replaced.  It also held that the insured’s delay in reporting the claim until after fixing the roof himself was a breach of the Duties Provision, and the breach resulted in actual prejudice to the insurer’s rights.  Therefore, the court had no choice but to find in favor of the insurer for both the breach of contract and bad faith claims.

Date of Decision:  July 21, 2010

Berko Invs. v. State Nat'l Ins. Co., Civil Action No. 08-2609, United States District Court for the Eastern District of Pennsylvania, 2010 U.S. Dist. LEXIS 73144 (E.D. Pa. July 21, 2010) (DuBois, J.)

In Ski Shawnee, Inc., v. Commonwealth Insurance Company, a bridge collapsed on a road leading to the insured’s ski resort, and the road was closed to the public for two days.   Approximately 70% of the insured’s patrons typically use the road to access the resort, and they could not access the resort using that road on those days because of the collapsed bridge.  The insurer provided the insured with a policy that included business income loss coverage for loss of income the insured sustains and extra expenses it incurs when “caused by action of civil authority that prohibits access to the covered premises.”

The insured filed a claim with the insurer for lost income, and the insurer hired a claim adjuster to determine the appropriate amount of loss.  After an evaluation and weeks of correspondence between the parties, the adjuster eventually notified the insured that there would be no coverage under the insurance policy for the loss of income resulting from the closure of the bridge.  The insured filed a complaint, bringing causes of action for breach of contract, breach of the Pennsylvania Unfair Insurance Practices Act, and bad faith.

The court determined that while the insured may have lost some income over the two days the bridge was closed, there was no genuine issue of material fact that at least some of Ski Shawnee’s customers were able to access the ski resort via alternate routes on those days.  Therefore, no single customer was actually prohibited from accessing the resort, so the income loss coverage provisions of the insurance policy did not apply.

Because the court had decided that the policy did not include coverage for the loss of profits, it also held that the insurer had a reasonable basis for denying benefits under the policy.  The court accordingly granted summary judgment on both the breach of contract and bad faith claims.

A private party cannot bring claims under Pennsylvania Unfair Insurance Practices Act and Unfair Claim Settlement Practices Act.  As the Court stated, “the UIPA and the UCSP are designed to be implemented and enforced by the Insurance Commissioner of Pennsylvania.  As such, Plaintiff, as a private citizen, cannot maintain a claim against Defendant on these statutory and regulatory sections, and Defendant's motion will be granted on this count as well.”

Date of Decision:  July 6, 2010

Ski Shawnee, Inc. v. Commonwealth Ins. Co., No. 3:09-CV-02391, United States District Court for the Middle District of Pennsylvania, 2010 U.S. Dist. LEXIS 67092, (M.D. Pa. July 6, 2010) (Caputo, J.).

In Luse v. Liberty Mutual Fire Insurance Company, a fire occurred in the insureds’ home.  They had insurance under a condominium policy that had been issued by the insurer.  An employee of the insurer inspected the home three days after the fire, and despite observing significant damage, he concluded that the house was livable.  He also determined that his employer’s policy would only provide secondary coverage for the damage because the insureds had an additional condominium policy which provided primary coverage.

One of the insureds had a history of respiratory issues, and in the two weeks after the fire, his oxygen saturation levels dropped.  The insurer took immediate action to have the insureds relocated, but by that time the individual had already suffered from increased respiratory problems.  However, the insureds had not notified the insurer of the individual’s respiratory or problems or their desire to relocate until the problems exacerbated.

The insureds filed a complaint based on insurance bad faith, asserting that the insurer failed to properly investigate the insureds’ claim once they had information that one of the insured’s suffered from respiratory issues, and that the insurer misinformed the insureds of the extent of their coverage.

The court determined that the insureds failed to show that there were genuine issues of material fact, as the insurer sent a representative to evaluate the damage, and the representative made a conclusion based on his findings.  Also, no one told the representative or his employer about the insured’s respiratory problems or a desire to be relocated until over two weeks after the fire.  Conclusions based on adequate investigations and informing the insureds that the company would be the secondary provider to the condominium policy do not constitute bad faith by any measure of the law.  The insurer was only under a duty to reasonably investigate all of the claims, and the undisputed facts of the case suggested that its obligations were met.  Therefore, the court granted the insurer’s Motion for Summary Judgment.

Date of Decision:  July 7, 2010

Luse v. Liberty Mut. Fire Ins. Co., Civil No. 1:09-CV-1221, United States District Court for the Middle District of Pennsylvania, 2010 U.S. Dist. LEXIS 63225 (M.D. Pa. July 7, 2010) (Rambo, J.).