Daily Archive for August 3rd, 2017

AUGUST 2017 BAD FAITH CASES: POLICYHOLDER GRANTED LEAVE TO AMEND COMPLAINT TO ALLEGE A BAD FAITH CLAIM (Philadelphia Federal)

Plaintiff-policyholders filed suit after a dispute over a denial of coverage regarding their homeowner’s insurance policy. Initially, defendant-insurer faced claims for breach of contract and a violation of the Pennsylvania Unfair Trade Practices and Consumer Protection Law. On April 26, 2017, seeking to assert a bad faith claim, the plaintiffs filed a Motion for Leave to Amend their (already) Amended Compliant.

The case arises out of severe property damage incurred by plaintiffs due to a January 2016 snowstorm. The snowstorm damaged the interior, exterior, and roof of the main residence, and damaged the roof of plaintiffs’ detached garage. The insurer provided plaintiffs with a payment of $5,801.77, which only covered damage to the interior of the main residence, minus the deductible and depreciation. The insurer denied plaintiffs’ claim for the exterior damage to the main residence, including the roof of the main residence and the roof of the detached garage. The exterior damages totaled $54,180.76.

The insurer argued that addition of a bad faith claim is futile. “’Futility means that the complaint, as amended, would fail to state a claim upon which relief could be granted.” The Court reiterated the liberal procedural standard for the amending of pleadings, and stated that defendants have “a heavy burden” in showing that plaintiffs’ amendment would be futile.

The Court ultimately granted the insureds leave to amend, because they argued that the insurer acted in bad faith by failing to provide reasons for its denial of coverage and failing to conduct a proper investigation of the claim. In support of its futility argument, the insurer attempted to have the Court review letters which included detailed and specific reasons for claim denial, along with proof that it offered to reinvestigate the claim. Nevertheless, the Court could not consider these documents at this stage because they were not attached to the amended complaint, nor were they matters of public record.

Date of Decision: July 18, 2017

Mitchell v. State Farm Fire & Cas. Ins. Co., No. 17-0737, 2017 U.S. Dist. LEXIS 111088 (E.D. Pa. July 18, 2017) (Surrick, J.)