AUGUST 2017 BAD FAITH CASES: CARRIER THAT DID NOT ISSUE POLICY STILL POTENTIALLY LIABLE FOR BAD FAITH ON A CLAIMS HANDLING THEORY (Western District)

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This case involved at least claims for breach of contract, breach of fiduciary duty, and breach of the contractual duty of good faith and fair dealing. The court also stated there was a statutory bad faith claim.

Two related insurers were named as defendants. One of the insurers did not issue the policy, but was alleged to have been involved in bad faith claims handling.

First, the court dismissed the breach of fiduciary duty claim under the gist of the action doctrine. The court found that any duty solely arose from the contract, so there could be no separate tort claim outside of the contract.

Second, the court agreed there could be no breach of contract claim against an insurance company that did not issue the policy. However, the court found that this did not automatically preclude a statutory bad faith claim against that insurance company based solely on its claims handling. [This holding runs up against the idea that statutory bad faith must be based on the denial of a benefit under the insurance contract, but is in general accord with case law finding that claims handling alone, without the denial of a benefit, can be the basis for a bad faith claim.]

Date of Decision: July 20, 2017

Golon, Inc. v. Selective Insurance Co., No. 17cv0819, 2017 U.S. Dist. LEXIS 113385 (W.D. Pa. July 20, 2017) (Schwab, J.)

 

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