MARCH 2017 BAD FAITH CASES: DELAYS IN APPRAISAL PROCESS COULD CONSTITUTE BAD FAITH (Philadelphia Federal)

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This case involved a significant homeowner loss that was ultimately subject to the policy’s appraisal process. Facing a one-year suit limitation, the insureds filed breach of contract and bad faith claims. The court dismissed the breach of contract claim because the appraisal process was binding, absent fraud, misconduct, corruption or other irregularity tainting the appraisal process, which was not present in the case. However, the court denied the motion to dismiss as to the insureds’ bad faith claim.

The issue was delay in the appraisal process. Among other things, the court stated that even if “an insurance claim has been settled and paid, Pennsylvania’s bad faith statute provides insurance claimants a means of redressing unreasonable delays by their insurers.”

The court looked at the following allegations in denying the motion to dismiss. The insureds demanded appraisal on November 10, 2015. The policy gave the insurer 20 days from that date to identify its appraiser. The insurer did not do so, and the insureds demanded appraisal twice more, 22 days later and 41 days later. The insureds also alleged that once the insurer’s appraiser was identified, that appraiser “delayed in contacting plaintiff’s appraiser for the purpose of identifying an umpire, resulting in further delay in the appraisal process.”

While this process was unfolding, the insureds could not reside in their home, which was uninhabitable. Over 7 months after the initial demand, in June of 2016, the appraisal was still not complete, and the insureds exhausted the policy period for payment of additional living expenses, and then had to spend their own money on alternative living arrangements. The insureds also alleged, “as a result of the delay in the appraisal process, plaintiffs had to retain counsel and commence legal action against defendant to avoid a time bar under the limitations period in the policy.” The appraisal process was completed on September 30, 2016.

The court found these facts made out a plausible bad faith claim. Quoting the court: “Taken as true, these allegations indicate that the delay was entirely attributable to defendant given its failure to timely identify the appraiser as required by policy. Moreover, defendant fails to offer any reasonable basis for causing the delay through its untimely compliance with the policy’s appraisal provision. Finally, the allegations of the amended complaint allow the proper inference that defendant knew or recklessly disregarded the lack of a reasonable basis for the delay.”

Date of Decision: January 30, 2017

Dagit v. Allstate Prop. & Cas. Ins. Co., No. 16-3843, 2017 U.S. Dist. LEXIS 12124 (E.D. Pa. Jan. 30, 2017) (O’Neill, J.)

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