NOVEMBER 2017 BAD FAITH CASES: NO BAD FAITH WHERE NO COVERAGE DUE; AND INDEPENDENTLY, NO BAD FAITH FOR FAILURE TO INVESTIGATE (Third Circuit)

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In this case, the Third Circuit affirmed the trial court’s grant of summary judgment on coverage and bad faith claims. Quoting the relevant language on bad faith:

“[The insured] argues that [the carrier] acted in bad faith by refusing to cover the claim and by failing to adequately investigate it. We agree with the District Court that this claim has no merit. Generally, there can be no bad faith claim for denial of coverage if the insurer was correct as a matter of law in denying coverage. Frog, Switch & Mfg. Co., Inc. v. Travelers Ins. Co.,193 F.3d 742, 751 n.9 (3d Cir. 1999). Thus, as we agree with the District Court that [the] breach of contract claim was meritless, so too was his bad faith claim.”

Even though the court stated the forgoing, it still addressed the issue of whether bad faith could be based solely upon a failure to investigate. As has been raised numerous times in this blog, there is an issue of whether section 8371 bad faith is cognizable for poor investigation practices in the absence of the denial (or delay in providing) of  a benefit.

“Nor can [the] bad faith claim stand independently based on [the] failure to investigate the claim before denying it. Rancosky v. Wash. Nat’l Ins. Co., 2015 PA Super 264, 130 A.3d 79, 94 (Pa. Super. 2015) (“Bad faith conduct includes lack of good faith investigation into the facts”). The record evidence clearly establishes that [the carrier] appropriately investigated [the] claim before determining that it was not covered under the Policy, inter alia, by hiring a private investigator to investigate the claim and to interview [the insured] and [the insured’s lessee], by sending a … field adjuster, and by setting forth the reasons for denial in a formal coverage opinion.”

Date of Decision: November 15, 2017

Wehrenberg v. Metropolitan Property & Casualty Insurance Co., U. S. Court of Appeals for the Third Circuit, No. 17-1327, 2017 U.S. App. LEXIS 22887 (3d Cir. Nov. 15, 2017) (Ambro, Krause, Rendell, JJ.)

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