JANUARY 2018 BAD FAITH CASES: INSUREDS ALLEGING BAD FAITH MUST “DESCRIBE WHO, WHAT, WHERE, WHEN, AND HOW THE ALLEGED BAD FAITH CONDUCT OCCURRED”; LETTER TO INSURANCE DEPARTMENT DID NOT SHOW BAD FAITH (Philadelphia Federal)

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The insured resided with her long-time partner at her home in Philadelphia when it was damaged by a fire. No one but the insured was listed on the policy.

Following the fire, the insured and her partner sought benefits under the policy for personal property destroyed and for home repairs. The insurer paid the insured $115,125.40 for home repairs, $160,982.21 for damage to personal property, and $37,784.81 for additional living expenses. The insurer did not pay the insured’s partner any benefits, arguing that he was not an insured person under the terms of the policy.

In addition, the insured received home repair estimates that ranged from $310,000 to $341,000, and the insurer did not pay any additional benefits beyond its $115,125.40 payment. The insured and her partner sued for bad faith, among other claims. The insurer moved for judgment on the pleadings.

The insured and her partner supported their bad faith claim with three arguments: (1) the insurer acted in bad faith when it sent a letter containing erroneous information about the claim to the Pennsylvania Insurance Department; (2) the insurer failed to obtain an appraisal; and (3) the insurer failed to properly investigate, evaluate, and communicate with the insured about the claim. The Court rejected all three of these arguments.

The court generally observed that “Pennsylvania federal and state courts have defined ‘bad faith’ as ‘a frivolous or unfounded refusal to pay proceeds of a policy.’” Specifically, as to the three arguments:

  1. The Court held that, in sending the letter containing erroneous information to the PID, there’s no evidence that this was done with a “motive of self-interest or ill will[,]” and was likely mere negligence.

[Note: The Court quoted case law stating, “A claimant must show that the insurer acted in bad faith based on some motive of self-interest or ill will.” However, this would appear to contradict the Supreme Court’s holding in Rancosky, that the motive of self-interest or ill will is not a required element of establishing a bad faith claim.]

  1. The policy stated that if there is an appraisal dispute, any party may demand an appraisal. The insured failed to make this demand.

  2. The Court held that the insured’s third argument was too vague to constitute bad faith, as insureds “must ‘describe who, what, where, when, and how the alleged bad faith conduct occurred.”

The Court dismissed all of the claims, but declined to award the insurer judgment on the pleadings, because it granted the insured leave to amend her complaint.

Date of Decision: December 21, 2017

Elican v. Allstate Ins. Co., No. 17-03105, 2017 U.S. Dist. LEXIS 209901 (E.D. Pa. Dec. 21, 2017) (Pappert, J.)

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