JULY 2006 BAD FAITH CASES
NO BAD FAITH IN DENYING COVERAGE FOR INJUNCTIVE RELIEF, EVEN WHERE COMPLAINT HAD BOILERPLATE REQUEST FOR COSTS, ATTORNEY’S FEES AND FURTHER RELIEF (Western District)

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In H.L. Libby Corporation v. Fireman’s Fund Insurance Company, two underlying lawsuits resulted from the alleged pollution of a collection pond following a heavy rain.  In this action, the insured alleged that the carrier acted in bad faith by covering only approximately one-third of the alleged overall legal costs in the first underlying case (Specialty I).  The insured also alleged that it was bad faith for the carrier to deny coverage altogether for the second underlying case (Specialty II).

The basis for denial in Specialty II was that it was it was an action for injunctive relief only, and therefore not covered by the policy.  The United States District Court for the Western District of Pennsylvania was presented with the carrier’s Partial Summary Judgment Motion.  When looking at the factual allegations contained in the Specialty II Complaint, the Court agreed that Specialty II was indeed an action for injunctive relief only.

The Court rejected the argument that the boilerplate phrase, “costs, attorney’s fees and other and further relief as the Court deems just and proper,” is in itself a claim for monetary damages.  In similarly rebuffing the argument that a brief in opposition to dismissal had alluded to monetary relief, the Court followed well-settled Pennsylvania law that the “four corners” of the Complaint determines whether coverage is triggered.  Since the Complaint requested only equitable relief, it did not trigger the carrier’s duty to defend or indemnify.

The insurer’s action in denying coverage in Specialty II did not constitute bad faith.  The Court, without detailed elaboration, denied summary judgment on the bad faith claims for failure to pay costs in Specialty I.

Date of Decision:  July 24, 2006

H.L. Libby Corp. v. Fireman’s Fund Ins. Co., United States District Court for the Western District of PA, Civil Action No. 03-601, 2006 U.S. Dist. LEXIS 50433 (W.D. Pa. Jul. 24, 2006) (Cercone, J.)

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NO BAD FAITH IN DENYING COVERAGE FOR INJUNCTIVE RELIEF, EVEN WHERE COMPLAINT HAD BOILERPLATE REQUEST FOR COSTS, ATTORNEY’S FEES AND FURTHER RELIEF (Western District)”


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