JULY 2009 BAD FAITH CASES
NO BAD FAITH WHERE A REASONABLE BASIS TO DENY COVERAGE EXISTS EVEN WHERE COURT FOUND DUTY TO EXIST (Philadelphia Federal)

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In Post v. St. Paul Travelers Insurance Company, the court granted summary judgment to the insurer on a bad faith claim.  This was the second of a series of three opinions issued in this case.  In the final decision on a motion for reconsideration, the court stood by this and its earlier opinion.

(Case 3, 5/22/9); (Case 1, 1/7/9). The court observed that under Pennsylvania law, questionable conduct giving the appearance of bad faith is not sufficient to establish a bad faith refusal to provide coverage if the insurer had a reasonable basis for denying the claim.  The insured’s allegations of misconduct could not amount to proof that the insured did not have a reasonable basis to deny coverage.  So it could not meet the first prong of the bad faith test, i.e. the absence of a reasonable basis to deny coverage.  In that case, even though the court had previously held that coverage was required, the insurer had a reasonable basis to deny coverage.

Date of Decision:  March 31, 2009

Post v. St. Paul Travelers Ins. Co., No. 06-CV-4587, 2009 U.S. Dist. LEXIS 52167, 609 F.Supp.2d 382  (E.D.Pa. March 31, 2009) (Brody, J.)

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NO BAD FAITH WHERE A REASONABLE BASIS TO DENY COVERAGE EXISTS EVEN WHERE COURT FOUND DUTY TO EXIST (Philadelphia Federal)”


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