JULY 2014 BAD FAITH CASES: COURT FINDS THAT UIPA VIOLATIONS CAN SUPPORT STATUTORY BAD FAITH CLAIM; AND THAT INSURED PLEADED SUFFICIENT FACTS REGARDING ALLEGED UNDERVALUATION TO STATE A CLAIM FOR BAD FAITH (Middle District)

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In Militello v. Allstate Property & Casualty Insurance Company, the insured owned a horse barn that suffered damage when one of the horses struck a support.  The insured made a claim, and the carrier offered to pay approximately half the claim.  The insured asserted that the barn was otherwise in good condition, and it was the horse that caused the problem.

The insured alleged that the carrier asserted that there were a variety of structural problems independent of the horse’s actions, for which payment was not due under the policy.  The insured alleged that the carrier’s assertion concerning these independent structural issues were false representations.

The insured also asserted violations of the Unfair Insurance Practices Act (UIPA) as a basis for his claims.  The carrier moved to strike the references to the UIPA and to dismiss the bad faith claim as merely embodying a dispute over value, and that mere failure to accede to the insured’s demands cannot be bad faith.

Citing prior Middle District precedent and the Pennsylvania Superior Court, the court found that UIPA violations could form the basis of a bad faith.  Further, the court found that the complaint, on its face, involved allegations of more than a valuation dispute, and that the case involved more than a simple claim that the insurer failed to meet the insured’s demand.  “Although the amended complaint would have ideally included additional facts suggesting that Defendant’s payment on the claim was purposely less than the full amount to which Plaintiff was entitled, the complaint does allege that Defendant made multiple representations to Plaintiff for purposes of undervaluing his property claim.”

Thus, the court stated that: “In light of the parties’ burdens at the motion to dismiss stage, and viewing the facts as true and granting Plaintiff all reasonable inferences, the court concludes that dismissal of Plaintiff’s bad faith claim would be premature. While discovery may provide a reasonable explanation for Defendant’s conduct, Plaintiff’s allegations raise a plausible inference of bad faith. As such, Defendant’s motion to dismiss Plaintiff’s bad faith claim will be denied.”

Date of Decision:  June 26, 2014

Militello v. Allstate Prop. & Cas. Ins. Co., Civ. No. 14-cv-00240 , 2014 U.S. Dist. LEXIS 86945, (M.D. Pa. June 26, 2014) (Rambo, J.)

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