MARCH 2013 BAD FAITH CASES: COURT PERMITS BAD FAITH SUIT TO PROCEED AGAINST HOME INSURER, DENIES FLOOD INSURER’S MOTION TO BIFURCATE, AND STRIKES CLAIM FOR PUNITIVE DAMAGES AGAINST HVAC CONTRACTOR (Philadelphia Federal)

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In Robinson v. Nationwide Mut. Ins. Co., insured homeowners filed suit against multiple parties after their home sustained damages following two severe storms in August and September 2011. In August 2011, the first storm hit, requiring repairs to the insureds’ water heater and oil tank. A contractor performed work on the units, but failed to properly cap the tank and then refused the insureds’ requests to fix it. In September 2011, a second storm hit, flooding the insureds’ property and spilling 130 gallons of oil from the uncapped tank.

Their home and floor insurers both refused to cover the damages. In August 2012, the insureds filed suit against both carriers, alleging bad faith and breach of contract against the home insurer, breach of contract against the flood insurer, and negligence against the HVAC contractor.

The homeowner’s insurance carrier filed a motion to dismiss the insureds’ bad faith claim. The court permitted the claim to proceed, citing several actions allegedly made in bad faith, including the carrier’s (1) misrepresentation of the benefits or terms of its insurance policy; (2) misrepresentation of the pertinent facts or contract provisions relating to the coverage at issue; (3) failure to conduct a reasonable investigation into the loss; (4) failure to interpret ambiguous policy language in the insureds’ favor; (5) inconsistent and conflicting estimates of the insureds’ loss; (6) refusal to pay claims without conducting a reasonable investigation; (7) failure to effectuate prompt, fair, and equitable settlement of claims in which the company’s liability under the policy had become reasonably clear; (7) actions to compel the insureds’ to institute litigation to recover amounts due under the policy by offering substantially less than the amounts due and ultimately to be recovered; and (8) failure to visit the property to assess damage to the home.

The contractor also moved to dismiss the insureds’ claim for punitive damages and the court agreed, finding that their failure to cap the oil tank was negligent at worst, not recklessly indifferent. Lastly, the flood insurer filed a motion to bifurcate claims against it. The court disagreed and denied the motion, holding that the court would hear claims against the flood insurer while the jury would hear claims against the home insurer and contractor.

As such, the court denied all motions, except for the contractor’s motion to dismiss claims for punitive damages, which it granted.

Date of Decision: February 26, 2013

Robinson v. Nationwide Mut. Ins. Co., No. 12-5065, 2013 U.S. Dist. LEXIS 25806, Eastern District of Pennsylvania (E.D. Pa. Feb. 26, 2013) (Buckwalter, J.)

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