NOVEMBER 2015 BAD FAITH CASES: COURT GRANTS INSURER SUMMARY JUDGMENT AFTER FINDING THAT INSURER HAD REASONABLE BASIS FOR ITS CLAIM DECISIONS (Middle District)

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In Militello v. Allstate Property & Casualty Insurance Company, the insured raised claims for breach of contract and bad faith, and alleged that “his property insurance company failed to accurately assess and pay a covered loss, and made false representations for the purpose of denying the full value of the claim.” The insurer moved for summary judgment on both claims.

The insurer contended that it was entitled to summary judgment on the bad faith claim because it “had a reasonable basis for all of its claim decisions.” The court observed that “mere negligence or bad judgment is not bad faith,” and that an insured must demonstrate by “clear and convincing evidence” that an insurer acted in bad faith.

In holding that the insured could not defeat the insurer’s motion for summary judgment on the bad faith claim, the court noted that the insurer promptly began investigating the insured’s claim within five days of receiving notice and reopened the claim once the insured contended that it had learned of previously unknown facts related to the cause of the damage. Further, the insurer issued payment to the insured, and requested the parties enter an appraisal after the insured’s counsel continued to dispute the amount of the loss.

In Militello v. Allstate Property & Casualty Insurance Company, the insured raised claims for breach of contract and bad faith, and alleged that “his property insurance company failed to accurately assess and pay a covered loss, and made false representations for the purpose of denying the full value of the claim.” The insurer moved for summary judgment on both claims.

The insurer contended that it was entitled to summary judgment on the bad faith claim because it “had a reasonable basis for all of its claim decisions.” The court observed that “mere negligence or bad judgment is not bad faith,” and that an insured must demonstrate by “clear and convincing evidence” that an insurer acted in bad faith.

In holding that the insured could not defeat the insurer’s motion for summary judgment on the bad faith claim, the court noted that the insurer promptly began investigating the insured’s claim within five days of receiving notice and reopened the claim once the insured contended that it had learned of previously unknown facts related to the cause of the damage. Further, the insurer issued payment to the insured, and requested the parties enter an appraisal after the insured’s counsel continued to dispute the amount of the loss.

Additionally, the insurer continued negotiations even after the insured terminated the appraisal, as well as retaining an independent contractor to prepare an estimate for the property damages, and issued an additional check to the insured. The insurer also continued to negotiate after the insured retained new counsel and initiated suit. Finally, the court stated that deposition testimony of the insured’s contractors, which directly contradicted statements made by the insured in his deposition, provided an ample basis for the insurer’s withdrawal from the appraisal process. Accordingly, the court found that the insurer had a reasonable basis for its claim decisions and that the insured failed to show that the insurer acted in bad faith by clear and convincing evidence.

Date of Decision: November 18, 2015

Militello v. Allstate Prop. & Cas. Ins. Co., CIVIL ACTION No. 1:14-cv-0240, UNITED STATES DISTRICT COURT FOR THE MIDDLE DISTRICT OF PENNSYLVANIA, 2015 U.S. Dist. LEXIS 155576 (M.D. Pa. November 18, 2015) (Rambo, J.)

Prior decisions in this case can be found here and here.

 

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