OCTOBER 2015 BAD FAITH CASES: COURT GRANTS INSURER’S MOTION FOR SUMMARY JUDGMENT ON BAD FAITH CLAIMS AFTER FINDING THAT CLAIMS WERE TIME-BARRED AND WITHOUT MERIT (Philadelphia Federal)

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In Blackwell v. Allstate Insurance Company, the Court dismissed the insured’s bad faith claim as time barred after the insured failed to establish an exception to the statute of limitations applied, independent of the whether the bad faith claim was without merit.

The insured’s complaint alleged that in March 2011, his home suffered water damage when a shut-off valve in a second floor bathroom failed. The insured hired a public adjuster as well as a water remediation company to mitigate the damage. Before the insurer could conduct its inspection of the property, the remediation company began tearing out portions of the insured’s property.

A representative of the insurer inspected the property and documented both the water damage and the tear-out in progress by the remediation company. On the day of the inspection, the insurer’s representative retained an engineer to determine whether the tear-out work constituted unnecessary demolition.

The insured subsequently fired the public adjuster and was advised by the insurer of the need to set up a claim for vandalism, as it had determined that the tear-out work was unnecessary and destructive. The insurer’s representative prepared two estimates in June 2011, and issued checks for damage caused by the shut-off valve and damage caused by the remediation company.

In November 2012, the insured requested replacement of his furnace, claiming that it was inoperable due to the shut-off valve failure that occurred in March 2011. The insurer acknowledged that it had included money to service, but not replace, the furnace in its previous estimate.

The insurer denied the claim and explained that an unreasonable amount of time had passed between the initial claim and discovery of damage to the furnace. The insured filed suit in November 2013, a year after the insurer denied the furnace replacement claim.

The insured alleged statutory bad faith. The insurer argued that the claim was time barred and without merit, as the insurer “acted promptly, provided a proper investigation, provided replacement value indemnification for an agreed upon amount, and had a reasonable basis for its coverage decisions.”

The court noted that the insured had until July 2013 to timely file this suit, as the final check was issued in July 2011, yet the insured did not offer any explanation as to why he waited until the statute of limitations had passed. The insured contended that he was “deceptively lulled into inaction” and argued that that the doctrine of equitable estoppel should apply to preclude the insurer from claiming the defense of untimeliness. However, the court could not find any evidence to show that the insured was misled in any way, and dismissed the bad faith claim as time barred.

Moreover, the court went on to find that the bad faith claim was without merit even if it was not time barred, as no evidence showed that the insurer failed to promptly and reasonably investigate the insured’s claims, or unduly delayed in determining or providing coverage. Further, the insured could not point to any evidence demonstrating that the insurer knew or should have known that the checks issued were inadequate to complete all necessary repairs. Thus, the court reasoned that it would grant the insurer’s motion for summary judgment on the merits had it not found that the claims were not timely filed.

Date of Decision:  August 31, 2015

Blackwell v. Allstate Ins. Co., CIVIL ACTION NO. 14-878, 2015 U.S. Dist. LEXIS 115155 (E.D. Pa. August 31, 2015) (Rufe, J.)

 

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