SEPTEMBER 2012 BAD FAITH CASES: COURT DISMISSES INSURED’S BAD FAITH CLAIM BECAUSE CARRIER’S EXPLANATION OF DAMAGES AND “INDEPENDENT ADJUSTER” TITLE GIVEN TO CARRIER’S EMPLOYEE DID NOT AMOUNT TO BAD FAITH (Western District)

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In Timothy v. State Farm Fire & Cas. Co., the court heard a carrier’s motion to dismiss several of its insureds’ claims stemming from a dispute over damages caused to the insureds’ home by a wind and hail storm.
After being notified of the damage, the carrier sent its Independent Adjuster to inspect the insureds’ home. The insureds were thereafter mailed a check for $250.80, the total damages assessed minus a $500 deductible. The insureds informed the carrier that this amount was insufficient. The Independent Adjuster sent them a letter detailing the damage he observed during his inspection of the home. He concluded that the alleged damages were not caused by severe weather, but poor installation, wear, old roofing and rocks that flew from the insured’s lawn mower.

The insureds brought suit, alleging breach of contract, breach of good faith and fair dealing, statutory bad faith and consumer protection law violations. The carrier removed the case to federal court and filed a motion to dismiss all counts except the insureds’ claim for breach of contract.

The carrier argued that the breach of good faith and fair dealing claim was merely a breach of contract claim re-cast as a tort action. The court agreed, finding that no common law tort claim for bad faith exists under Pennsylvania law.

With respect to the statutory bad faith claim, the carrier argued that the claim contained insufficient factual allegations. The insureds disagreed, arguing that the carrier “attempted to deceive” them by “having their employees sign letters . . . with the title ‘Independent Adjuster’ when the employees were clearly not independent.” They also alleged that the carrier falsely claimed in bad faith that the damage to their siding was caused by “stones . . . ejected from a lawn mower.”

The court ruled for the carrier, dismissing the insured’s bad faith claim. First, the court reasoned, the carrier’s letterhead prominently displays its name and its correspondence clearly indicates that the Independent Adjuster was working for them. Second, the court found that the insureds’ factual allegations were underdeveloped for the purposes of a bad faith claim, but may relate to their breach of contract count.
The court therefore dismissed the insureds’ bad faith claim and remanded the case back to state court.

Date of Decision: August 23, 2012

Timothy v. State Farm Fire & Cas. Co., 12-cv-732, 2012 U.S. Dist. LEXIS 119698, U.S. District Court for the Western District of Pennsylvania (W.D. Pa. Aug. 23, 2012) (McVerry, J.)

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