APRIL 2012 BAD FAITH CASES: COURT DENIES INSURED’S MOTION FOR RECONSIDERATION, WHICH REPEATED ARGUMENTS FROM THE PARTIES’ MOTION OPPOSING SUMMARY JUDGMENT (Middle District)

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The insured parties’ filed a motion for reconsideration of the court’s granting of the carrier’s motion for summary judgment. The action arose out of a coverage dispute between the insureds and their carrier after a fire at the insureds’ rental property.

In 2008, the insureds rented a home and purchased renter’s insurance from the carrier. In early 2009, the insureds moved from the rental home. Before the move was complete however, the insureds’ first rental home caught fire.

The cause of the fire was determined to be arson. After the fire, the insureds contacted the carrier to recover for damage to personal property left at the rental home during their move in 2009.

After discovering the cause of the fire, the carrier became aware of several “red flags” relating to the insureds’ claim. As a result, the carrier determined that further investigation of the claim was necessary. The insureds refused to cooperate with the investigation, prompting the carrier to deny coverage for personal property destroyed in the fire. The insureds filed suit and the carrier moved for summary judgment, which the court granted.

Turning to the insureds’ motion for reconsideration, the court recognized that the parties merely relied upon the same unavailing arguments that they had asserted during the summary judgment phase. The court reiterated that the existence of “red flags” may form the basis for an insurer’s investigation and that the insureds had a contractual obligation to comply with the insurer’s requests. This failure to cooperate, the court reasoned, was more than a technical departure from the terms of the policy, severely prejudicing the carrier’s interests. As such, it was not erroneous for the court to have granted summary judgment to the carrier.

Date of Decision: March 6, 2012

Verdetto v. State Farm Fire and Casualty Co., NO. 3:10-CV-1917, U.S. District Court for the Middle District of Pennsylvania, 2012 U.S. Dist. LEXIS 29593 (M.D. Pa. Mar. 6, 2012) (Caputo, J.)

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