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The case involved a skylight atrium collapse in an apartment building. The policy at issue provided coverage for collapse, but only within certain exceptions. The insured property owner asserted these policy exceptions applied to create coverage.

The insurer sought summary judgment on plaintiff’s breach of contract and bad faith claims.

On coverage, the court ruled a factual issue remained on whether the decay at issue was hidden. If hidden, there would be coverage. Thus, summary judgment could not be rendered on this exception.  On the other hand, summary judgment was rendered as to a windstorm exception, as the record showed the damages could not have been the result of wind.

Next, the court granted summary judgment on the bad faith claim. The insured unsuccessfully asserted that the record supported claims that the insurer (1) failed to investigate, and (2) denied coverage for the loss absent any evidence the damage was not hidden.

As to the investigation, Eastern District Judge Marston observed that the insurer conducted an immediate investigation, and hired an adjuster and structural engineer as part of that investigation. Both professionals found evidence the decay was not hidden. Rather, their reports found the insured knew or should have known about the deterioration and decay, adducing visible signs of decay in post-collapse photographs, and the presence of roofing mastic that demonstrated a state of disrepair.

Expert reports of this kind provide a reasonable basis to deny coverage, and preclude actionable bad faith claims.  Judge Marston relied upon Judge Robreno’s 2020 Gethsemane opinion, summarized here, and 2011 El Bor opinion, summarized here, to support this conclusion.

In granting summary judgment on bad faith, Judge Marston states the insured “fails to point to any evidence from which a jury could clearly and convincingly find that [the insurer] lacked a reasonable basis for denying benefits and knew or recklessly disregarded its lack of a basis….”

Date of Decision:  October 26, 2021

Covenant Realty v. Westminster American Insurance Co., U.S. District Court Eastern District of Pennsylvania No. 2:20-CV-00301-KSM, 2021 WL 4963519 (E.D. Pa. Oct. 26, 2021) (Marston, J.)