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This case involves a motion to dismiss the insured’s bad faith claim.

In carrying out the analysis under Twombly/Iqbal, Judge Kenney states that a “Court must also use its judicial experience and common sense when analyzing a motion to dismiss ….” Specifically, “[i]n the context of breach of insurance contract claims that also contain a count for bad faith, the Court must do away with a robotic reading of Twombly and Iqbal and instead use its common sense when addressing whether a bad faith claim can survive a motion to dismiss.”

This blog post includes a few notes which are not intended to be conclusive or exhaustive on the wide range of interesting issues raised in the court’s opinion, but are added as some starting points for discussion on a few of those issues.


In this case, the insured suffered a property damage loss and alleged the insurer refused to pay the claim in bad faith. Specifically, the insured alleged the insurer’s bad faith conduct included:

  1. Sending correspondence falsely representing that Plaintiff’s loss caused by a peril insured against under the Policy was not entitled to benefits due and owing under the Policy;

  2. [F]ailing to complete a prompt and thorough investigation of Plaintiff’s claim before representing that such claim is not covered under the Policy;

  3. [F]ailing to pay Plaintiff’s covered loss in a prompt and timely manner;

  4. [F]ailing to objectively and fairly evaluate Plaintiff’s claim;

  5. [C]onducting an unfair and unreasonable investigation of Plaintiff’s claim;

  6. [A]sserting Policy defenses without a reasonable basis in fact;

  7. [F]latly misrepresenting pertinent facts or policy provisions relating to coverages at issue and placing unduly restrictive interpretations on the Policy and/or claim forms;

  8. [F]ailing to keep Plaintiff or their representatives fairly and adequately advised as to the status of the claim;

  9. [U]nreasonably valuing the loss and failing to fairly negotiate the amount of the loss with Plaintiff and their representatives;

  10. [F]ailing to promptly provide a reasonable factual explanation of the basis for the denial of Plaintiff’s claim;

  11. [U]nreasonably withholding policy benefits;

  12. [A]cting unreasonably and unfairly in response to Plaintiff’s claim;

  13. [U]nnecessarily and unreasonably compelling Plaintiff to institute this lawsuit to obtain policy benefits for a covered loss, that Defendant should have paid promptly and without the necessity of litigation.


After reviewing motion to dismiss standards under Federal Rules 1, 8, and 12, the court stated that it “must do away with a robotic reading of Twombly and Iqbal and instead use its common sense when addressing whether a bad faith claim can survive a motion to dismiss. When the Court applies its common sense in analyzing a bad faith claim, here, it becomes apparent that Plaintiff’s bad faith claim survives Defendant’s Motion to Dismiss.”

In beginning its analysis, the court set out the three required steps in analyzing a motion to dismiss: (1) are the elements of a claim stated; (2) identifying conclusory allegations that are not entitled to an assumption of truth; and (3) assuming the veracity of well-pleaded facts and determining if these facts give rise to plausible rights to relief. Judge Kenney further observed that “[a] claim may survive a motion to dismiss if it ‘pleads sufficient factual allegations to raise a reasonable expectation that discovery will reveal evidence’ which supports the claim’s elements.”

The court also recited the basic elements of a bad faith claim: (1) the absence of a reasonable basis to deny a benefit; and (2) a knowing or reckless disregard for this lack of a reasonable basis.

The court then set out the following specific bad faith pleading principles in reaching its conclusion.


  1. “[B]ad faith claims are inherently intertwined with breach of insurance contract claims.”

  2. “If an insurance company denies a claim and a plaintiff truly believes it was unreasonable, then a bad faith claim only logically follows the underlying breach of contract claim.”

[Note: Some cases have observed that the insured’s subjective belief in the insurer’s unreasonableness is not adequate to state a claim; rather, there must be facts pleaded that can lead to an objective inference of bad faith in handling the insureds claims. See, e.g., Grustas (summarized here), Clarke (summarized here), Bodnar (citing Williams v. Hartford, summarized here), and Robbins (summarized here). Also supporting the notion that a subjective belief is not alone sufficient, and that adequate facts must be pleaded from which to draw objective inferences, is the Third Circuit’s note in Allstate v. Squires “that our experience in addressing Pennsylvania insurance coverage disputes has demonstrated that insureds tend to bring bad faith claims when insurers reject their claims even though there are legitimate disputes over whether the claims are covered.”]

  1. “Plaintiff pleading facts pertaining to the breach of contract are also facts that suggest the denial was unreasonable, which goes to satisfying the first element of a bad faith claim under § 8371.”

[Note: There are other cases appearing to hold that the alleged breach of contract alone is not a basis by itself to infer bad faith, e.g., Kiessling, Wyoming Valley FOP, and Sherman.]

  1. “Although there is a logical connection between a breach of contract and bad faith claim, it is virtually impossible for a plaintiff to know whether a defendant insurance company actually acted in bad faith when denying the plaintiff’s claim.” This is relevant to the second element, knowing or reckless indifference element of a bad faith claim.

  2. “A plaintiff is not in a position to specifically factually plead the second element because those facts go to the insurer’s state of mind. This information is clearly not available to a plaintiff at the time of the filing of the complaint.”

  3. “This [lack of information] is an obstacle that a plaintiff may never overcome because the defendant holds the evidence of bad faith.”

  4. “The bad faith aspect of an insurance matter will never fully materialize to a plaintiff until discovery is completed.”

  5. “The only aspect of a bad faith claim that a plaintiff can legitimately plead that is within its purview is the length of time the insurance company took to deny the plaintiff’s claim.”

[Note: It seems possible, e.g., that an insured may also have information concerning communications with an insurer about the insurer’s reasoning in denying a claim. Insureds will provide at least an original notice of the claim to the insurer, and will typically follow up with communications on the claim’s status. These communications may originate with the insured, the insured’s counsel, or the insured’s own adjuster or expert, and can be described in a pleading. If there are no communications from the insurer in response to the insured’s communications, or no visits from the insurer to inspect and investigate the damages or claim at issue, then the insured can likewise plead its knowledge of the insurer’s failure to respond to such specific communications or to investigate the claim.]

  1. “Other than the length of time, a plaintiff will never know whether a denial was done in bad faith, i.e., whether the insurance company denied the plaintiff’s claim knowing it did not have a reasonable basis to do so.”

[Note: Imagine a scenario where a portion of a building fails, and the issue is whether it failed due to wear and tear over a period of decades. The insured makes a claim and the insurer promptly sends out an expert engineer to inspect the damage. The expert prepares a report in short order, that identifies wear and tear as the cause of loss. The insurer writes to the insured that its expert engineer indicated there was a failure due to decades of wear and tear, there is a policy exclusion for wear and tear, and thus coverage is denied.

The insured is in a position to engage its own expert to review that conclusion, or it could demand coverage without any countervailing expert opinion on a theory the exclusion does not apply. If the insured were to obtain a countervailing expert opinion or offer an argument as to why the exclusion did not apply, the insured could plead these facts in its complaint concerning the dispute over causation or the scope of the exclusion, and why the insurer’s position is unreasonable on the facts or the law.]

  1. “The crucial undiscovered facts would only show themselves in discovery.”

  2. “It is inequitable for an insurance company to hold all the facts pertaining to a bad faith claim and then move to dismiss the bad faith claim because the plaintiff did not have access to specific facts to plead bad faith.”


  1. If the motion to dismiss is not granted, “there would no greater burden on the parties.”

  2. “The discovery needed to flesh out a breach of insurance contract claim is the same discovery needed to investigate the related bad faith claim.”

  3. “There would be no extra discovery nor any extra costs on the parties in order to determine whether the insurer acted in bad faith.”

[Note: While there is some overlap in facts relevant to both coverage and bad faith, the evidence needed to prove the two claims is not necessarily identical. Imagine a breach of contract/bad faith case where the insurer denied coverage based upon its interpretation of a policy exclusion. The exclusion’s applicability hinges on a disputed fact outside of the insurer’s control, such as the date the key event occurred, whether the insured was acting in the course and scope of employment, whether a substance constitutes a pollutant as a matter of law, whether the insured’s act was intentional from the point of view of the insured, etc.

Determining the nature of that one factual issue will determine the coverage/breach of contract claim. This fact has an independent existence. It is not created or determined by the insurer’s claim files, adjuster communications with the insured, expert opinions on claims procedures, etc., but by physical reality at the time of the event at issue. The contents of these materials may go to bad faith, but they do not appear necessary to proving the existence of the key fact that will determine the breach of contract itself.]

  1. “[I]f the insurance company did not act in bad faith, then it can move to dismiss the bad faith claim at the summary judgment stage after discovery has been completed.”


  1. “[W]hen pleading a bad faith claim in conjunction with a breach of insurance contract claim that is sufficiently pled, the defendant is on notice as to what needs to be defended.”

  2. “A bad faith claim in conjunction with the breach of contract claim does not change the facts or issues of the case.”

  3. “On the contrary, facts in a complaint alleging a breach of insurance contract normally support a plaintiff’s allegation that the defendant acted in bad faith.”

  4. “These facts properly put the defendant on notice as to what it needs to defend against.”


  1. “[J]udging the sufficiency of a pleading is a context-dependent exercise.”

  2. “Some claims require more factual explication than other to state a plausible claim for relief.”

  3. “An insurance bad faith claim is in the category of claims that require less factual explication.”

[Note: This aspect of the opinion may be compared to other opinions on adequately pleading bad faith where the pleading was found inadequate, e.g. these recent opinions: Judge Slomsky’s February 2019 opinion in Kiessling, these three opinions issued by Judge Caputo in February 2019, Judge Leeson’s McDonough opinion from February 2019, Judge Darnell Jones’ opinion in Das from December 2018, Judge Rambo’s opinions in Winslow from December 2018 and Rickell in November 2018, and Judge Fischer’s Rosenberg opinion from July 2018.]

  1. “[E]ach bad faith claim should be analyzed according to the potential facts available to the plaintiff at the time of the filing of the complaint and must depend on the context of each case.”


Applying the foregoing principles, the court first recognized that the plaintiff was not attempting to argue that a failure to immediately pay policy limits was bad faith. Rather, the court observed that “Plaintiff’s Complaint generally pleads bad faith.” Plaintiff alleges it suffered covered damages to insured property and gave prompt notice of its loss. The complaint alleges that the insurer has refused multiple demands for payment over a period of time without any legal basis or cause in refusing to pay benefits.

The court found these to be factual allegations, and not conclusory allegations. As such, these allegations must be accepted as true, the court must assume the alleged damages were covered under the policy, and therefore it must be assumed as true that the insurer refused to pay money owed on covered claims.

The court recognized that the allegations were “broad and not very specific”; however, they still “support a bad faith claim because of the Court’s responsibility to draw reasonable inferences from well-pled factual allegations.” Thus, “Plaintiff’s factual allegations, in conjunction with the allegations pertaining to bad faith conduct, support the reasonable inference that Defendant knew it lacked a reasonable basis to deny Plaintiff’s claim, thereby acting in bad faith when it denied Plaintiff’s claim.” In addition, “[t]he allegations in Plaintiff’s Complaint also raise a reasonable expectation that discovery will uncover proof that Defendant acted in bad faith.”

[Note: Here are links to categories of opinions summarized on this Blog where federal pleadings were considered adequate and inadequate.]

Finally, it is interesting to compare Judge Kenney’s opinion in this matter to the first few sentences of Judge Kearney’s opinion in the 2017 Sherman case, quoted here, even with the factual distinctions in the two cases:

“Pennsylvanians suing their automobile insurer for failing to pay their insurance claim may allege breach of the insurance policy and bad faith under a Pennsylvania statute. They are not the same claim. Alleging bad faith requires showing how the insured acted unreasonably both in denying the policy benefits and later ignoring its unreasonable denial.  When, as today, the insured pleads facts from over two years ago which detail the insurer’s responsive steps but then fail to allege a single fact thereafter to describe why the claim is not paid other than concluding the claim is not paid, we are left without a basis to understand if the insurer acted in bad faith. Failure to pay a claim may be a breach of contract but is not bad faith without pleading specific facts as to the insurer’s repsonses to the claim.”

Date of Decision: March 4, 2019

1009 Clinton Properties, LLC v. State Farm Fire & Casualty Co., U. S. District Court Eastern District of Pennsylvania Civil Action No. 18-5286, 2019 U.S. Dist. LEXIS 33668, 2019 WL 1023889 (E.D. Pa. Mar. 4, 2019) (Kenney, J.)