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Plaintiff brought suit stemming from the denial of a property loss claim.  Plaintiff had purchased a single commercial property located in Philadelphia which contained seven subunits including an office, multiple apartments and a barber shop.  Plaintiff advised his Allstate Agents that although he occasionally slept overnight in his office, he had a primary residence in New Jersey, which was insured under another policy.  A policy was issued for the commercial property providing coverage, inter alia, for the property, its contents and loss of use.  On August 1, 2004 the property was seriously damaged due to a fire.

Allstate denied the claim asserting that since plaintiff did not reside on the premises, it was not covered under the property’s insurance policy.  Allegedly, plaintiff did not know until after the claim had been denied that his Allstate agents had written the policy as a “homeowner’s policy” because that was the only way they could obtain coverage for all of the commercial properties.

Plaintiff subsequently brought suit against Allstate and his Allstate agents alleging that they had acted in bad faith.  Allstate subsequently filed a motion for judgment on the pleadings stating that plaintiff’s bad faith claim should be dismissed because plaintiff’s Answer to Allstate’s Counterclaims concedes that plaintiff resided in New Jersey and not at the property at issue.

In the alternative, Allstate argued that plaintiff’s bad faith claim should be dismissed because, at a minimum, its coverage determination was at least reasonable.  In response, plaintiff argued that if the terms of the policy precluded coverage, it was due to the failure of Allstate’s agents to obtain the appropriate policy and that Allstate could be found liable for bad faith if the loss is deemed to be compensable.

The Court noted that the issue on a motion for judgment on the pleadings is whether under any reasonable reading of the pleadings plaintiff has sufficiently alleged a claim.  Since Allstate was moving for a judgment on the pleadings, and not summary judgment, the Court held that it would be premature to conclude that plaintiff could not provide evidence at some point in the future that Allstate had acted in bad faith.

Scarpato v. Allstate Ins. Co., United States District Court for the Eastern District of Pennsylvania, No. 05-05520, 2007 U.S. Dist LEXIS 4585 (E.D. Pa. Jan. 23, 2007) (Yohn, J.)