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In Lockhart v. State Farm Mutual Automobile Insurance Company, the insured sued his insurer after it denied his vehicle theft claim.  The insured claimed that he had parked his truck outside of the grocery store, shopped for 30-45 minutes, discovered that his truck was missing, and immediately reported the theft to the police.  The insured’s policy covered theft but excluded coverage if the vehicle was stolen “by or at the direction of an Insured.”  The insured also purchased “GAP insurance” for the difference between the cash value of the vehicle and the amount owed on the note, which was approximately $10,000.00 at the time of the incident.

The insured told the claims representative that, at the time of the incident, his truck was locked and that there were two sets of keys – one in his possession and one hidden inside the center console of truck.  The insurer’s records indicated that the insured had made a vehicle theft claim four years earlier.  The insurer began an investigation of the claim, which revealed multiple suspicious facts.  In the weeks prior to the reported theft, the insured had visited several dealers in an effort to trade in his truck for a new one.

When the police officer who was investigating the incident asked the insured about additional keys to the truck, the insured told him that there was not a key inside the truck, which was inconsistent with his statement to the claims representative.  The police officer did not find any broken glass or other evidence of a break-in.  Additionally, two employees working outside of the grocery store had not noticed any suspicious activity around the time of the alleged theft.

The insurer requested an expert report regarding the truck’s anti-theft system.  The expert opined that there was only a “remote” possibility that the vehicle was stolen without the use of a key.  The expert determined that it would have taken at least thirty minutes to deactivate the alarm and start the vehicle, and that the use of a tow truck would have been noticed by others.  Additionally, the insured never provided his cell phone records as requested by the insurer, and the insured’s wife never contacted the investigator as repeatedly requested.

After completing its investigation, the insurer concluded that the loss “was not direct, sudden and accidental as defined under the policy,” and that the insured had made material misrepresentations during the presentation of the claim.  Accordingly, the insurer denied the claim.

The insured sued for statutory bad faith and breach of contract, and the insurer filed a motion for summary judgment.  In considering the motion for summary judgment, the court emphasized the insured’s heightened burden as well as the fact that a bad faith claim cannot succeed if the insurer acted reasonably.

The court stated, “Our courts have repeatedly held that an insurance company’s substantial and thorough investigation of an insurance claim, which forms the basis of its refusal to make or continue making benefit payments, establishes a reasonable basis that defeats a bad faith claim.”

The court concluded that the insurer performed a comprehensive investigation of the insured’s claim and that the investigation revealed sufficient information to make the insurer’s decision reasonable.  Accordingly, the court held that the insurer was entitled to summary judgment on the bad faith claim.

Date of Decision: February 16, 2010

Lockhart v. State Farm Mut. Auto. Ins. Co., 2:08-cv-993, United States District Court for the Western District of Pennsylvania, 2010 U.S. Dist. LEXIS 12992 (W.D. Pa. Feb. 16, 2010) (McVerry, J.).