FEBRUARY 2015 BAD FAITH CASES: COURT DISMISSES BAD FAITH CLAIM TO THE EXTENT IT SOUGHT EMOTIONAL DAMAGES UNDER THE BAD FAITH STATUTE, FINDING THE PENNSYLVANIA STATUTE PRESCRIBES SPECIFIC REMEDIES (Middle District)
In Hoffman v. State Farm Fire & Cas. Co., plaintiffs brought suit alleging a claim of breach of insurance contract and a statutory bad faith claim. Plaintiff purchased a homeowners’ insurance policy from the insurer, after which a fire rendered the home uninhabitable. The firefighters at the scene of the fire concluded the incident was accidental and electrical in origin. The loss was immediately reported to the insurer, who then began a year-long investigation into the cause and nature of the fire.
Plaintiffs alleged this investigation unreasonably cast suspicion upon them, and caused an unnecessary delay in the resolution of the claim. Furthermore, the insurer’s investigator removed electrical boxes and writing from the home without the homeowners’ permission.
The lengthiness of the investigation forced the plaintiffs to seek alternative housing, which they allege the insurer did not assist in obtaining, forcing them to live nearly 50 miles from their children’s school. Furthermore, the insurer delayed its payments of plaintiffs’ $150,000 claims, making an initial payment of only $59,000, and never paying the full value of the claim.
After plaintiffs filed suit, the insurer filed a motion to dismiss some of the claims set forth in the complaint. Specifically, the insurer sought dismissal of a claim for attorney’s fees based on the breach of contract claim, dismissal of any claim for emotional distress based on the bad faith actions of the insurer, dismissal of the breach of contract claim for inadequately describing the damages sought by plaintiff, and dismissal of the bad faith claim in its entirety due to failure to state a claim.
The Magistrate Judge recommended granting the motions to dismiss as to the attorney’s fees associated with the breach of contract claim, and any claim for emotional distress on the basis of the insurer’s bad faith, but denying the motion as to all other requests. In his opinion, the Magistrate Judge determined that under Pennsylvania law, attorney’s fees are not recoverable in a contract action absent an explicit provision allowing for such damages in the original contract.
Furthermore, no claim for pain, suffering, or emotional distress is permitted under the bad faith statute. Rather, the statute explicitly prescribes the relief available should an insurer act in bad faith, allowing for an award of interest on the amount of the claim from the time the claim was made at a prime rate of interest plus 3%, punitive damages, and courts costs and attorney fees. Therefore, damages for pain, suffering, and emotional distress simply cannot be recovered under the statute.