INSURER’S FAILURE TO FOLLOW UP ON ITS OWN INVESTIGATION IDENTIFYING AN ACTUAL LOSS, AND THEN REFUSING TO MAKE ANY PAYMENT, PLAUSIBLY ALLEGES BAD FAITH (Philadelphia Federal)
Eastern District Judge Padova permitted this first party property damage bad faith claim to proceed, finding the complaint’s allegations were not merely conclusory.
The insureds pleaded the following facts. They reported property damage to their insurer. The carrier hired a construction company to inspect the property, determine needed repairs, and calculate the loss. The contractor found the property’s foundation and structure were damaged, but “did not calculate the amount of the loss because [the insurer] needed to first determine ‘the extent of the corrective work conducted at or related to [a] neighboring property.’”
The insurer allegedly never made that determination, however, and then refused to pay for the plaintiffs’ known damages. The insureds retained their own expert who valued repairs at over $211,000.
Judge Padova found these allegations went beyond the kind of conclusory pleadings rejected by other courts.
He recognized the principle that: “Implicit in section 8371 is the requirement that the insurer properly investigate claims prior to refusing to pay the proceeds of the policy to its insured.”
Here, the insurer allegedly “acted in bad faith by failing to investigate in good faith and disregarding its own expert’s determination that the structure and foundation of the property were damaged.” Specifically, the complaint alleged the insurer retained an expert to investigate the property damage and then disregarded that expert’s damage assessment, “failed to determine the extent of the corrective work conducted at the neighboring property, refused to investigate the loss to determine what it would cost to repair the foundation and building structure of Plaintiffs’ property, failed to ascertain the amount of the loss, and failed to pay Plaintiffs for the damage to the exterior, foundation, and building structure of their property.”
These factual allegations plausibly stated “a claim for bad faith stemming from [a] failure to properly investigate the damage to Plaintiffs’ property prior to denying coverage.”