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In Seto v. State Farm Insurance Company, the court heard a carrier’s motion for summary judgment in response to an insured’s claim for breach of contract and bad faith. The case arose from two fires that destroyed the insured’s home. The insured sought to recover under its homeowner’s insurance policy. After a year of investigation, the carrier proposed $116,321.67 in benefits, which represented the actual cash value (“ACV”). However, the insured’s contractor found that the replacement cost value (“RCV”) was $208,061.01.

Soon thereafter, there was a second fire in the insureds’ home, which caused additional damages. The carrier issued $43,635.02 to the insureds for the damages caused by the second fire. The insureds acquired a second estimate, but did not apprise the carrier until after the suit was filed.

In late 2009, the carrier tendered $157,717.00 to the insureds and also paid additional life expenses (“ALE”) benefits totaling $30,425.01. The insureds then brought suit for bad faith and breach of contract. The carrier moved for summary judgment.

First, the court examined the insureds’ allegation that the carrier delayed in tendering payment under the policy, amounting to bad faith. Specifically, the insureds argue that although the carrier was provided with the second estimate in 2009, it did not respond until 2011. The record, however, indicates that the insureds never personally submitted the second estimate. In fact, the carrier only received a copy when the insureds served their complaint in late 2010. The court, therefore, found that the delay was directly caused by insureds’ failure to personally delivery the estimate to the carrier.

Second, the court analyzed the insureds’ claim that the carrier low-balled its offer that was significantly lower than other estimates the insureds obtained. After the first fire, the carrier immediately inspected the property, created an itemized estimate of damages, and promptly paid $116,321.67 to Plaintiffs. Then, when the carrier received a higher estimate from the insured’s contractor, it agreed to review and consider that estimate. However, before the carrier could consider the estimate, a second fire occurred. Because the second fire appeared to be purposeful, an investigation ensured. Afterwards, the carrier paid an additional $43,635.02 to the insureds for their home. Thereafter, the carrier reviewed and considered the second estimate and issued a supplemental payment of $29,000.00.

In support of their claim for additional benefits, the insureds procured an expert report on the quality of the carrier’s valuation loss, finding it “incomplete in the extreme.” However, the expert’s report was not supported by an affidavit or declaration, and under Third Circuit case law this was required to consider an expert report in the context of a summary judgment motion. As such, the court deemed the report “not competent to be considered.” Even if considered, the court found that the expert report would not have created a material issue of fact on bad faith.

Lastly, the court heard the insured’s argument for additional ALE while they were living in Florida. The court denied this claim, finding the carrier’s denial of additional ALE benefits to be objectively reasonable. Because the insured failed to produce sufficient documentation to support their claim for additional ALE benefits, they were not entitled to their claim. Therefore, the court granted summary judgment to the carrier on all counts.

Date of Decision: January 11, 2012

Seto v. State Farm Ins. Co., 855 F. Supp. 2d 424, No. 2:10-cv-00505, 2012 U.S. Dist. LEXIS 3306, (W.D. Pa. Jan. 11, 2012) (McVerry, J.)