JANUARY 2013 BAD FAITH CASES: COURT GRANTS SUMMARY JUDGMENT TO CARRIER ON BAD FAITH CLAIM BECAUSE ITS INVESTIGATION WAS COMPLETE AND INSURED’S UNFAIR CLAIMS SETTLEMENT PRACTICES CLAIM WAS INAPPOSITE
In Swan Caterers, Inc. v. Nationwide Mut. Fire Ins. Co., the court heard a carrier’s summary judgment motion in response to its insured’s breach of contract and bad faith claims. The suit arose from direct physical loss and damage that the insured’s place of business sustained as a result of a wind and rainstorm. However, the carrier’s adjuster reported that the damage was caused by faulty construction. The carrier thereafter denied coverage.
In response the insured commenced this lawsuit, arguing (1) that it sustained harm when the carrier failed to properly investigate its claim and (2) that the carrier waived its suit limitation clause through continued investigation into the damaged property, and is estopped from asserting the provision as a defense. The court disagreed with both arguments, reasoning that “harm” to the insured must be physical loss or damage to property and that the carrier never indicated that it would not enforce the suit limitation clause. The court also held that the carrier’s failure to inform the insured of the provision is irrelevant because a carrier is under no obligation to remind its insureds of a suit limitation clause contained in the policy.
With respect to the carrier’s alleged bad faith, the insured claimed that (1) the carrier conducted an insufficient investigation into the damage and that (2) alleged Unfair Claims Settlement Practices Regulation (UCSPR) violations supported a claim for bad faith. The court disagreed, reasoning that the carrier could not have viewed the original damage because the insured conducted repairs before the carrier’s adjuster visited the premises. Moreover, allegedly contradictory statements made by the carrier’s adjuster were unsupported by factual evidence. The court also held that UCSPR claims are inapposite to the insured’s bad faith claims, following other federal cases and some state cases for the proposition that violations of this Act cannot be the basis for a private cause of action and cannot be considered in the section 8371 context. As such, the court granted summary judgment to the carrier.
Date of Decision: November 13, 2012
Swan Caterers, Inc. v. Nationwide Mut. Fire Ins. Co., No. 12-cv-00024, 2012 U.S. Dist. LEXIS 162305, U.S. District Court for the Eastern District of Pennsylvania (E.D. Pa. Nov. 13, 2012) (Yohn, J.)