JANUARY 2015 BAD FAITH CASES: WHERE NO COVERAGE IS DUE AN INSURER HAS GOOD CAUSE TO DENY COVERAGE, AND THUS A BAD FAITH CLAIM CANNOT STAND (Philadelphia Federal)
In Guglielmelli v. State Farm Mut. Automobile Insurance Company, the insured brought breach of contract and bad faith claims seeking damages for bodily injury under an automobile insurance policy. The policy incorporated a “sign-down form,” which reduced the uninsured/underinsured motorist limits. The plaintiff was listed as the first-named insured, but did not execute the sign-down form. Rather, the plaintiff’s co-resident, listed as a second-named insured, executed the form.
The first-named insured argued that the form was not binding, and further argued that a stacking waiver executed on a second, single-vehicle policy did not prohibit inter-policy stacking, nor did the “household exclusion” under that policy apply. The court found that the sign-down form was enforceable, and that the stacking waiver and exclusion found within the second policy prevented inter-policy stacking of coverage. Thus, the court ruled that there was no coverage.
Having so ruled, the court granted judgment for the insurer on the bad faith claim. Quoting the Third Circuit’s opinion in Frog, Switch & Mfg. Co. v. Travelers Ins. Co.: “Bad faith is a frivolous or unfounded refusal to pay, lack of investigation into the facts, or a failure to communicate with the insured.” Thus, “[w]here the policy does not provide for the specific coverage requested, an insurer has good cause to deny that coverage.”