The insureds sought a declaration of their right to the advancement of their defense expenses in a related action and alleged that the insurer’s refusal to advance their defense expenses constituted bad faith.
First, the court determined that coverage should have been extended to the insureds based on the unambiguous language of the policy. Next, the court looked to whether or not the decision to deny coverage constituted bad faith. Both parties sought summary judgment on the bad faith issue and relied on the deposition testimony of the claims examiner who denied coverage.
The court noted that at the summary judgment stage, the plaintiff must demonstrate bad faith by clear and convincing evidence, and the court is required to view the record in the light most favorable to the non-moving party. As a result of these standards, the court determined that the insurer’s denial of coverage was negligent by clear and convincing evidence, but when viewed in the light most favorable to the non-moving party, a jury could conclude that the denial of coverage was simply due to error. Therefore, the summary judgment motions filed by each party were denied.
Date of Decision: June 27, 2007
McPeek v. Travelers Casualty and Surety Company of America, United States District Court for the Western District of Pennsylvania, No. 2:06-cv-114, 2007 U.S. Dist. LEXIS 46628 (W.D. Pa. June 27, 2007) (McVerry, J.).