Plaintiff’s claim arose out of the collapse of a milk silo on plaintiff’s property. Plaintiff purchased a milk silo and obtained an insurance policy for the silo with the insurer. The plaintiff informed the insurer that the silo had collapsed before. The insurer conducted a loss risk assessment and did not find any defect in the silo’s design. Subsequently, the milk silo collapsed and plaintiff filed a claim for the loss.
The insurer hired an engineer who determined the collapse was caused by a design defect in the silo. The insurer denied the claim because the collapse was caused by a design defect which is specifically excluded from coverage by the terms of the policy. Plaintiff claimed that it did not receive a copy of the additional policy form with this exclusion until after the collapse.
Plaintiff filed a two count suit against the insurer and alleged that the insurer acted in bad faith. The insurer then filed a motion to dismiss the bad faith claim. The court found that that plaintiff’s complaint was sufficient to state a claim of bad faith.
Plaintiff alleged that the insurer denied the claim on the basis of a policy exclusion not previously disclosed to plaintiff and thus not enforceable. Also plaintiff alleged that the insurer hired an inspector charged with the duty of classifying plaintiff’s loss under the policy exclusion. Both of these allegations in the complaint involve unreasonable conduct on the part of the insurer arising out of the insurance policy.
Thus to the extent that plaintiff alleges the insurer acted in bad faith by breaching the terms of the policy, this claim is cognizable under the bad faith statute.
However, plaintiff also advanced bad faith allegations outside the scope of the bad faith statute. Plaintiff claimed that the insurer had an obligation to inform them that the silo was defectively designed or provide coverage for design defects leading to collapse. This claim is not cognizable under the bad faith statute because it relates to actions prior to issuing the policy, and the bad faith statute only applies to actions arising out of the insurance company’s performance pursuant to the insurance contract.
Therefore the court granted the insurer’s motion for summary judgment in part with regard to the allegations outside the scope of the bad faith statute and denied the motion in part with regard to the cognizable bad faith claims.
Date of Decision: April 23, 2008
Harrisburg Dairies, Inc. v. Selective Ins. Co. of Am., 2008 U.S. Dist. LEXIS 33381 (M.D. Pa. Apr. 23, 2008)(Rambo, J.)