JULY 2009 BAD FAITH CASES NO BAD FAITH WHERE A REASONABLE BASIS TO DENY COVERAGE EXISTS EVEN WHERE COURT FOUND DUTY TO EXIST (Philadelphia Federal)
In Post v. St. Paul Travelers Insurance Company, the court granted summary judgment to the insurer on a bad faith claim. This was the second of a series of three opinions issued in this case. In the final decision on a motion for reconsideration, the court stood by this and its earlier opinion.
(Case 3, 5/22/9); (Case 1, 1/7/9). The court observed that under Pennsylvania law, questionable conduct giving the appearance of bad faith is not sufficient to establish a bad faith refusal to provide coverage if the insurer had a reasonable basis for denying the claim. The insured’s allegations of misconduct could not amount to proof that the insured did not have a reasonable basis to deny coverage. So it could not meet the first prong of the bad faith test, i.e. the absence of a reasonable basis to deny coverage. In that case, even though the court had previously held that coverage was required, the insurer had a reasonable basis to deny coverage.