JULY 2012 BAD FAITH CASES: COURT RULES THAT BAD FAITH COUNT SHOULD NOT PROCEED TO DISCOVERY BECAUSE CARRIER WAS NOT REQUIRED TO INDEMNIFY INSUREDS (Middle District)
In Borough of Moosic v. Darwin Prof’l Underwriters, Inc., the court heard a carrier’s motion to dismiss filed in response to an insured’s complaint seeking declaratory judgment and bad faith damages. The case stemmed from an underlying civil rights action between an aggrieved couple and the Pennsylvania municipality that allegedly violated their freedom of speech.
As a result of the suit, the insured defendants in the underlying action sought coverage pursuant to their “Public Officials Liability” policy with the carrier. However, the carrier denied coverage because the incidents leading to the underlying lawsuit predated the inception date of the policy. The insureds argued that the carrier owned them indemnification and defense because the alleged civil rights violations were “related claims” that should be treated as a single claim post-dating the commencement of the insurance policy.
The court ruled that the insureds were not entitled to indemnity and defense, granting the carrier’s motion for dismissal. Because the insureds were not entitled to indemnity or defense, a finding of bad faith would be inconsistent with the court’s holding. As such, the court held that the insureds’ bad faith claim should not proceed to discovery.