JULY 2015 BAD FAITH CASES: (1) COURT DISMISSES BREACH OF IMPLIED DUTY OF GOOD FAITH AND FAIR DEALING CLAIM BECAUSE (i) IT CANNOT BE PLEADED SEPARATELY FROM A BREACH OF CONTRACT CLAIM AND (ii) BECAUSE THE ALLEGATIONS SUPPORTING THAT CLAIM WERE IDENTICAL TO THOSE SUPPORTING THE STATUTORY BAD FAITH CLAIM; AND (2) COURT ENTERS JUDGMENT FOR INSURER ON BAD FAITH CLAIM AFTER FINDING THAT INSURED, AS ASSIGNEE, RELEASED INSURER FROM ANY CLAIMS (Eastern District)
In Charbonneau v. Chartis Property Casualty Company, the court dismissed an assignee’s claims for breach of implied duty of good faith and fair dealing because it could not be pleaded separate from the breach of contract claim, and because it duplicated the statutory bad faith claim; and then dismissed the statutory bad faith claim because the assignor insured had released that claim in settling with the insurer.
The plaintiff had been living as a tenant in a historic home that was destroyed by fire. The plaintiff attempted to exercise an option under her lease to buy the property from the owner, who was involved in negotiations with his homeowner’s insurer in connection with the loss. After the homeowner reached a settlement with his insurer that would pay the property owner $18.5 million as a result of the fire, litigation ensued between the property owner and the plaintiff.
The plaintiff ultimately received $11 million of the $18.5 million settlement and title to the property, and an assignment of claims from the homeowner-insured.
The plaintiff then filed an action against the insurer, “claiming that [the insurer’s] dealings with [the property owner] were improper and that she, as assignee, has been wrongly denied millions of dollars in additional insurance proceeds owed to her to cover the cost of rebuilding” the property. The insurer filed a motion for summary judgment.
In entering judgment for the insurer on the breach of implied duty of good faith and fair dealing claim, the court stated that the duty of good faith and fair dealing “does not allow for a cause of action separate and distinct from a breach of contract claim.” Here, the plaintiff did just that by bringing a breach of implied duty of good faith claim as a cause of action independent of her breach of contract claim.
Further, the court pointed to Third Circuit case law for the proposition that “a party is not entitled to maintain an implied duty of good faith claim where the allegations of bad faith are ‘identical to’ a claim for ‘relief under an established cause of action.’”
The court found that here, “the allegations of bad faith that [the insured] uses to support her implied duty of good faith claim are identical to those with which she supports her § 8371 claim … which is indeed an established cause of action.” Thus, because the allegations of implied bad faith duplicated the allegations of statutory bad faith, the court entered judgment for the insurer on the implied duty of good faith claim. [This same court made a similar ruling in May of this year.]
The court next addressed the insured’s statutory bad faith claim. The insured argued that as an assignee of the property owner, she has an interest in the proceeds of the policy and could therefore sue the insurer for refusing to pay those proceeds. While the case law allows for such an assignment, in settling with the insurer, the property owner insured had released the insurer “from any claims, demands, damages, actions or other forms of proceedings of any kind whatsoever of or for bad faith, including but not limited to claims under 42 Pa.C.S. § 8371, arising in any way” out of the property fire.
Thus, because the plaintiff stood in the shoes of the insured who could not bring such a claim himself, she could not prevail on the statutory bad faith claim. Alternatively, as there was no genuine dispute of material fact that the insurer’s refusal to pay the insured was either frivolous or unfounded, the court entered judgment for the insurer on the statutory bad faith claim.