JUNE 2009 BAD FAITH CASES WHERE THERE IS NO “OCCURRENCE” AND NO COVERAGE, THERE CAN BE NO BAD FAITH (Philadelphia Federal)
In Specialty Surfaces International, Inc. v. Continental Casualty Company, the court found that the underlying claims were in the nature of a breach of contract, and not negligence; thus there was no occurrence under Pennsylvania law (which law the court applied after a choice-of-law analysis), and no coverage.
“Without any obligation under the policy, the defendant cannot have acted in bad faith or in breach of its duty of good faith and fair dealing.”
In reaching its conclusion that faulty workmanship is not an occurrence, the court relied upon an important triad of coverage cases addressing what constitutes an occurrence, Kvaerner Metals Division of Kvaerner U.S. v. Commercial Union Ins. Co., Millers Capital Ins. Co v. Gambone Brothers Development Co., and Nationwide Mutual Ins. Co. v. CPB International, Inc.