JUNE 2010 BAD FAITH CASES NO BAD FAITH WHEN AN INSURER HAS REASONABLE BASIS TO DENY BENEFITS AND NO DELAY IN INVESTIGATION (Western District)
In Williams v. Allstate Insurance Company, the insureds owned residential property, for which they maintained a homeowners’ insurance policy. The initial amount of coverage was $60,000, but one day the insureds called their insurer to increase the coverage to $100,000 in light of the house’s remodeling and a new appraisal. A representative for the insurer allegedly said she would take care of the paperwork.
The insurer sent a representative to the house to verify that remodeling had been done, but the insureds were not home at the time. An electrical fire destroyed the house less than a week after the insureds called the insurer requesting for more coverage. The insurer offered to pay only $60,000, claiming that there was no agreement to increase the coverage to $100,000 at the time of the fire. The insureds then filed a lawsuit, alleging breach of contract and bad faith.
The court denied the insurer summary judgment on the breach of contract claim because there was a genuine issue of fact regarding whether the policy was orally modified. Also, a fax to the insureds shortly after the initial phone call indicated that the remodeling was not actually finished yet, and that the insureds were supposed to call the insurer once it was finished so the property could be inspected.
Concerning the bad faith claim, the insureds claimed that two bases for bad faith were (1) the failure to depose one of the insureds during the investigation, and (2) the insurer’s delay in concluding the investigation.
The court ruled that the one-month delay between the beginning of the insurer’s investigation and the decision was not unreasonable. It also determined that the insurer had a reasonable basis for denying benefits under the policy. The insurer concluded that the insureds were still in the process of remodeling their home, and thus the increase in coverage had not gone into effect when the fire occurred. Therefore, the court granted the insurer summary judgment on the bad faith claim.
Date of Decision: May 17, 2010
Williams v. Allstate Ins. Co., Inc., Civil Action No. 8-1160, United States District Court for the Western District of Pennsylvania, 2010 U.S. Dist. LEXIS 48160, (W.D. Pa. May 17, 2010) (Ambrose, J.).