JUNE 2015 BAD FAITH CASES: FIRST PARTY BAD FAITH CLAIM FAILS AS A MATTER OF LAW WHEN AN INSURER IS GRANTED SUMMARY JUDGMENT ON THE BREACH OF CONTRACT CLAIM (New Jersey Federal)
In 151 E. Leaming Ave Condo Ass’n v. QBE Specialty Ins. Co., the insured’s bad faith claim failed as a matter of law because the Court had already entered summary judgment in favor of the insurer as to the insured’s breach of contract claim.
The underlying suit arose after the insured’s property was damaged during Superstorm Sandy. The insured filed suit against its insurer, claiming breach of contract and breach of the implied covenant of good faith and fair dealing/bad faith. In support, the insured alleged that the insurer “failed to pay insurance benefits due and owed under its policy.” The commercial policy at issue contained water exclusion for property coverage. After investigating the insured’s claim, the insurer determined that the property loss was caused by a flood and denied the claim pursuant to the water exclusion.
The insured argued that the property damage was caused by wind, not water, and obtained an expert report to support this conclusion. The insurer filed for summary judgment. It took the position that the expert report should be stricken based on impermissible “net opinions.” Additionally, the insurer argued that the insured’s expert had no experience with regard to evaluating wind or flood damage, and that his observations as a lay witness did not create a genuine issue of material fact. The Court agreed and ordered the expert report to be stricken.
The Court then considered additional evidence and arguments submitted by plaintiff, but found these too did not create genuine issues of material fact, and granted the insurer summary judgment on the breach of contract claim. The Court found that the insured presented “no competent evidence to permit a rational factfinder to conclude that wind and not water caused plaintiff’s damage.” Thus, the water exclusion applied and summary judgment was granted.
The Court then considered the insured’s bad faith claim, and noted that “in order to establish a bad faith claim, an insured must have been granted summary judgment in their favor on the issue of coverage.” Because the insurer was granted summary judgment as to the insured’s breach of contract claim, the Court found that the insured’s bad faith claim failed as a matter of law.