MARCH 2009 BAD FAITH CASES NO BAD FAITH WHERE NO DUTY TO DEFEND FOR BREACH OF IMPLIED WARRANTY OF HABITABILITY; SUCH BREACH IS NOT PROPERTY DAMAGE UNDER HOMEOWNER’S POLICY (Third Circuit)
In Prudential Property and Casualty Insurance Company v. Boyle, the court affirmed the lower court’s summary judgment for the insurer, concurring that there was no duty to defend or indemnify the insured in an underlying case for breach of an implied warranty of habitability and, therefore, no bad faith.
This case involves an underlying case against the insured for several claims, including breach of the implied warranty of habitability relating to the poor condition of the house they sold. The insurer denied a defense under the homeowners’ policy and filed this case for a declaratory judgment on the matter, prompting the insured to file for breach of contract and bad faith.
The court agreed with the lower court’s determination that the underlying case did not trigger coverage under the policy because a claim for breach of the implied warranty of habitability is not for property damage caused by a loss; it is, instead, for an economic loss arising from the contract of sale. Without coverage, there is no duty to defend or indemnify and, without such a duty there can be no bad faith.