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The insureds brought a claim against their home insurance carrier under Pennsylvania’s Unfair Trade Practices and Consumer Protection Law (“UTPCPL”), to which the carrier responded with a motion to dismiss.

The claim stemmed from a fire that damaged the insureds’ residence in 2006. The damaged incurred was covered under its policy with the carrier, which investigated the damage. The carrier also recommended that the insureds select a contractor from their list of approved vendors, who were paid directly by the carrier. Unbeknownst to the insureds, the carrier had a financial stake in having its insureds utilize the services of participating contractors.

After selecting a contractor, who began working on the insureds’ home, the couple noticed that the quality of the work performed on their home was subpar. They also noticed that their property had been damaged and ordered the contractor to discontinue work. A Code Enforcement Officer later determined that the work was not in compliance with local building codes. Although the insureds paid for the work that had been done, they were forced to hire another contractor to complete the job, costing them $94,293.39.

The insureds commenced an action against the contractor in 2008, receiving a judgment against him. The insureds also commenced an action under the UTPCPL against their carrier, alleging that it engaged in deceptive practices. The carrier responded by filing a motion to dismiss.

Turning to the carrier’s motion, the court first held that the insureds had standing to sue the carrier because they had purchased “goods or services primarily for personal, family or household purposes” from the carrier as required under the UTPCPL statute.

As the insureds had relied upon representations about the carrier’s list of preferred contractors, there existed a causal connection between the carrier’s conduct and the detriment caused by the insureds’ reliance thereupon. The court denied the carrier’s motion on this issue.

Next, the court ruled that the insureds had properly alleged that the carrier engaged in fraudulent conduct, denying the carrier’s motion on this allegation. Specifically, the court ruled that the insureds had plausibly alleged misfeasance under the UTPCPL statute.

However, the carrier disagreed, arguing that, in the absence of breach of contract and bad faith claims, which were now past the statute of limitations, the insureds could not proceed. The carrier reasoned that the insureds were trying to “circumvent the applicable limitations periods by recasting…bad faith claims” as misfeasance under the UTPCPL. The court found this argument unavailing, finding that the carrier’s affirmative misrepresentations were not simple nonfeasance.

Lastly, the court ruled that the carrier’s conduct satisfied both the “fraudulent” and “deceptive” requirements of the UTPCPL statute, allowing them to proceed in their consumer protection action.

Therefore, the carrier’s motion to dismiss was denied and the court ruled that the insureds plausibly stated a claim, permitting the suit to proceed to discovery.

Date of Decision: February 24, 2012

Leary v. State Farm Fire & Casualty Co., No. 3:11-145, 2012 U.S. Dist. LEXIS 23898 (W.D. Pa. Feb. 24, 2012) (Gibson, J.).