MAY 2006 BAD FAITH CASES JURY DECIDES BAD FAITH ISSUE AS TO DECLINING FIRE COVERAGE ON BASIS THAT POLICY ISSUED FOR MULTIPLE FAMILY DWELLING ACTUALLY USED AS REHAB CENTER (Philadelphia Commerce)
The plaintiff owned a property which was insured for three-family occupancy. Unbeknownst to her insurer, however, plaintiff had leased the dwelling to an entity providing boarding-house accommodations to eleven unrelated recovering addicts in eight distinct units. She sued the insurer for bad faith after the insurer refused coverage for damages stemming from a fire.
The insurer moved for summary judgment (judgment as a matter of law), arguing that the insured’s bad faith claim should be barred. The insurer reasoned that by representing that three families occupied the property, and by failing to disclose that eleven unrelated individuals actually lived on the premises, the insured breached the insurance contract and rendered the policy void from the onset.
The insurer’s employee who wrote the insurance policy in question testified that “[t]he use of the insured property is material to the issuance of an insurance policy as it determines the premium amount and whether the policy can be written at all.”
However, the Philadelphia Commerce Court found that the insurers, as moving parties, had failed to demonstrate that [no genuine issue of fact exists as to whether] insuring the property under a three-family occupancy posed fewer or less significant risks than insuring the same premises under an occupancy of eleven unrelated adults.
In addition, the Court applied a long-standing Pennsylvania rule (the so-called “Nanty-Glo Rule”) that where the testimony of the party having the burden of proof is oral, the credibility of that testimony is always for the jury. Therefore, the Court declined to enter judgment as a matter of law.