MAY 2015 BAD FAITH CASES: COURT DISMISSES BAD FAITH CLAIM IN AMENDED COMPLAINT WITH PREJUDICE UNDER TWOMBLY/IQBAL, AFTER INSUREDS WERE ON NOTICE OF PLEADING DEFICIENCIES AND FAILED TO CURE THEM IN THEIR AMENDED COMPLAINT (Philadelphia Federal)
In Groth v. State Farm Fire & Casualty Company, the insureds brought a bad faith claim against their homeowners’ insurer. They alleged the insurer acted in bad faith through the manner of claims investigation, by placing the insurer’s interest over the insureds’ interest, by improperly construing the insurance policy, and by not paying the claim. The insurer moved to dismiss this amended complaint. The insurer had similarly moved to dismiss the bad faith claim in the original complaint, and the insureds had been given leave to amend to respond to the insurer’s original motion.
The insureds’ alleged that: the insurer’s agent had stopped his damage investigation, but when he relented to the insureds and pursued his efforts, he found damage; that the insurer’s agent apparently misrepresented his expertise, in concluding roof damages were the result of ongoing damage and neglect; the insurer allegedly instructed the insureds to bring their own roofer to an inspection, but then would not allow that roofer to talk; that at that same inspection, an agent of the insurer concluded that the damage was not covered because improper installation of the roof had resulted in rot, deterioration and mold, but the insurer never did any cultures or tests to check for mold; along with various other allegations disagreeing with the insurer’s conclusions and methods.
The court found that “these allegations, to the extent that they do not simply state legal conclusions (which many of them do) do not contain facts suggestive of proscribed bad faith.” “There [were] no concrete facts alleged in the Complaint to show that [the insurer’s] investigating or declining to pay the claim were frivolous or unfounded or that its actions were dishonest or motivated by self-interested or ill will.” Thus, under Twombly/Iqbal, the insured’s amended complaint did not plead “sufficient facts to plausibly state that [the insurer] did not have a reasonable basis for denying benefits under the policy and that it knew of or recklessly disregarded its lack of a reasonable basis in denying the claim.”
The bad faith claims were dismissed with prejudice because the amended complaint had been filed in response to a similar motion to dismiss the first complaint raising the same arguments, with the insurer’s counsel citing extensive legal authority. Despite this prior motion, the amended complaint was “virtually identical to [the] initial complaint, with only a very few minor changes, none of which added anything of substance[, and] [t]he changes were so limited that the [insureds-plaintiffs] could not reasonably have believed that they would address any of the deficiencies [the insurer] had identified [in the original motion].” Thus, the insureds had been put on notice of their pleading deficiencies, “but then failed to address any of those deficiencies or even to make any material changes whatsoever in their … Amended Complaint,” and therefore, a second opportunity to amend would be futile.