MAY 2018 BAD FAITH CASES: SINCE THERE WAS NO DUTY TO COVER DAMAGES THERE CAN BE NO BAD FAITH CLAIM (Middle District)

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In this homeowner’s water damage case, after a detailed analysis of the facts and coverage issues, the court dismissed the insured’s breach of contract claim for failure to pay insurance coverage. The court then quickly addressed the insured’s bad faith claim.

“[B]ecause [the insurer] had a reasonable basis to deny [the insured’s] claim for coverage, the bad faith claim will be dismissed.” The court explained: “[T]o recover under a claim of bad faith, the plaintiff must show that the defendant did not have a reasonable basis for denying benefits under the policy and that defendant knew or recklessly disregarded its lack of reasonable basis in denying the claim.” “Therefore, where the insurance company had a reasonable basis for denying Plaintiff’s claim, the bad faith claim necessarily fails.”

Specifically, the Court quoted from two prior cases: (1) “[W]e will affirm the grant of summary judgment … on this claim because [the] bad faith claim necessarily fails in light of our determination that [the insurer] correctly concluded that there was no potential coverage under the policy” and (2) “Since there was no duty by Defendant to cover the damages to the Plaintiffs’ house and personal property, there can be no bad faith claim”.

Date of Decision: May 18, 2018

Sanko v. Allstate Ins. Co., U. S. District Court Middle District of Pennsylvania No. 3:16-CV-1620, 2018 U.S. Dist. LEXIS 84943 (M.D. Pa. May 18, 2018) (Mariani, J.)