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This is a delay in payment bad faith case, based on fire damage to a home.  There is no dispute case coverage was due, and the issue is whether the claim handling and timing of various payments the insurer made were so tardy as to constitute statutory bad faith.  The court granted the insurer’s summary judgment motion after finding the facts did not support either element of bad faith, and that an expert report could not create issues of fact in the insured’s favor.

Chronology of Important Claim Handling and Payment Facts

As will be detailed immediately below, the claim was handled and paid in less than six months, during which time there was active investigation and review by the carrier, as well as payments along the way before final payment.  Further, during this time, the insured twice-raised new damage claims beyond the damages sought in its initial notice.

On November 21, 2019, the insured notified the carrier of her claim, three days after the fire loss.  The insurer recognized coverage was due, and agreed to come out for an inspection on the first day the insured offered to make the premises available, two weeks later, December 5, 2019.  The adjuster immediately began to estimate the losses on the inspection date, and the carrier issued an advance payment of $15,000 in seven business days from the first inspection.

On the same date the $15,000 check issued, the insured raised the existence of additional damages for the first time.  “Thereafter, [the insurer] issued $2950 monthly payments for additional living expenses to cover the costs of Plaintiff’s displacement from her home.”

The adjuster completed his preliminary damage estimate on February 12, 2020, and submitted it to his superior for internal review.  There was a “back and forth” process internally, and the adjuster made some changes his manager requested.  After the manager accepted these revisions, the estimate was finalized.

On February 26, 2020, the insured again expanded her claim by seeking roof replacement, submitting documents for the first time to support this new claim.  The adjuster agreed to cover the cost of roof replacement without any additional inspection.

On March 20, 2020, management approved the adjuster’s estimate, and four days later, the insurer issued a supplementary damage payment of approximately $58,000.  On May 6, 2020, it issued a personal property damage payment of approximately $7,600.  The carrier’s total payments were $104,000.

Thus, the total time from first notice to final payment was less than six months.

General Bad Faith Standards in Delay Cases

Philadelphia Federal Judge Beetlestone observed that claim handling delays might form the basis of a bad faith claim.  The test for an insurer’s reasonableness in claim handling is an objective test. “To succeed on a statutory bad faith claim premised on an insurer’s delay, the plaintiff must establish that ‘the delay is attributable to the defendant, that the defendant had no reasonable basis for the actions it undertook which resulted in the delay, and that the defendant knew or recklessly disregarded the fact that it had no reasonable basis to deny payment.’” She cites the Third Circuit’s 2014 Mirarchi decision, summarized here, and Judge Goldberg’s 2018 Williams decision, summarized here.

In evaluating delays:

  1. “While delay is a relevant factor in determining whether the insurer has acted in bad faith, a long period of delay between demand and settlement does not, on its own, necessarily constitute bad faith.”
  2. “Rather, courts have looked to the degree to which a defendant insurer knew that it had no basis to deny the claimant; if delay is attributable to the need to investigate further or even to simple negligence, no bad faith has occurred.”
  3. While a showing of ‘mere negligence or bad judgment’ is insufficient to prove a claim of bad faith … ‘proof of an insurer’s motive of self-interest or ill-will, while potentially probative … [,] is not a mandatory prerequisite to bad faith recovery under Section 8371 ….”
  4. “A delay attributable to the uncertainty of the claim’s value or the insurer’s need to investigate further does not constitute bad faith”

The Facts do not Support a Bad Faith Claim

The insured focused on the “delay” between the December 5, 2019 inspection, and payment of the undisputed sum at issue on March 24, 2020; a period of three months and 19 days.  The insured failed to adduce evidence that this putative delay was unreasonable.  Rather, “[t]he undisputed facts provide an objectively reasonable justification for the delay: the investigation, preparation, and approval of the adjuster’s estimate.”

Judge Beetlestone focused on the adjuster starting the estimate process immediately, the nature of the back and forth review process to finalize the estimate, advance payments during the claim handling process, and the insured’s introducing new damage claims during the process.  As to this last point, it was reasonable to infer that the insured’s raising new claims during the process was a cause of delay, which could not be attributed entirely to the carrier.

Even assuming arguendo that there was an unreasonable delay between the site inspection and preparing the estimate, the insured could not adduce “clear and convincing evidence that [the insurer] ‘knew or recklessly disregarded the fact that it had no reasonable basis to deny payment.’” The adjuster provided multiple reasons for this two month delay, which were reasonable, e.g., the claim was complex, it was more than simply cleaning and painting the home as there were roof repairs, and ceiling and floor removal. Moreover, the process could not begin until the site inspection because he did not grasp the scope of damages before then.

Court Finds Expert’s Interpretation of Adjuster’s Conduct does not Demonstrate Knowing or Reckless Disregard

The insurer’s expert opined that the adjuster appeared overwhelmed and was feeling pressure from his work volume.  The insured added that the adjuster was too busy with other claims to address the insured’s claim in a timely manner.  “However, the expert report’s suggestion that the adjuster was ‘overwhelmed’ or ‘pressure[d],’ even taken as true, does not establish the adjuster’s knowing or reckless disregard, and therefore does not defeat summary judgment.” “At most, the evidence suggests ‘simple negligence’ in the insurance adjuster’s failure to complete the preliminary estimate more promptly.”

Judge Beetlestone also observed that “[t]he mere presence of an expert opinion supporting the non-moving party’s position does not necessarily defeat a summary judgment motion; rather, there must be sufficient facts in the record to validate that opinion.” In this case, the expert opined industry standards require an estimate and payment to the insured should take three weeks in total; however, the expert cited no authority to support this standard, and did not even identify any authoritative sources for insurance standards that the expert reviewed.  Nor did the expert offer authority for the conclusion that it is an industry standard the adjuster should have engaged a building consultant or other vendor if the adjuster was too busy to do the work himself.

Moreover, the expert omitted important facts in his report when evaluating the delay, e.g., the advance payments, the insured’s additional damage claims, and the new documents supporting those claims.

“In short, Plaintiff’s expert report does not present sufficient facts to validate its opinion that [the insurer] fell short of accepted practices and standards in the context of this case, and therefore presents ‘no analysis or interpretation that would alter the court’s conclusion as to the insufficiency of the evidence’ of unreasonable delay presented here.”

Date of Decision:  May 5, 2021 (2021 is correct here.  We did not summarize this case last year, but are doing so now.)

Desalis v. Nationwide Prop. & Cas. Ins. Co., U.S. District Court Eastern District of Pennsylvania No. CV 20-1771, 2021 WL 4078035 (E.D. Pa. May 5, 2021) (Beetlestone, J.)