The insured suffered a significant fire loss, and made various property damage and lost business claims to the insurer. Some of these claims were paid, after both parties had prepared their own estimates of the same losses. The insured sued for breach of contract and bad faith after not getting the full sums it demanded. The carrier moved for summary judgment on the bad faith claim.
The court granted the carrier summary judgment on the bad faith claim.
- The insured alleged the carrier wooed one the estimators to reduce the value of his estimate, by taking him to a baseball claim and pressuring him to lower the estimate. The court found the argument unreasonable, as, among other things, lowering the estimate would also lower the amount he could make as the contractor seeking to do the work.
- No reasonable jury could conclude a sum the insurer paid, without designation, could be solely attributed to lost profits, thereby resulting in an unduly low payment for property damage.
- The dispute over the value of the property damage claim merely represented a difference in valuation, and was not grounds for bad faith. Western District Judge Gibson observed Pennsylvania’s Superior Court would only find a valuation dispute evidence of bad faith in extreme and blatant circumstances, where the low-ball offer bears no reasonable relationship to the loss. He cited a case where the offer was 29 times lower than the ultimate arbitration award. On the other hand, an offer that was slightly less than 50% of the insured’s damage claim is not bad faith.
Here, the insurer paid $1.6 million against a $2.3 million demand, which offer was lower than the demand, but reasonable based on the record.
The court also observed that because this offer was not made in bad faith under section 8371, continuing the litigation was not in bad faith either.
- Finally, the court observed alleged discovery abuses during litigation, alone, cannot form the basis of statutory bad faith under section 8371. Section 8371 protects insureds from an insurer’s conduct as an insurer, not from discovery abuses as an adversary in litigation.
Date of Decision: October 29, 2021
Dubois Country Club, Ltd. v. Depositors Insurance Company, U.S. District Court Western District of Pennsylvania No. 3:19-CV-190, 2021 WL 5041145 (W.D. Pa. Oct. 29, 2021) (Gibson, J.)