NO COMMON LAW BAD FAITH WHERE DENIAL OF COVERAGE FOR LATE NOTICE IS REASONABLE (Philadelphia Federal)
In this breach of contract and common law bad faith action, on a lawyer’s professional liability policy, the court found a number of bases for denying coverage. As such, the insurer had a reasonable basis to deny coverage and there could be no bad faith. Thus, the court granted the insurer’s summary judgment motion.
First, because this was a claims made policy, “Pennsylvania law does not require an insurer to demonstrate prejudice when the relevant notice provision is contained in a claims-made policy like the one before us.” The court found the insured did not give the required notice in a timely manner.
Next, to the extent no damages were sought, there was no coverage due under the policy.
In addition, there was no coverage due because some of the claims against the insured did not arise out of legal services, as required by the policy
Further, the court found a number of exclusions applicable, and no coverage was due on this additional basis.
Finally, as to bad faith, the court stated: “That leaves only [the insured’s claims] for breach of contract and breach of the duty of good faith and fair dealing (i.e., bad faith). However, because [the insurer] had a reasonable basis for denying coverage under the policy, we grant summary judgment in favor of [the insurer].” In support, the court cited a 2004 case for the proposition that the insurer should be successful where it “’reasonably believed that [the insured] had forfeited coverage under the Policy by failing to timely comply with the notice provision,’ and ‘[t]hus, the [insurance company’s] actions cannot be the basis for a bad faith claim[.]’”