NOVEMBER 2007 BAD FAITH CASES FAILURE TO PAY NOT VIOLATION OF UNFAIR TRADE PRACTICES AND CONSUMER PROTECTION LAW; TENANTS NOT COVERED UNDER AN OWNERS’ POLICY UNLESS STATED (Philadelphia Federal)
The owners and tenants of a residential building that collapsed filed a breach of contract and bad faith action arising out of the owners’ insurance policy. Both sets of plaintiffs also filed a claim for violations of the Pennsylvania Unfair Trade Practices and Consumer Protection Law (“the CPL”). The tenants sought damages for the loss of personal property in the collapse. The owners did not reside at the premises. Nationwide moved to dismiss the tenants’ claims because they were not covered under the policy.
While the owners stated they intended for the policy to cover the personal property of the tenants, the Eastern District of Pennsylvania Court ruled in favor of Nationwide. The Court reasoned that the policy did not state that the tenants were covered (unlike a “guest” or servant,” who would be covered), and the policy had used the word “tenant” elsewhere. The Court therefore entered judgment against the tenants
Nationwide also argued that judgment should be entered in their favor on plaintiffs’ claims under the CPL. They argued that an insurer’s failure to pay on a claim constitutes merely nonfeasance (failure to perform a contractual duty), whereas a violation under the CPL requires malfeasance (improper performance of a contractual obligation).
The plaintiffs had alleged that Nationwide violated the CPL by, “failing to give equal consideration to paying the claim as to not paying the claim, failing to objectively and fairly evaluate plaintiffs’ claim, asserting policy defenses without a reasonable basis in fact, compelling plaintiffs to institute this lawsuit to obtain policy benefits that defendant should have paid promptly and without the necessity of litigation, acting unreasonably and unfairly in response to plaintiffs’ claim, and otherwise unreasonably and unfairly withholding policy benefits justly due and owing…”
The Court did not state what particular section (if any) of the CPL plaintiffs’ relied on. The Court found that even though some of plaintiffs’ allegations might constitute malfeasance (such as asserting policy defenses without a reasonable basis in fact), plaintiffs did not present any evidence of said malfeasance. Therefore, the Court dismissed the CPL claims.