NOVEMBER 2012 BAD FAITH CASES: COURT DENIES BAD FAITH CLAIM BECAUSE UNDERLYING COVERAGE ACTION FAILED (District of New Jersey)
In Wojciechowski v. State Farm Fire & Cas. Co., the court heard a carrier’s summary judgment motion stemming from a coverage dispute and bad faith claim alleged by its insureds. The dispute arose from a broken pipe in the insureds’ home. To discover the broken pipe, a plumber had to rip up carpet and flooring in the insured’s home. When the insureds sought coverage for the damage and broken pipe, the carrier refused, citing applicable policy exclusions. Specifically, the carrier’s expert found that the pipe had burst because of wear and tear, a category of damages excluded from the insureds’ homeowner’s policy.
The insureds filed suit, seeking to determine coverage under the policy and alleging bad faith. The carrier responded by filing for summary judgment.
First, the insured argued that, despite the wear and tear exclusion, the “Resulting Loss Exception” in the policy nevertheless provided coverage for damage caused by water leaking from the broken pipe. The court disagreed, refusing to read the exception so broadly as to allow it to swallow the exclusion.
Second, the court reasoned that the leak exclusion in the policy also applied, barring coverage for water damaged caused by leakage from the broken pipe.
Third, the court addressed the insured’s claim that a sub-surface water exclusion in the policy should apply. The insured argued that, although the pipe was below a concrete slab in the floor, it was nevertheless placed above ground. The court rejected this claim for lack of competent evidence.
The court therefore granted the carrier’s motion for summary judgment. Because the insureds’ underlying coverage action failed, its bad faith claim was also denied.