NOVEMBER 2014 BAD FAITH CASES: INSURED FAILED TO PLEAD SUFFICIENT FACTS TO MAKE OUT BAD FAITH CLAIM WHERE PARTIAL PAYMENT MADE BY CARRIER, BUT LEAVE TO AMEND GRANTED (Middle District)
In Stephens v. State Farm Fire & Cas. Co., a husband and wife brought suit against their homeowners’ insurance carrier alleging breach of contract, statutory bad faith, and a claim under Pennsylvania’s Unfair Trade Practices and Consumer Protection Law. Plaintiffs alleged they suffered concurrent losses to their home via theft, vandalism, and water damage. An adjuster visited the property to view the damages and evaluate the claimed losses, and, based on that evaluation, the carrier paid some benefits toward the claimed losses. Plaintiffs then filed suit against the insurer.
Plaintiffs initially brought their action pro se, however, four days prior to the statute of limitations, they moved for leave to amend and filed an amended complaint. In the bad faith count of the amended complaint, Plaintiffs alleged the insurer only paid them partial benefits on their claim, and that the claims had been given three different claim numbers despite being related to concurrent loss events. The carrier opposed the motion for leave, arguing the amended complaint was untimely and futile since the claims raised by the plaintiffs failed as a matter of law.
The Magistrate Judge’s Report and Recommendation, later adopted by the District Court, denied the carrier’s motion as to lack of timely filing because Plaintiffs filed their motion and amended complaint prior the deadline, albeit four days prior. It did, however, grant the motion with respect to futility on the bad faith count.
The court found two key problems with plaintiffs’ bad faith claim. First, it faced a “threshold factual hurdle,” as Plaintiffs received a partial payment of their claim under the policy, which the court found to be inconsistent with a claim of complete bad faith on the part of the insurer.
Secondly, the claim failed as a matter of law, because Plaintiffs merely made conclusory allegations that the partial payment constituted a breach of the contract, and therefore the carrier had engaged in bad faith conduct. The court determined that without a factual basis to support the claim, established case law required the complaint be dismissed.
The district court judge adopted the magistrate’s opinion, and dismissed the claim without prejudice, allowing Plaintiffs the opportunity to further amend the claim and articulate a factual basis to support the bad faith allegations against the carrier.