NOVEMBER BAD FAITH CASES NO BAD FAITH WHERE INSURER PARTIALLY DENIED CLAIM FOR WATER DAMAGE BASED ON POLICY EXCLUSION (Philadelphia Federal)
The insured had a commercial building insurance policy on a three-story property. The insured notified its insurer that a drain line from the roof had separated and caused damage to the first floor and basement. The insurer had an engineer investigate the site. The engineer determined that a leak from the roof drain caused water to enter the interior of the building near the basement stairs.
Additionally, the engineer determined that water from a ground source infiltrated the basement of the building, which accounted for the large amount (42 inches) of water and the silt along the floor and walls of the basement.
The policy excluded damage caused by “ground water, surface water and flood water.” The insurer denied the insured’s claim for the damage to the basement, but offered to pay for the damage to the first floor caused by “a failed roof drain.” The insured sued the insurer for bad faith, among other causes of action.
The court found that the insured’s claim for the damage to the basement was excluded from coverage, and therefore, the insurer’s partial denial was proper. Additionally, the court observed that the insured’s bad faith claims would be dismissed because the insured failed to present any evidence that the insurer did not have a reasonable basis for partially denying coverage.
The district court granted summary judgment in favor of the carrier.