OCTOBER 2018 BAD FAITH CASES: A FINDING THAT NO COVERAGE IS DUE REQUIRES JUDGMENT FOR INSURER ON BAD FAITH CLAIM (Western District)
The insurer refused to pay the claim based upon policy conditions not being met. The court agreed there was no coverage based on the policy’s language and the facts of record, and it rejected the bad faith claim on that basis.
This was a property damage case resulting from a burst water pipe. The policy required continued residence as a condition for coverage. The insureds were not residing at the property at the time a water pipe burst. After the carrier refused to pay based on the residence requirement, the insured sued for breach of contract and bad faith.
In finding no breach of the policy, the court ruled the policy required continued residence, the facts showed the insureds did not meet that condition, and the insurer had not waived this residence condition.
On bad faith, the insureds unsuccessfully argued (1) the insurer had advised them to seek water remediation and then denied coverage; and (2) the insurer failed to inform them that they were not complying with the residency requirement. The court focused on the absence of any coverage obligation in determining whether (1) the insurer’s position lacked a reasonable basis, and (2) that it knew or recklessly disregarded that fact — Pennsylvania’s two criteria for determining statutory bad faith.