SEPTEMBER 2007 BAD FAITH CASES THIRD PARTY HAS NO STANDING TO BRING A BAD FAITH CLAIM BY GARNISHMENT ACTION ABSENT AN ASSIGNMENT (Philadelphia Federal)
The Court ruled that a third party/judgment creditor could not institute a garnishment action against an insurer based on the theory of bad faith without a formal assignment of the bad faith claim from the insured. The Plaintiffs, manufacturers of refrigeration and air conditioning units, and RD&S, designer and installer of the refrigeration system at the subject premises, were sued when liquid ammonia escaped causing damage to the premises and the food stored therein.
Plaintiffs asserted that it was entitled to indemnification from RD&S. RD&S, who was insured by Cincinnati Insurance Company, notified its insurer. At a mediation where the insurer settled the underlying action, it reserved $200,000 to address the indemnification claim. Plaintiffs moved for summary judgment against RD&S for indemnification, which was granted by the trial court.
Plaintiffs, thereafter, filed a declaratory judgment action alleging that the insurer’s creation of the $200,000 reserve fund and failure to negotiate the indemnification claim constituted bad faith.
The Court ruled that Plaintiffs had no standing to bring a garnishment action against an insurer based on bad faith without an assignment from the insured, RD&S.
Date of Decision: September 5, 2007
York Int’l Group v. Cincinnati Ins. Co., United States District Court for the Eastern District of Pennsylvania, No. 06-4778, 2007 U.S. Dist. LEXIS 65798 (E.D. Pa. September 6, 2007)(Kauffman, J.)