In Rice v. State Farm Fire and Casualty Company, the insureds owned a house that was covered by the insurer. The policy allegedly covered both the property and the insureds’ personal property inside the dwelling. A fire occurred in the house, and there was significant fire, smoke, and water damage to the insureds’ personal property located in the house. They were displaced from their house, and although they demanded payment for the losses that have occurred, the insurer failed to pay them.
The insureds filed a Complaint with counts for breach of contract, bad faith, and a violation of the Unfair Trade Practices and Consumer Protection Law. The insurer then filed a Motion to Dismiss all counts except for the breach of contract count.
In examining the bad faith claim at the pleading stage, the court noted established law that the insured must show that the insurer did not have a reasonable basis for denying benefits under the policy, and that it knew or recklessly disregarded its lack of reasonable basis in denying the claim. It then determined that the insurer’s argument for dismissing the claim that there is no evidence that it acted in bad faith was not persuasive because the case was only at the pleading stage, where the insureds only must state a claim for bad faith. Whether the evidence supports or refutes the insureds assertions should be determined at trial, not in a Motion to Dismiss. Because the insureds’ Complaint contained multiple examples of how the insurer violated Pennsylvania’s bad faith statute, the bad faith count survived the Motion to Dismiss and proceeded to the next stage.
Date of Decision: August 25, 2010
Rice v. State Farm Fire & Cas. Co., Civil Action No. 4: 10-CV-1280, United States District Court for the Middle District of Pennsylvania, 2010 U.S. Dist. LEXIS 87625 (M.D. Pa. Aug. 25, 2010) (McClure, Jr., J)