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The court was faced with breach of contract and bad faith claims that arose from the carrier’s denial of coverage for property damage at the insured’s place of business.  In early 2008, the insured returned to one of his warehouses to find that water had entered the building through the roof and soaked some of the contents.  The insured did not notify the carrier, but replaced the damaged roofing on his own.  Later in 2008, the insured notified the carrier that its property had sustained an estimated $104,676.70 worth of damages from severe wind.

Soon after, a roofer made temporary repairs to the warehouse roof and took photos that documented the damage before and after repair.  An adjuster for the carrier found that the damage was from wear, noting that the damage fell below the insured’s policy deductible.  However, an agent of the carrier never acknowledged receipt of the before and after photographs taken by the adjuster.  As a result, the carrier denied coverage.  In early 2009, the property sustained additional damages from strong winds and the insured submitted a second claim to the carrier.

Prior to trial, the carrier found the before and after photos and agreed that the damage from early 2008 would cost $14,195 to repair.  The carrier also concluded that the price for repairing the interior damage was $27,358.41.  However, the insured argued that it was owed $1,013,032.88 for water damage that the contents of the warehouses incurred.  The carrier disagreed and found that cleaning, repairing and salvaging the damaged items would cost $18,469.44.

During a bench trial, the court found that the insured’s testimony regarding the initial 2008 damages was not credible.  However, the court gave credence to the testimony of the adjuster and found that $15,845 worth of damages to the roof had actually occurred in 2008.

With respect to the interior damage, the carrier agreed that it owed $27,358.41 to repair the damaged property.  However, the court reasoned that, because the insured never documented the initial damage that its building sustained in 2008, its testimony regarding the events was unpersuasive.

The court concluded that the contents of the warehouse had only sustained $18,469.44 worth of damages.  The court reasoned that the insured could not show that there was damage to the building’s contents beyond what the adjusters and the carrier had found attributable to the early 2008 incident.

Although the insured was unable to recover its desired amount, the court still ruled that the carrier breached its insurance contract by failing to pay $15,845 for damage to the roof, $27,358.41 for damage to the interior of the building and $18,469.44 for damage to the building’s contents.

As for the insured’s bad faith claim, the court held that the carrier may have been negligent in not reviewing the before and after photos when it received them, but its conduct did not rise to the level needed to find bad faith.  As soon the carrier saw the photos, it agreed to cover the damage to the insured’s property, even though the insured had been less than diligent in notifying the carrier of its loss.  Therefore, the court rejected the insured’s bad faith allegations.

Date of Decision: August 24, 2011

MOORE’S HOME IMPROVEMENT, INC. v. NATIONWIDE PROPERTY AND CASUALTY INSURANCE CO., NO. 10-CV-0161, U.S. District Court for the Eastern District of Pennsylvania, 2011 U.S. Dist. LEXIS 96199 (E.D. Pa. Aug. 24, 2011) (Joyner, C.J.)