THERE CANNOT BE A BAD FAITH CLAIM AGAINST AN INSURER IF THAT INSURER HAD NO DUTY TO DEFEND (Philadelphia Federal)
A putative additional insured brought breach of contract and bad faith claims. The insurer denied a defense and indemnification on the basis that the policy did not cover the additional insured. The court agreed, and then granted the carrier summary judgment on all claims.
As to the bad faith claim, the plaintiff’s“sole argument for its bad faith claim is based on the lapse in time between [the] request … for coverage in the [underlying] action on May 23, 2018 and [the] response denying coverage on October 22, 2018.” The court observed that while delay can be “’a relevant factor in determining whether bad faith has occurred … a long period of time between demand and settlement does not, on its own, necessarily constitute bad faith.’” “’Rather, courts have looked to the degree to which a defendant insurer knew that it had no basis to deny the claimant; if delay is attributable to the need to investigate further or even to simple negligence, no bad faith has occurred.’”
While these are significant points in measuring delay if a payment is due or defense owed, the court never had to reach the delay issue because the bad faith claim lacked merit once coverage was denied. “There cannot be a bad faith claim against an insurer if that insurer had no duty to defend.” The court relied on 631 N. Broad St., LP v. Commonwealth Land Title Ins. Co. for this principle.
Thus, there was no evidence of bad faith under the circumstances. Rather, the undisputed evidence established that the insurer “correctly refused to defend and indemnify” the putative additional insured.