WITHOUT A COVERAGE OBLIGATION, IT IS IMPOSSIBLE TO SHOW THAT INSURER LACKED A REASONABLE BASIS FOR DENYING COVERAGE (Philadelphia Federal)
The insured brought breach of contract and bad faith first party property damage claims. These claims were based upon faulty workmanship, the consequences flowing from that faulty workmanship, and failed efforts at repairs.
Eastern District Judge McHugh granted summary judgment on coverage, based upon a faulty workmanship exclusion. He then granted summary judgment on the bad faith claim, stating
To succeed on a bad faith claim, plaintiffs must show by clear and convincing evidence “that the defendant did not have a reasonable basis for denying benefits under the policy and that the defendant knew or recklessly disregarded its lack of reasonable basis for denying the claim.” … Here, the exclusion was properly invoked. “A reasonable basis is all that is required to defeat a claim of bad faith.” J.C. Penney Life Ins. Co., 393 F.3d at 367 (citing Horowitz v. Fed. Kemper Life Assurance Co., 57 F.3d 300, 307 (3d Cir. 1995)). See alsoCresswell v. Pennsylvania Nat. Mut. Cas. Ins. Co., 820 A.2d 172, 179 (Pa. Super. Ct. 2003) (stating that where the court found that the insurer did not have a duty to provide coverage, “it is impossible” to show that the insurer lacked a reasonable basis for denying coverage).
