In Aldsworth v. State Farm Fire & Casualty Co., the insured initially claimed that they suffered water infiltration in their home after a wind and rain storm damaged the roof. The insurer sent out an engineer. The engineer concluded that the cause of the loss was a construction defect on the part of a roofing contractor who had performed work on Plaintiffs’ roof in 2002. Plaintiffs had retained a public adjuster who amended the claim to being a claim for collapse based on Defendant’s engineer’s report. Defendant’s engineer had concluded that it was snow loads that exceeded the load capacity of the roof that caused the collapse. The collapse caused by weight of ice, snow or sleet is a covered loss under the policy. The carrier denied the claim. The insured brought claims for breach of contract and bad faith.
The court set out a very broad statement on bad faith, based on Pennsylvania Superior Court opinions, e.g., bad faith during the pendency of litigation may be considered as evidence of bad faith; bad faith is not restricted to an insurer’s denial of benefits and includes a wide variety of objectionable conduct including lack of good faith investigation and failure to communicate with a client; a claim for bad faith may be based on an alleged violation of the Unfair Insurance Practices Act (this later position being frequently rejected by other District Courts, while accepted in the Superior Court). The court did state that negligence or bad judgment do not constitute bad faith, and to support a finding of bad faith, the insurer’s conduct must be such as to “import a dishonest purpose,” and the plaintiff must show that the insurer breached its duty of good faith through some motive of self-interest or ill will.
The insurer sought to dismiss the bad faith claim on the basis that it obtained an expert report from an engineer. The insured took the position, that even assuming everything the engineer said was true, under its view of coverage, the insurer should still have covered the claim. The court agreed with the insurer that the parties have a difference of opinion regarding coverage of the claim. However, it looked to the insured’s averment that “[u]nder the terms of the policy, assuming arguendo that the engineer’s conclusions are accurate, the loss remains covered”, the reasonableness of Defendant’s basis for denying coverage is an issue. In other words, if the engineer’s conclusions do not eliminate coverage under the policy, Defendant’s interpretation of those conclusions is at issue and, at this stage of the proceedings, it cannot avoid a bad faith claim based on its reliance on the engineer’s report.
In light of Defendant’s motion to dismiss burden and the facts and circumstances presented here, we conclude that dismissal of Plaintiffs’ bad faith claim would be premature. While discovery may not provide Plaintiffs with the required clear and convincing evidence that Defendant “(1) did not have a reasonable basis for denying benefits under the policy; and (2) knew or recklessly disregarded its lack of a reasonable basis in denying the claim,” a determination on these matters is not properly made on the record before us. Therefore, Defendant’s motion to dismiss Plaintiffs’ bad faith claim is properly denied.
Date of Decision: February 14, 2014
Aldsworth v. State Farm Fire & Cas. Co., CIVIL ACTION NO. 3:13-CV-2941, 2014 U.S. Dist. LEXIS 18656 (M.D. Pa. February 14, 2014) (Conaboy, J.)