In a recent Hurricane Sandy case, Bannon v. Allstate Insurance Company, the dispute centered on an insurance policy that provided “that coverage for dwellings or other structures did not include loss caused by ‘flood, including, but not limited to, surface water, waves, tidal water or overflow of any body of water or spray from any of these things, whether or not driven by wind.” Plaintiff filed suit after the insurer denied coverage, and claimed that the insurer’s adjuster admitted that the home was destroyed by wind. Plaintiff provided further evidence in support of this claim, including statements from witnesses, professional opinions, and photographic evidence. The insured brought claims for breach of the implied duty of good faith and fair dealing, as well as breach of contract and under the Consumer Fraud Act (“CFA”). The primary issue the Court dealt with was whether the insurer’s position was “fairly debatable” in denying coverage.
In refusing to dismiss Plaintiff’s complaint, the Court noted that the question of whether denial of coverage was fairly debatable was a fact-specific question. The Court reasoned that it was not obvious from the face of the complaint if the coverage denial was fairly debatable, and pointed to the alleged facts that the insurer’s adjuster initially opined that the damage to the insured’s home was caused by wind, and that the insurer sent an engineer to inspect the insured’s home after its denial of coverage. The Court did, however, dismiss the punitive damages claim, reasoning that Plaintiff produced no evidence that the insurer’s conduct rose to the necessary level of egregiousness, as well as the claim for attorneys’ fees, on the basis that Rule 4:42-9(a)(6) does not apply to first party claims.