April 2009 Bad Faith Cases Statute Of Limitations Did Not Accrue Where Carrier Rescinded Original Denial Of Coverage (Philadelphia Federal)

In Butler v. Scottsdale Insurance Company, the carrier asserted that the insured did not bring its claim until two years and seven months after the carrier denied coverage.  Statutory Bad Faith has a two year statute of limitations and that kind of claim accrues when “the insurer first provide[s] definite notice of a refusal to indemnify or defend.” In this case, however, after the original denial, the carrier rescinded that denial to conduct further investigation.  The court treated this as essentially negating the denial of coverage and the original accrual date.  The Court also observed that the claim breach of the contractual duty of good faith was timely under the 4 year contract statute of limitations.

Dated of Decision:  February 5, 2009

Butler v. Scottsdale Ins. Co., UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF PENNSYLVANIA, NO. 08-CV-4597, 2009 U.S. Dist. LEXIS 8461 (E.D. Pa. Feb. 5, 2009) (Davis, J.)