In Grigos v. Certain Underwriters at Lloyds, London, the insured was the principal owner of a diner that suffered significant damage in a fire in December 2006. In addition to the damage to the property, the company lost income while the diner was forced to close for repairs. The insurer covered the insured in a policy that required it to pay for “direct physical loss of or damage to Covered property . . . caused by or resulting from any Covered Cause of Loss.” The policy also covered the insurer for losses if the business had to close due to one of the covered causes of loss. Fire was not excluded from the policy and therefore was considered a covered cause of loss.
The insured notified the insurer of the fire the day after it occurred. The insurer assigned the claims to a third party, and the representative there acted hostile and untruthful towards the insured throughout the process. He first told the insured that there was a policy exclusion for decay and deterioration of food, and the damaged food at the store would therefore not be covered, but there was no such exclusion. The insurer’s own investigator then valued the damaged food at over $36,000, but the insurer’s representative offered far less money to the insured.
Additionally, the representative delayed any payments he made to the insured for almost four months after the fire, and once he did pay them he only provided a check for $10,000, which was $40,000 less than what the insured requested in good faith as an advance. After receiving the advance, the insured sent additional proofs of loss, which the representative rejected without explaining why he did so.
Once the insured believed the insurer would not voluntarily pay anywhere near the amount he was requesting, he demanded an appraisal, as the insurance policy required an appraisal whenever the parties could not agree upon a loss. After waiting a month to respond to the demand, the insurer’s representative denied the request for appraisal because there was a dispute over the “scope of damages,” but the court determined that a “scope of damages” dispute cannot prevent an appraisal when a contract requires it in the case of disputed damages.
Finally, throughout the process, the representative seemed to intentionally delay events as much as possible, often waiting until the last day of a deadline to respond to requests and other inquiries. Once the insured could not deal with the representative anymore, he filed the instant suit for breach of contract and bad faith, and based on the facts, the court was sympathetic to him. It first determined that the insurer’s refusal to proceed to appraisal, combined with the constant delaying of the insured’s claims despite having no substantive objections, meant that the insurer breached the insurance policy as a matter of law.
Concerning the bad faith allegation, the court determined that the insurer “knowingly misrepresented the policy and intentionally delayed the resolution of [the insured’s] claims.” It also misrepresented the policy’s terms, mentioning an exclusion that simply did not exist. The insurer often requested repetitive paperwork and otherwise delayed the insured’s claims for no stated reason. Finally, the court rejected the insurer’s argument that it should not be held responsible for the independent adjuster’s actions. The court found that there was clear and convincing evidence that the insurer acted in bad faith, and it granted summary judgment to the insured on the breach of contract and bad faith claims. It also ordered the case to proceed to trial for assessment of damages on the bad faith claim. The case settled after being listed for trial.
Date of Decision: December 15, 2010
Grigos v. Certain Underwriters at Lloyds, London
, No. 01907, Commerce Program, Control No. 10090785, Common Pleas Court of Philadelphia County, Pennsylvania, Civil Trial Division, 2010 Phila. Ct. Com. Pl. LEXIS 383, (Dec. 15, 2010) (Bernstein, J.)