April 2017 Bad Faith Cases: Facts Showing An Insurer Acted Recklessly Or Knowingly Are Required To Withstand a Motion For Judgement on the Pleadings (Philadelphia Federal)

This bad faith claim arises out of an insurer’s refusal to participate in an appraisal of the insured’s property damage claim. The insurer paid for some of the loss, but refused the insured’s request for appraisal. The insurer asserted that because the request was made a year after the loss, it was not required by the policy. The insured sued for breach of contract and bad faith, alleging that the policy mandated an appraisal.

The insurer filed a Motion for Judgment on the Pleadings, arguing that the factual allegations in the complaint were insufficient to sustain a bad faith claim. The Court agreed, placing its focus on the second element of a statutory bad faith claim – that the insurer knew or disregarded its lack of a reasonable basis for denying benefits. Specifically, the Court found that the Plaintiff had failed to allege any facts to show that the insurer acted knowingly or recklessly. Merely reciting the elements of the bad faith claim, supported only by conclusory statements, is insufficient. In this respect, the Court found the insured’s complaint lacking where it merely alleged, inter alia, that the insurer placed “its interests over the interests of its insureds” and did not have “a reasonable basis for denying Plaintiff the benefits due under the policy.”

Further, the Court refused to consider whether the insurer’s explanation for refusing appraisal was ultimately correct. Instead, the Court found that the sole issue was whether there were any facts in the complaint showing that the insurer knew or recklessly disregarded its lack of a reasonable basis for denying benefits. The correctness of the policy issue itself was an issue best explored in a breach of contract claim, not one for bad faith.

Date of Decision: March 30, 2017

Long v. Farmers New Century Ins. Co., No. 15-6724, 2017 U.S. Dist. LEXIS 47552 (E.D. Pa. Mar. 30, 2017) (Stengel, J.)