AUGUST 2006 BAD FAITH CASES TOO MANY MEN ON THE ICE – COURT BLOCKS ALMOST ALL OF HOCKEY TEAM’S SHOTS ON GOAL IN DISMISSING BAD FAITH CLAIMS (Philadelphia Federal)
In Comcast Spectacor L.P. v. Chubb & Son, Inc., et al., the Philadelphia Flyers sought insurance coverage for performance bonuses paid under contract to hockey player Joni Pitkanen. Pitkanin had a base salary of nearly $600,000, with potential bonus incentives worth up to $2.6 million. The bonuses depended on Pitkanen’s achieving certain individual awards or statistical plateaus. If he achieved two or more bonuses, he would receive the bonuses plus the difference between the total paid under the contract and $2.6 million.
Comcast Spectacor, the Flyers’ parent company, obtained insurance coverage on the bonuses; which it believed provided broad coverage for any bonus payment. Apparently unknown to Comcast, the actual policy only triggered coverage if Pitkanen reached two or more of the bonus conditions. Pitkanen scored on only one of bonuses, and Comcast found it self shorthanded to the tune of the $400,000 bonus; plus a one-time premium payment of $543,750. Comcast sued its insurance broker, two insurers, an insurance producer and a holding company. Comcast’s shots on goal failed to find the net, with the Defendants scoring on their Motions to Dismiss.
The United States District Court for the Eastern District of Pennsylvania dismissed nearly all claims against these five companies and one individual, which included among others breach of contract, breach of duty of good faith and fair dealing, bad faith, and negligent misrepresentation. The Court dismissed all but one Count of negligent misrepresentation against the insurance broker. There was no breach of contract because there was no documentary evidence that the Flyers wanted coverage for each potential bonus, rather than two or more. The only potential argument on which Comcast might eventually prevail was based upon alleged oral representations by the broker to Comcast, stating that he would attempt to locate coverage for any possible bonus payment. The majority of the claims against the non-insurers were dismissed because the defendants, who were not insurers under the policy, could not be liable for breach of contract, bad faith, etc. The insurers were dismissed from the action because the policy’s express language did not cover the bonus; therefore, no breach or bad faith possible. Thus, while not shut-out, the contest ended in a route against the home team.
Date of Decision: August 8, 2006