In Somerset Industries, Inc. v. Lexington Insurance Company, the parties disputed insurance coverage from a rainstorm that caused severe water damage to the insured’s warehouse and inventory. The insured alleged that the insurer acted in bad faith by failing to promptly investigate and offer payment on the claim. The insurer contended that the insured’s failure to cooperate contributed to delay the process. Specifically, the insurer argued that it has made numerous requests to the insured for information in support of its claimed loss and that it failed to provide all of the requested documents. In response, the insured argued that the insurer repeatedly ignored its inquiries regarding the status of its claim and its requested advance. The Court found that the undisputed facts show that the insured failed to respond to numerous requests for documents regarding damage to the building, equipment, fixtures and business loss income. The Court held that given the extent of the alleged loss, which required a thorough investigation by the insurer, and the delayed response by the insured, the insured has failed to provide clear and convincing evidence that the insurer acted in bad faith.
Date of Decision: July 7, 2009