In Stiso v. State Farm Fire & Casualty Company, a Hurricane Sandy case involving significant interior water damage, the court found coverage was excluded and then went on to address the insureds’ claims for (1) the breach of the implied covenant of good faith and fair dealing and (2) bad faith. It stated that both claims are tantamount to the same cause of action. To prove a first party bad faith claim, the insured must show that (1) the insurer lacked a fairly debatable reason for denying coverage, and (2) insurer knew of or recklessly disregarded the lack of a reasonable basis for denying coverage.
The court stated that: “Plaintiffs clearly have not established these above-referenced factors because they have failed to show, as discussed at length [in analyzing the coverage issue], that [the insurer] lacked a reasonable basis for denying coverage.” With emphasis the court then added: “Indeed, I have granted summary judgment on Plaintiffs’ breach of contract claim.” The claim was investigated by multiple representatives of the insurer, and in reaching its decisions on coverage, the insurer did nothing that convinced the court that the insurer had no reasonable basis for denying certain coverage. Summary judgment was granted on all issues.
Date of Decision: November 18, 2015
Stiso v. State Farm Fire & Cas. Co., Civil Action No. 13-5741 (FLW), 2015 U.S. Dist. LEXIS 155762 (D.N.J. Nov. 18, 2015) (Wolfson, J.)