In Selective Way Insurance Company v. Servpro of King of Prussia, an insurance carrier filed a breach of contract and fraud action against a policy holder arising out of a fire. The United States District Court for the Eastern District of Pennsylvania was presented with several Motions in Limine regarding the admissibility of evidence gathered after the alleged denial of coverage. The policy holder sought to exclude evidence gathered from post-denial-of-coverage investigations conducted by the insurer, law enforcement agencies, and third parties at the insurer’s request. The carrier wanted to use the evidence to show that the policy holder was responsible for the fire, thereby demonstrating that there was a sufficient and reasonable basis to deny coverage. The Court ruled that the evidence could be used to establish that the insured were responsible for the fire to support the insurer’s breach of contract, fraud and material misrepresentation claims only. That evidence could not be used to defend against the insured’s statutory bad faith counterclaim. The Court reasoned that only the information which was part of the insurer’s investigation prior to its denial of coverage may factor in the jury’s determination of the statutory bad faith counterclaim. To implement the Court’s Order, the jury charge would contain a limiting instruction.
Date of Decision: January 31, 2006