In Lloyd’s London v. United Fin. Cas. Co., the court heard a carrier’s motion to dismiss a bad faith and breach of contract action brought by an insurer acting (1) as the assignee of the assignor-insured and (2) the subrogee of an insured shipping company whose goods were damaged in the underlying accident.
The assignor-insured owned a “Flag Car Service” that escorted oversized loads being transported by shipping companies. In 2008, an employee of the assignor-insured passed under an overhead bridge as a truck owned by the shipper-insured followed. The truck hit the bridge, causing damage to the vehicle and its oversized cargo.
The assignor-insured’s carrier denied coverage under the policy, but the shipper’s insurer paid $124,386 in damages resulting from the accident. In 2011, the subrogee filed a tort action against the assignor-insured (prior to the assignment) and obtained a default judgment for $143,846.91. However, the assignor-insured’s carrier contends that it never received notice of the subrogee’s 2011 lawsuit against the assignor-insured. After the default judgment, the shipper’s insurer sought subrogation against the assignor-insured’s liability carrier, alleging breach of contract and bad faith on behalf of the assignor-insured for the carrier’s original denial of coverage.
The assignor-insured’s carrier filed a motion to dismiss in opposition of the subrogee’s suit, alleging that (1) the bad faith action was time-barred and that (2) the assignor-insured failed to provide notice of the 2011 lawsuit, a condition precedent to coverage under its policy.
First, the court addressed the statute of limitations argument, finding that the subrogee’s bad faith claims on behalf of the assignor-insured should be dismissed. The court reasoned that the two-year statute of limitations for bad faith claims began to run when the carrier provided notice of its refusal to provide coverage to the assignor-insured. The date of its denial was in August 2009, more than two-years prior to the filing of this action, warranting dismissal of the bad faith claim.
Second, the court addressed the carrier’s claim that the assignor-insured failed to comply with the policy’s notice provision. The court rejected this claim because, under Pennsylvania law, an insured is generally excused from complying with a notice provision after its insurance company has disclaimed coverage. Therefore, once the assignor-insured’s carrier denied coverage over the accident, it could not rely on the policy’s notice provision as a condition precedent to coverage.
In conclusion, the court dismissed the bad faith count, but permitted the subrogee’s breach of contract action to proceed.
Date of Decision: June 28, 2012
Lloyd’s London v. United Fin. Cas. Co., No. 12-2063, 2012 U.S. Dist. LEXIS 89992, U.S. District Court for the Eastern District of Pennsylvania (E.D. Pa. June 28, 2012) (Schiller, J.)