JULY 2015 BAD FAITH CASES: COURT PERMITS BAD FAITH CLAIM TO PROCEED BECAUSE COMPLAINT PROVIDED SUFFICIENT FACTUAL ALLEGATIONS, AND INSURER’S ARGUMENTS WENT BEYOND THE BOUNDS OF WHAT THE COURT WOULD ADDRESS AT THE PLEADING STAGE (Western District)

In Montgomery v. Allstate Property and Casualty Insurance Company, the court denied the insurer’s motion to dismiss the insureds’ bad faith claim based on averments set forth by the insureds that rose above conclusory allegations.

The insureds claimed that their mobile home and its contents were destroyed by fire. The insureds further attested that the insurer’s adjuster inspected the property and declared the home a “total loss”.  They allege that despite the home being a total loss, the insurer “refused to provide reimbursement for foundation repair/replacement, home jacks, replacement landscaping and other expenses that were assertedly covered under the policy.”

The insured filed suit for breach of contract and bad faith. The insurer moved to dismiss the bad faith count on the basis that the insureds failed to plead sufficient facts under Twombly.

The court found that the insureds did not “raise only conclusory allegations lacking specific factual support”.  They provided a “factual basis for [their] allegation of statutory bad faith.” In response to the insurer’s arguments for dismissal, the court specifically noted that a quick payment does not by itself preclude a bad faith claim where the insureds put at issue whether the payment was knowingly or recklessly unreasonable.  Further, the court added that the insurer’s defense of citing policy language and other assertions justifying its non-payment of the foundation expenses do not preclude a bad faith claim at the pleading stage.

The court then added, however, that the insurer could later raise the putative inadequacy of the bad faith claim, and that the insureds would ultimately have the burden of proving a bad faith claim by clear and convincing evidence.

Date of Decision: June 23, 2015

Montgomery v. Allstate Prop. & Cas. Ins. Co., Civ. No. 15-324, 2015 U.S. Dist. LEXIS 81163 (W.D. Pa. June 23, 2015) (Lenihan, U.S.M.J.)