JUNE 2006 BAD FAITH CASES BAD FAITH CLAIM CANNOT BE SUSTAINED BECAUSE COVERAGE EXCLUDED UNDER ABUSE OR MOLESTATION EXCLUSION (Philadelphia Commerce)

In 12th St. Gym, Inc. v. Philadelphia Indemnity Insurance Company, the Philadelphia Court of Common Pleas, Commerce Court, granted the carrier’s Motion for Judgment on the Pleadings.  The Complaint alleged that the insurer refused to defend Plaintiff in an underlying action; specifically, a woman claimed she had been sexually assaulted by an masseuse employed at the gym.  The Court noted that in deciding the obligations of the parties under an insurance agreement, including whether an insurer has a duty to defend, courts follow a two-step procedure:  first, the Court must determine the scope of the policy’s coverage, and second, it must examine the complaint in the underlying action to ascertain if that pleading triggers coverage.  Because the claims in the underlying sexual assault case were excluded from coverage under the policy’s Abuse or Molestation Exclusion, the Court determined that Defendant had no duty to defend Plaintiff in the underlying action, thus nullifying any claims of bad faith.

Date of decision:  June 12, 2006

12th Street Gym, Inc. v. Philadelphia Indem. Ins. Co., July Term 2005, No. 3393 2006 Phila. Ct. Com. Pl. LEXIS 239 (C.C.P. Philadelphia June 12, 2006) (Sheppard, J.)