In Cher-D, Incorporated, t/a Pine Knob Inn v. Great American Alliance Insurance Company, the court denied summary judgment to the insurer on the statutory bad faith count against it because there was sufficient evidence for a reasonable jury to find bad faith in how it settled the insured’s claim.
The insured property suffered an electrical fire in October of 2004, for which the insured immediately filed a claim. The insurer determined it was a covered loss and sent its own contractor to make safety repairs to facilitate an investigation. The insured gave notice of its intent to rebuild and thought that the insurer was going to initiate that process, based on comments from the insurer’s contractor. The insurer, however, did nothing to facilitate rebuilding and did not respond to repeated queries from the insured’s public adjustor regarding the status of the claim and payment. In the interim, the insurer did not renew the policy, trespassers frequently broke into the building and vandalized it, and a second fire occurred after the policy expired. The insured, nevertheless, filed a claim for the second fire and it was denied. The insurer did not provide its damage estimate from the first fire until nine months after the event. The insured filed this suit for breach of contract and statutory bad faith less than three months afterward.
The court denied summary judgment to the insurer on the bad faith claim because it determined that there was sufficient evidence for a jury to find bad faith. It cited precedent when explaining that delay in settling a claim can be evidence of bad faith when the insurer’s responsibility is clear and the insured makes repeated demands for payment, especially when there is an absence of “red flags” to cause concern. The court also noted that a jury had awarded punitive damages for a delay of ten months in a similar case where the insurer did not explain its delay. Taking all of the facts together, it denied summary judgment in this case.
Date of Decision: April 7, 2009