JUNE 2010 BAD FAITH CASES BAD FAITH CLAIM SURVIVES MOTION TO DISMISS WHEN COMPLAINT SUFFICIENTLY ALLEGES THE EXISTENCE AND BREACH OF AN INSURANCE CONTRACT (Middle District)

In L.R. Costanzo Company, Inc. v. Ohio Casualty Insurance Company, the insured was a construction company that served as the general contractor for a building erected for the Pocono Mountain Regional Police Commission (“PMRPC”).  The building suffered water leakage problems, and the PMRPC filed suit against the insured, alleging claims of negligence, breach of contract, and breach of the duty of good faith on the part of the insured.

The insured claimed that the insurer provided it with a general liability insurance policy, and that when it requested that the insurer retain counsel and appear in court to defend the PMRPC’s lawsuit against it, the insurer refused to do so.  The insured then filed its own suit against the insurer, alleging bad faith and breach of contract in failing to conduct a reasonable investigation of the claims at issue and unreasonably failing to defend the insured in the lawsuit against it.

The insurer had claimed that no insurance contract ever existed between the parties.  However, the court held that the insured had sufficiently alleged that a contract of insurance existed between the parties, as evidence indicated that the insurer was listed as the “serving office” on the insurance policy, and the insurer’s logo headed each page of the policy.  The court therefore denied the insurer’s Motion to Dismiss with respect to both the breach of contract and bad faith claims.

Date of Decision:  June 11, 2010

L.R. Costanzo Co. v. Ohio Cas. Ins. Co., No. 3:10cv774, United States District Court for the Middle District of Pennsylvania, 2010 U.S. Dist. LEXIS 57697 (M.D. Pa. June 11, 2010) (Munley, J.)