JUNE 2010 BAD FAITH CASES NO BAD FAITH WHEN THE INSURER USED LEGITIMATE SUPPORTING EVIDENCE TO DENY COVERAGE AND PRIOR PA CASE LAW AGREES WITH THE INSURER’S DECISION (Philadelphia Federal)

In Collins v. Allstate Insurance Co., the insured suffered multiple direct physical losses to his property as a result of wind and rain from a storm.  The insurer covered the house under an insurance policy, which required it to “repair, rebuild or replace all or any part of the damaged, destroyed or stolen property of like kind and quality within a reasonable time.”  The insurer hired adjusters to inspect the property, prepared an estimate of damages, and issued a check to the insured for that amount.  The insured then learned that it would cost thousands more dollars to repair the damages than the amount received. 

The insured filed a Complaint that alleged breach of the insurance contract and bad faith.  The central dispute concerned the cost of replacing the roof of the house, which was by far the most expensive repair to make.  The insurer only agreed to pay for the damaged slopes of the property as opposed to replacing the entire roof.  The insured asserted in his bad faith claim that the insurer (1) intentionally treated coverage of the interior of the property differently than the exterior, and (2) placed its own interests above his. 

The insurer filed a Motion for Summary Judgment on the bad faith claim, arguing that the insured’s allegations were not supported with facts and the record before the court did not support the allegations.  It submitted evidence that the roof of the insured’s property contained mismatched slates and did not have a uniform appearance before the storm, and it had used that evidence in evaluating the claim and determining that only certain portions of the roof were actually damaged by the storm.

The court ruled that, based on this evidence and a prior Pennsylvania case with a similar situation, the insured had not produced evidence from which a reasonable juror could find by clear and convincing evidence both that: (1) the insurer did not have a reasonable basis when it denied coverage for replacement of the entire roof and only agreed to provide coverage to repair or replace the slates that were actually damaged; and (2) it knew or recklessly disregarded a lack of a reasonable basis in denying the claim. The minor issues the insured raised were clearly not sufficient to establish either of these factors by clear and convincing evidence and certainly not both.  Therefore, the court granted the insurer’s Motion for Summary Judgment with respect to the bad faith claim.

Date of Decision:  June 17, 2010

Collins v. Allstate Ins. Co., Civil Action No. 2:09-cv-01824-WY, United States District Court for the Eastern District of Pennsylvania, 2010 U.S. Dist. LEXIS 60436 (June 17, 2010) (Yohn, Jr., J).