In Simmons v. Trumbull Ins. Co., the court addressed an insured’s breach of contract and bad faith claims stemming from the denial of benefits under her automobile policy. The case arose from a car fire that caused substantial damage to the insured’s car. After promptly reporting her loss to the carriers, the insured’s claim was denied. The carriers’ employee sent a letter explaining that the claim was denied because the loss was caused by an electrical or mechanical failure, two occurrences excluded from the insured’s policy.
The insured thereafter filed this suit against the named insurer and a financial services company through whom plaintiff alleged the named insurer issued the policy. The insured’s claim was that the named carrier issued the automobile policy “acting by and through” the financial services company, which should also be amenable to breach of contract and bad faith liability. The defendants moved to dismiss both claims against the financial services company on the grounds that it was not a proper defendant.
With respect to the financial services company, the court held that it was an insurer for the purposes of the Pennsylvania bad faith statute. Using a two-part factor test, the court held that the company was (1) identified as an insurer on various policy documents and (2) acted as an insurer. For instance, the company’s logo appeared on the insured’s insurance card. The insured’s policy documents also used the company’s name repeatedly. Even the letter denying coverage under the policy contained the company’s logo. As such, the court ruled that both the named carrier and the financial services company were insurers for the purposes of bad faith liability.
The court also denied the carriers’ motion to dismiss the bad faith count because the denial letter stated that the insured’s car “had a short and melted the negative battery cable but there was no other damages [sic] to any other components.” Yet, the insured’s complaint alleged “substantial fire damage,” permitting the inference that the carrier did not reasonably investigate the insured’s claim. The court reasoned that this was enough to survive the carrier’s motion to dismiss.
Date of Decision: April 25, 2012
Simmons v. Trumbull Ins. Co., No. 11-6571, 2012 U.S. Dist. LEXIS 58425, U.S. District Court for the Eastern District of Pennsylvania (E.D. Pa. Apr. 25, 2012) (Padova, J.)