In Rizk v. State Farm Fire & Cas. Co., the insured had a homeowners policy that excluded coverage for frozen plumbing pipes; however, the exclusion did not apply “if the insured used reasonable care to maintain heat in the building.” The insured alleged that although he was away from the home during the winter months, attending school, he had a friend come to the house to set the thermostat at an appropriate temperature to prevent freezing; and that they would come and check the house periodically during January. Still the pipes froze. The carrier denied coverage, and the insured brought breach of contract and bad faith claims. The carrier argued the bad faith count should be dismissed for not setting forth a plausible bad faith claim.
The court rejected this argument. First, the insured specifically alleged that he took reasonable care to maintain heat by having a friend set the thermostat to an appropriate temperature, and by checking on the property at various times in January 2013. Second, the insured further alleged that the carrier purposefully interpreted the policy to resolve ambiguities in favor of itself; failed to provide a reasonable basis for denial of the claim; and failed to reasonably and adequately investigate the claim.
The court cited Judge Conaboy’s February 2014 decision in Aldsworth for the proposition that “where the reasonableness of the defendant’s basis for denying coverage was a factual issue, dismissal of the plaintiff’s bad faith claim was premature.” Whether the insurer in this case had a reasonable basis for denying the claim depended on the factual issue of whether the insured took reasonable care to maintain heat in the residence. Again, citing Aldsworth: “While discovery may not provide Plaintiffs with the required clear and convincing evidence that Defendant ‘(1) did not have a reasonable basis for denying benefits under the policy; and (2) knew or recklessly disregarded its lack of a reasonable basis in denying the claim,’ a determination on these matters is not properly made on the record before us.”
Date of Decision: May 21, 2014
Rizk v. State Farm Fire & Cas. Co., CIVIL NO. 1:14-CV-619, 2014 U.S. Dist. LEXIS 70460 (M.D. Pa. May 21, 2014) (Caldwell, J.)