The Third Circuit upheld the district court’s grant of summary judgment to the insurer on breach of contract and bad faith claims. It found a maintenance exclusion applicable to the burst pipe claims at issue. The court rejected the insured’s attempt to strain the meaning of words in the policy to achieve coverage.
As to the bad faith claim, because the court concluded “that the maintenance exclusion was properly applied, [the insurer] by definition had a reasonable basis to deny [the] claim.” The court cited its prior decision in Frog, Switch & Mfg. Co. v. Travelers Ins. Co., 193 F.3d 742, 751 n.9 (3d Cir. 1999), to support this principle.
The court then noted that “even if viewed as a distinct claim that requires us to consider only the facts [the insurer] knew at the time of the coverage determination to evaluate its subjective intent, the experts’ reports detailing the condition of [the] furnace coupled with the frozen condition of the home, [the insured’s] failure to ‘winterize’ his home, and [the insured’s] characterization of the incident as a ‘water-freeze’ to his public adjuster provided more than a reasonable basis for [the insurer] to deny coverage.”
Date of Decision: March 6, 2017
Dougherty v. Allstate Prop. & Cas. Ins. Co., No. 16-2680, 2017 U.S. App. LEXIS 3930 (3d Cir. Mar. 6, 2017) (Krause, Nygaard, Vanaskie, JJ.)