In McMahon v. State Farm Fire and Casualty Company, the Plaintiffs were insured under a homeowner’s policy they purchased from the Defendant. The policy insured against “accidental direct physical loss” to their home. Plaintiffs made a claim for damages under the policy after learning they needed to replace a drain pipe in their bathroom. Since the Plaintiff’s home was built on a concrete slab and the drain pipe was contained within the concrete slab, the plumbers Plaintiffs hired to replace the pipe were forced to rip up the carpeting, break up the concrete slab and expose the pipe. Defendants denied coverage for the water damage stating that the insurance policy did not extend to plumbing that was being replaced due to wear, tear or deterioration. As a result, Plaintiffs filed an action alleging that defendants acted in bad faith and breached the insurance contract. Both Plaintiff and Defendant filed motions for summary judgment.
In reviewing these motions, the Court held that Plaintiffs failed to present evidence that Defendants breached the insurance contract. The Court found that the insurance contract was intended to insure Plaintiffs against unexpected physical damage to their house and personal property. The Plaintiffs losses, however, were due to normal wear and tear and were not unexpected. The fact that the pipe was difficult to get to was a result of the construction of the property and therefore the costs of the repairs are not covered under the policy.
The Court also held that Plaintiffs failed to present evidence showing that Defendant acted in bad faith. The Court found that Defendant conducted an adequate investigation and denied the claim based on a reasonable interpretation of the policy language. Defendants sent an adjuster to Plaintiffs’ home nine days after the claim was made and spoke to the plumbers who did the repair work. The Defendant then sent Plaintiffs a letter outlining the reasons for the denial and citing the applicable policy provisions. Because Plaintiffs failed to show that Defendant lacked a reasonable basis for denying their claim and failed to establish claim for bad faith, the Court granted judgment in favor of Defendant.
Date of Decision: May 8, 2007