In El Bor Corporation v. Fireman’s Fund Insurance Company, the insured was a corporation that owned a gym. The insurer covered the insured for up to $1,000,000 for risks of physical loss to the facility, with a few excluded causes of loss, including poor design, construction, or maintenance of the property.
In early 2009, the man who operated the gym noticed staining on the ceiling, but he did not initially report his findings to the insurer. The ceiling started to leak shortly thereafter. The insured eventually did contact the insurer in April 2009 after talking with a pubic adjuster, which notified the insured of its potential claims. The public adjuster believed that the accumulation of snow and ice on the roof caused the damage. On behalf of the insured, it then provided an estimate of over $125,000 of damages to the insurer, including the cost of replacing the roof.
The insurer hired an independent adjuster to inspect the property, and he concluded that the building had been “poorly constructed and inadequately maintained,” and that the accumulation of snow and ice was not enough to cause the observed damage. Based on its findings, the insurer denied the insured’s claim but did agree to pay almost $10,000 to repair internal water damages. After receiving this news, the insured filed a Complaint, containing counts for breach of contract and bad faith. The insurer then filed a motion for summary judgment.
Concerning the breach of contract claim, the insurer argued that the insured failed to comply with portions of its policy regarding notice of the claim, protecting its property, permitting inspection of its property, and cooperating during the adjustment. The court dismissed each of these arguments, however, and the breach of contract claim survived summary judgment.
The insured had also alleged that the insurer acted in bad faith by 1) ignoring its claim for months, 2) waiting several months to deny the claim after receiving the independent adjuster’s report, and 3) relying on policy exclusions that did not apply to this case. The court first determined that there was no evidence that any delay was knowing or reckless. It also decided that the insurer did not unreasonably rely on policy exclusions, as the independent adjuster determined that the roof was poorly constructed and maintained, which would fall under an exception if true. Because the insured did not sufficiently demonstrate evidence that a jury could find that the insurer lacked a reasonable basis for denying benefits under the policy and knew or recklessly disregarded that basis, the court granted the insurer’s motion for summary judgment on the bad faith count.
Date of Decision: May 9, 2011