MAY 2013 BAD FAITH CASES: COURT RULES THAT BAD FAITH CLAIM CANNOT BE PREMISED ON CARRIER’S FILING FOR DECLARATORY JUDGMENT (Philadelphia Federal)

In First Liberty Ins. Corp. v. Walker, the carrier filed a declaratory judgment action to determine its obligation to defend its insured in an underlying state court property damage action. The underlying action was commenced by the insured’s neighbor as the result of intentional property damage and as a means to concede an easement on the insured’s property. As both of these occurrences would not be covered under the insured’s homeowner policy, the carrier assumed defense under a reservation of rights and then filed this action. The insured thereafter filed a counterclaim for bad faith, which the carrier moved to dismiss.
The court granted the carrier’s motion to dismiss, reasoning that the insured did not properly allege how the carrier violated the policy or describe how the carrier’s defense was inadequate. Moreover, the court ruled that the insured’s bad faith claim could not be premised upon the carrier’s declaratory judgment action alone. Lastly, the court granted the insured leave to amend.
Date of Decision: March 7, 2013
First Liberty Ins. Corp. v. Walker, No. 12-6823, 2013 U.S. Dist. LEXIS 32018, U.S. District Court for the Eastern District of Pennsylvania (E.D. Pa. Mar. 7, 2013) (Yohn, J.)