NOVEMBER 2007 BAD FAITH CASES NO BAD FAITH WHERE DENIAL REASONABLE BASED ON CLAIMS HANDLING, EVEN THOUGH COVERAGE REMAINED AT ISSUE (Western District)

In Easy Sportswear, Inc. v. American Economy Insurance Complany,

the insured claimed that some of its property was lost due to storm damage.  A reservation of rights letter was issued promptly after the claim was submitted.  The carrier investigated, via an adjusting firm and an independent roof specialist who concluded that the damage was not caused by the storm, but that rain water had gotten into the building because the roof had deteriorated.  On the issue of coverage, the court concluded that there was potentially coverage under the policy, but that the material facts remained in dispute over whether or not there would be coverage; thus, summary judgment was denied both parties on coverage.

The carrier’s motion on summary judgment on the bad faith claim was granted.  The court cited to the facts that there was a timely reservation or rights letter; that there was an investigation that the carrier claimed was reasonable and formed the basis for a reasonable and good faith denial of coverage – an argument that was unrefuted; and that the denial was promptly communicated.  The court found that based on the affidavits of the adjustor and roofing specialist and correspondence supporting the foregoing, there was a reasonable basis to deny the claim, and certainly no clear and convincing evidence to the contrary. 

Date of Decision: November 21, 2007

Easy Sportswear, Inc. v. American Economy Ins. Co., No. 05-1182, 2007 U.S. Dist. LEXIS 86114 (W.D. Pa. November 21, 2007) (Fischer, J.)

L.A.