NOVEMBER 2012 BAD FAITH CASES: COURT DENIES BAD FAITH CLAIM BECAUSE CARRIER’S DELAY WAS VALID IN LIGHT OF THE INSURED’S ALLEGED MISREPRESENTATIONS OF FACT (District of New Jersey)

In Certain Underwriters at Lloyd’s of London v. Alesi, the court heard an insurer’s declaratory judgment action seeking a determination of its liability for damages alleged by its insured under a homeowner’s policy. The insured counterclaimed for breach of contract and bad faith damages, to which the carrier responded by filing a motion for summary judgment. The dispute originally arose from an insurance claim made by the insured party for personal property loss and lost rent under a homeowner’s policy purchased from the carrier. The personal property loss claim concerned items that were allegedly stolen from the home by the insured’s estranged ex-wife. The insured’s claim for benefits also sought coverage for property damages that his home sustained when it was allegedly vandalized and flooded.
The carrier’s motion argued that, because of the insured’s willful misrepresentations of fact concerning his losses, the insured’s policy should be voided and summary judgment should be granted in the carrier’s favor. Having rejected the insured’s claims for personal property loss and lost rents, the court rejected the bad faith count as related to those two claims. With respect to the insured’s property damage claim, stemming from the alleged vandalism to his home, the insured argued that irreconcilable estimates of damages justified its delay. Moreover, the insured was under investigation for insurance fraud in connection to the vandalism of his property. The carrier also claimed that the insured had sought coverage for items that he wanted to purchase, not merely required repairs.
Given these factual circumstances, the court reasoned, the insured was not entitled to damages for bad faith. The court therefore ruled in favor of the carrier under the “reasonably debatable” bad faith standard, concluding that the insured’s continued misrepresentations during the adjustment period were made to the carrier’s detriment.
Date of Decision: December 30, 2011
Certain Underwriters at Lloyd’s of London v. Alesi, 843 F. Supp. 2d 517, U.S. District Court for the District of New Jersey (D.N.J. 2011) (Hillman, J.)