NOVEMBER 2015 BAD FAITH CASES: COURT GRANTS INSURER SUMMARY JUDGMENT AFTER FINDING THAT (1) INSURER CONDUCTED REASONABLE INVESTIGATION AND (2) ANY DELAYS IN CLAIM INVESTIGATION WERE NOT SOLELY ATTRIBUTABLE TO INSURER (Philadelphia Federal)

In Tran v. Seneca Insurance Company, a case defended by Jay Barry Harris and Christina Capobianco of Fineman, Krekstein & Harris, the insured alleged that the insurer denied coverage in breach of contract and in bad faith. In support of her bad faith claim, the insured argued that the insurer used “unfair investigation techniques” and intentionally “delayed the payment of her claim,” which, according to the insured, showed that the insurer never intended to pay for the loss. The insurer moved for summary judgment. In response, the insured averred that there was a dispute of material fact as to two particular allegations of bad faith: (1) that the insurer and its agents never attempted to estimate the size of the insured’s loss, and (2) that the insurer unreasonably delayed the investigation.

The court first found that nothing in the record supported the insured’s assertion that the insurer was indifferent to the loss or “never intended to honor the policy.” The court further concluded that the insurer conducted a reasonable investigation, which included employing specialists to investigate the loss, reviewing the fire department’s investigation and the insured’s estimate for the loss, conducting an examination under oath, and requesting additional documents over the course of the year. Based on the record, the court found that the insured could not show by clear and convincing evidence that the insurer was indifferent to the loss or conducted an investigation in a way that would suggest that the insurer never intended to honor the policy.

As to the insured’s claim that the investigation was unreasonably delayed, the court noted that in order to prevail on this claim, the insured must demonstrate that “the delay is attributable to the [insurer], that the [insurer] had no reasonable basis for the actions it undertook which resulted in the delay, and that the [the insurer] knew or recklessly disregarded the fact that it had no reasonable basis to deny payment.” The court stated that bad faith does not occur where a delay is “attributable to the need to investigate further or even to simple negligence.”

Here, the insurer assigned an adjuster to investigate the loss immediately after being notified of the incident, and the adjuster performed an inspection within three days of the loss. While an engineer hired by the insurer to inspect the roof and investigate the cause of loss did not begin its investigation until approximately six months after the incident, the court observed that the insured refused to respond to the insurer’s requests for information for several months, and that the insurer only retained the engineer after months of attempting to communicate with the insured without a response. Further, while the insurer waited several months after the engineer’s investigation to deny the claim, the court recognized that the insurer continued to investigate during this period as well.

Thus, the court found that the record did not provide clear and convincing evidence of bad faith, and that the delays in the investigation were not solely attributable to the insurer. Accordingly, the court granted the insurer’s motion for summary judgment with respect to the insured’s bad faith claim.

Date of Decision: October 14, 2015

Tran v. Seneca Ins. Co., CIVIL ACTION NO. 14-5491, 2015 U.S. Dist. LEXIS 139527 (E.D. Pa. October 14, 2015) (DuBois, J.)