NOVEMBER 2015 BAD FAITH CASES: THERE CAN BE NO CLAIM FOR BAD FAITH WHERE NO INSURANCE POLICY WAS EVER ISSUED (Philadelphia Commerce Court)

In The Bank of New York Mellon v. Commonwealth Land Title Insurance, the putative insured brought claims for breach of contract and bad faith for denying coverage under a title insurance policy.

A commitment letter in connection with a loan, to issue a policy of title insurance in connection with the sale of property, had been transmitted by a non-party closing service.  The commitment letter stated that several conditions precedent had to be satisfied before the title insurance would be issued. Among other things, there was a mortgage that had to be satisfied. The plaintiff admitted that this condition was never fulfilled.  No title insurance policy was ever issued because that condition was not satisfied.

When the plaintiff made a claim to the title insurance company, the title insurer responded that coverage was being denied because, among other reasons, a policy had never been issued. The court found: “As a matter of law, because the policy was never issued, plaintiff’s claims of a breach under the policy and defendants alleged acts of bad faith under the policy cannot stand.”  It considered the existence of an insurance contract a necessary element of both the breach of contract and bad faith claims, in dismissing those claims.

Date of Decision:  September 15, 2015

Bank of N.Y. Mellon v. Commonwealth Land Title Ins., June Term 2014, No. 00709, Court of Common Pleas of Philadelphia, 2015 Phila. Ct. Com. Pl. LEXIS 293 (CCP Phila. September 15, 2015,) (Glazer, J.) (Commerce Court)