OCTOBER 2006 BAD FAITH CASES
SUMMARY JUDGMENT REVERSED AS MATERIAL FACTS EXISTED AS TO WHETHER OVERHEAD AND PROFIT WERE DUE INSURED WHERE INSURED DID OWN REPAIRS (Pennsylvania Superior Court)
In Mee v. Safeco Insurance Company of America, Plaintiff had purchased a homeowner’s policy from Defendant insurer. After Plaintiff suffered loss to his home as a result of an overflowing toilet, Defendant insurer refused to pay benefits to Plaintiff for overhead and profit (OP) for the repairs because Plaintiff repaired the work himself instead of hiring a general contractor. Plaintiff filed a class action suit against Defendant insurer, claiming breach of contract and bad faith, and appealed the lower court’s grant of summary judgment. The Superior Court of Pennsylvania looked to Pennsylvania case law, which indicated that a homeowner was entitled to OP where use of a general contractor would have been reasonably likely, even if no contractor was used. Whether the use of a general contractor was reasonably likely depended on the nature and extent of the damage and the number of trades needed to make repairs. The Court held that if Plaintiff could establish that the use of a general contractor would be reasonably likely, he could prevail. Thus the Court concluded a genuine issue of material fact existed to whether Defendant acted in bad faith by not paying OP on Plaintiff’s claim, and remanded the case for further proceedings.
Date of Decision: September 14, 2006.