In Atiyeh v. National Fire Insurance Company of Hartford, the insured owned a real estate business that was covered by the insurer with a commercial insurance policy. One day, the pipes in the insured’s building froze, causing damage to the building and the insured’s personal property. The insured also suffered a loss from the interruption of his business. The insured promptly notified the insurer of the damages. After an investigation of the insured’s real estate and personal property, the insurer denied the insured coverage.
The insured filed a Complaint, containing counts for breach of contract and bad faith. The court then dismissed the Complaint, but the bad faith count was only dismissed without prejudice. The insured then filed an amended Complaint that only alleged a bad faith violation. He claimed that the insurer falsely and fraudulently represented that he had not performed routine maintenance on the premises, when in reality the insurer knew or should have known that the premises were properly maintained. In addition, the insured asserted that the insurer unreasonably refused to indemnify him for his loss.
In addressing this bad faith claim, the court acknowledged Pennsylvania case law, stating that to successfully plead bad faith, an insured’s allegations must “demonstrate that the insurer (1) lacked a reasonable basis for denying benefits and (2) knew or recklessly disregarded its lack of a reasonable basis.” It then held that because the insured asserted that the insurer did actually perform an investigation before denying his claim, and no sufficient allegation it was done in bad faith, there is no possible bad faith. Concerning the insured’s additional allegations that the insurer falsely represented that he had not maintained the premises and that it unreasonably refused to indemnify him for his loss, the court ruled that these were “bare-bones conclusory allegations which [did] not state a plausible bad faith claim.” The court therefore the court granted the insurer’s Motion for Judgment on the Pleadings to dismiss the bad faith claim.
Date of Decision: September 27, 2010
Atiyeh v. Nat’l Fire Ins. Co.
, Civil Action No. 07-cv-04798, United States District Court for the Eastern District of Pennsylvania, 742 F.Supp. 2d 591, 2010 U.S. Dist. LEXIS 102697 (Sept. 27, 2010) (Gardner, J.)