In Am. Collision & Auto. Ctr., Inc. v. Windsor-Mt. Joy Mut. Ins. Co., the court heard a carrier’s motion to dismiss a breach of contract and bad faith claim brought by the owner of a damaged boat that sought benefits under its policy.
In 2006, the insured’s father bought a boat through his business, a collision center. The boat was financed by a separate company that provided loans to the insured in exchange for various asserts of the insured’s family business. In late 2006, the boat was damaged in a fire on the pier where it was docked. The insured reported the loss to its carrier, who denied coverage by claiming that the insured did not own the boat. The carrier refused to reverse its decision, even after its investigator found that an unidentified homeless person started the fire.
In 2007, the insured and its financier filed suit in state court in Philadelphia and the carrier removed to federal court. At trial, the carrier changed positions and argued that the insured did not own the boat, although the carrier provided no evidence of fraud. Moreover, the carrier had paid a small claim to the insurer the previous year for damage to the boat’s outdrive. The carrier also produced evidence at trial that it had not provided to its insured and allegedly made several misrepresentations of fact at trial, some of which were at odds with testimony given by the carrier’s own witnesses.
In this action, the insured brought suit for breach of contract and bad faith. The carrier argued that these claims were time-barred and should therefore be dismissed. First, the court found that the insured’s breach of contract claim was barred by the statute of limitations. The insured argued that the carrier had concealed its litigation strategy until mid-2009, meaning that the insured did not receive notice of the carrier’s breach until that time. The court disagreed, finding that even if the carrier’s fraudulent concealment tolled the limitations period, the breach of contract action would still be untimely under the terms of the policy.
Second, the court addressed the insured’s bad faith claims. The insured contended that it met the two-year statute of limitations because the carrier’s discovery violations were concealed and failed to provide the insured with notice of bad faith. The court reasoned that this was incorrect because bad faith claims must stem solely from the carrier’s original denial of coverage. As such, the carrier’s alleged “discovery violations” do not give rise to an independent bad faith claim sufficient to toll a later statute of limitations.
Therefore, the carrier won on its motion to dismiss the insured’s suit.
Am. Collision & Auto. Ctr., Inc. v. Windsor-Mt. Joy Mut. Ins. Co., 2012 U.S. Dist. LEXIS 139490, U.S. District Court for the Eastern District of Pennsylvania (E.D. Pa. Sept. 27, 2012) (Gardner, J.)