OCTOBER 2013 BAD FAITH CASES: BAD FAITH CLAIM ADEQUATELY PLEADED WHERE, AMONG OTHER THINGS, INSURED ALLEGED THAT THE CARRIER UTILIZED AN IMPROPER EXPERT AND FAILED TO RETAIN LEGAL COUNSEL TO EVALUATE THE CLAIM, AS WELL AS DELAY IN SETTLEMENT. COURT ALSO PERMITTED CLAIM FOR NEGLIGENCE IN UNDERVALUING NECESSARY POLICY LIMITS TO PROCEED (Western District)

In Allied Dental Group v. State Farm Fire & Casualty Co., the plaintiff purchase a business insurance policy that provided coverage for business personal property and improvements and betterments, and coverage for the actual loss of business income sustained during a period of restoration. A fire severely damaged the office building plaintiff leased and as a result plaintiff submitted a claim under the Policy. The carrier paid plaintiff the approximate limit under the first coverage, but its losses were over double that policy limit.  Plaintiff’s lawsuit alleges that the carrier was negligent in its evaluation and recommendation of coverage under the Policy and, as a result, plaintiff was underinsured. In addition, Plaintiff alleges that Defendant breached the terms of the Policy and acted in bad faith during the investigation and settlement of the claim in a reasonable time frame.

The carrier argued that the claim should be dismissed because the plaintiff has failed to allege sufficient facts to state a plausible claim under Pennsylvania law. The court denied the insurer’s motion to dismiss the bad faith claim.  It found at least a plausible claim for bad faith was stated based on the allegations concerning failure to investigate and delay in settling the claim. Plaintiff made specific factual averments including, but not limited to, that the carrier refused to meet with corporate accountants to discuss the insureds’ losses; unreasonably utilized an accountant who was not familiar with plaintiff’s billing process and later relied on that accountant’s opinions in determining coverage; failed to retain legal counsel regarding plaintiff’s claim; failed to meet with plaintiff regarding certain factual determinations necessary to determine its loss; and delayed payment for thirteen months.  This not only met the criteria for pleading under Twombly, but set out the kind of conduct that, if proven, could constitute bad faith.

On the negligent recommendation claim, the court not only found a claim to be stated, but allowed the fleshing out of that claim in an amended complaint to relate back to the original complaint and thus survive the statute of limitations hurdle.
Date of Decision: September 27, 2013

Allied Dental Group, Ltd. v. State Farm Fire & Cas. Co., Civil Action No. 12-1637, 2013 U.S. Dist. LEXIS 138673 (W.D. Pa. September 27, 2013 (Bissoon, J.)