In Hudgins v. Travelers Home & Marine Ins. Co., plaintiff’s home was destroyed in a fire. An investigation of the cause of the fire took place, and plaintiff’s son was arrested and charged with arson. The insurer continued its investigation, but failed to make a decision as to coverage until nearly 10 months after the fire when the charges against plaintiff’s son were dropped and he submitted to an examination under oath. Following the deposition, the insurer accepted coverage and issued payment, but aggregated the total value of all items included in plaintiff’s personal property claim and depreciated the value. The insurer also ended additional living expense payments under suspicious circumstances. Multiple lawsuits were filed as a result of the claims settlement process, with the instant breach of contract and statutory bad faith action being filed in state court and removed to federal court by the insurer. The insurer then moved for summary judgment on the bad faith claims.
First, the court found that a bad faith claim can be pursued despite the insurer’s acceptance of coverage. A statutory bad faith claim extends to an insurer’s actions such as unfair investigation techniques or delayed payment of claims. Thus, plaintiff’s allegations that the insurer unreasonably delayed its investigation and coverage decision, as well as her challenge of the depreciation reduction on her personal property claim and the insurer’s refusal to reinstate her ALE payments, could all support a bad faith claim.
The court then turned to each allegation of bad faith to consider the insurer’s argument plaintiff lacked evidentiary support for her claims. First, the court considered whether the insurer’s delay in investigation was in bad faith. The only piece of evidence needed to make the coverage determination was plaintiff’s son’s sworn statement, and the insurer failed to take the deposition for nine months. The court found whether this presented an unreasonable delay in investigation was a question of fact for the jury and denied summary judgment.
Next, the court considered whether the insurer’s interpretation of the policy was unreasonable as to establish bad faith. Plaintiff alleged the insurer acted in bad faith when it asserted an “appraisal defense” in an underlying action. Although the defense was procedurally rendered moot and never reasserted, the court found if reliance on the defense, even temporarily, was a frivolous interpretation of the policy, such an action could constitute bad faith. Therefore, summary judgment was denied on that count.
Conversely, the court found no reasonable jury could find the insurer’s interpretation of the policy allowing it aggregate and depreciate the value of plaintiff’s personal property was unreasonable, and granted summary judgment.
The court found a material question of fact as to whether the insurer’s decision to stop making ALE payments was in bad faith. Plaintiff presented evidence suggesting the insurer stopped paying ALE because plaintiff sought sanctions in response to a motion filed by the insurer in an underlying litigation, as well as evidence its refusal to reinstate the payments broke with its usual practice. Therefore, summary judgment was denied.
Finally, plaintiff’s attempt to include an ‘abuse of process’ claim as a part of her allegations of bad faith failed due to plaintiff’s failure to produce enough evidence to enable a jury to find the insurer did not have a reasonable basis for its actions in the underlying action.
Date of Decision: July 31, 2013
Hudgins v. Travelers Home & Marine Ins. Co., Civil Action No. 11-882, 2013 U.S. Dist. LEXIS 107775 (E.D. Pa. July 31, 2013) (Yohn, J.)