In PMW Real Estate Mgmt., LLC v. State Farm Fire & Casualty Co., the court was faced, on summary judgment, with the issue of whether a building collapse was caused by “hidden decay”, as provided for in a coverage extension to the policy. If the decay was hidden, then coverage would exist. As the phrase “hidden decay” was not defined in the policy the court did a plain language analysis of that phrase’s meaning and then compared it to the facts in the case. The court found the expert reports showed decay, within the meaning of that word. Even if the decay was caused by an excluded source under the policy, e.g., water infiltration, the policy extension overrode those exclusions. The court read the term “collapse” broadly, as required, in the insured’s favor.
As to whether the decay was “hidden” the court imposed an objectively reasonable standard vs. an actual awareness standard, observing willful blindness could not make the decay hidden. The court stated that if there were visible signs, then the decay was not hidden; however, the insured would not be expected to do invasive examinations. The parties’ experts differed on the presence of visible signs of decay, thus creating a dispute of fact that could not be answered on summary judgment.
On the insured’s bad faith claim, the insured argued that the insurer “predisposed to deny its claim, and that [the insurer] failed to conduct a meaningful investigation of the claim.” As required under the summary judgment standard, taking the facts and all reasonable inferences in the non-movant (insured’s) favor, the court denied the insurer’s summary judgment motion seeking dismissal of the bad faith claim. The court cited the factual claim that the insurer’s adjuster told the insured that the claim would be denied before ever observing the collapsed area. The court also found contradictions in the insurer’s expert’s report and his deposition testimony, which could allow the jury to determine that the expert did not spend enough time at the site, and his reliance on his observations from the exterior of the building were not adequate to prepare a reliable, comprehensive report upon which the insurer could reasonably rely.
Date of Decision: August 5, 2013
PMW Real Estate Mgmt., LLC v. State Farm Fire & Casualty Co., No. 2:11cv1395, 2013 U.S. Dist. LEXIS 109989 (W.D. Pa. Aug. 5, 2013) (Cercone, J.)