SEPTEMBER 2010 BAD FAITH CASE CONTRACTUAL BAD FAITH CLAIM SURVIVES DISMISSAL WHEN DISPUTE OVER WHETHER THE INSURER TRUTHFULLY PROVIDED INFORMATION TO THE INSURED (Philadelphia Federal)

In Wolk v. Westport Insurance Corporation, the insured was an attorney and his law firm, who had a pending suit against their professional liability insurer for failing to defend it against claims asserted against the firm in connection with its representation of a client in a state court lawsuit.  The dispute in this separate suit concerned the insurer allegedly retaliating against the insured by falsely reporting the cost of defending itself in the first action as a loss under the insurance policy, making it more difficult for the insured to find a replacement insurer.  The insured asserted claims for tortuous interference, disparagement, and contractual bad faith against the insurer.

While the court dismissed the insured’s claims for tortuous interference for failure to state a claim and commercial disparagement because the one-year statute of limitations had run, it denied the motion to dismiss the bad faith claim.  It noted that once the insurer undertook to provide the loss information, it was required to do so truthfully, and the parties disputed whether the insurer had actually truthfully provided the information.  Additionally, the court determined that it is not necessarily required that a claim for contractual bad faith, which is the equivalent of a claim for the breach of a contractual duty to act in good faith, be limited to situations where the insurer has defended or settled a claim on behalf of the insured; it was simply established that contractual bad faith claims most-often arise and are well-established in that context.

Date of Decision:  August 9, 2010

Arthur Alan Wolk & Arthur Alan Wolk Assocs. v. Westport Ins. Corp., Civil Action No. 09-cv-0998-JF, United States District Court for the Eastern District of Pennsylvania, 2010 U.S. Dist. LEXIS 81932 (E.D. Pa. Aug. 9, 2010) (Fullam, Sr., J.)