SEPTEMBER 2010 BAD FAITH CASES NO BAD FAITH WHEN THE INSURED FAILS TO COOPERATE; LONG TIME PERIOD BETWEEN DEMAND AND SETTLEMENT NOT NECESSARILY BAD FAITH (Western District)

In Tangle v. State Farm Insurance Companies, a fire occurred at the residential property owned by the insured.  The insured had a homeowner’s policy with the insurer.  The fire and police departments were suspicious as to the cause of the fire, as upon their entry, they noted a heavy odor of gasoline, and they determined that the fire had originated  in a second floor bedroom where they found evidence of a time delay ignition device and an accelerant.

Shortly after the insured visited the insurer’s office to make a claim, the police notified the insurer that the fire was being investigated as arson and that insured was a suspect.  The insurer retained a private fire investigator, who determined that the fire was “the direct result of an incendiary act” and was “aided by the use of an accelerant.”  The insurer’s investigator eventually held an examination under oath with the insured, but the insured failed to bring the requested documentation to the examination and allegedly did not provide it to the insurer after multiple other requests.

The insurer eventually paid the insured $46,459.62 for the value of the damaged property and the contents inside.  However, the insured had already filed a claim for breach of contract and bad faith, alleging that the insurer unreasonably delayed payment on the insurance contract for approximately 17 months.

The court first noted that under Pennsylvania law, a long period of time between demand and settlement does not necessarily constitute bad faith; so long as the delay occurs due to the need to investigate further or even because of simple negligence, no bad faith has occurred.  In this case, the record clearly showed that much of the delay was caused by the insured’s failure to cooperate with the insurer.  He failed to provide documents even after multiple requests, and he rescheduled his examination under oath many times before finally taking it.  The magistrate judge therefore concluded that the insurer reasonably delayed its payment, and she recommended that the insurer be granted summary judgment on the bad faith claim.

Date of Decision:  August 4, 2010

Tangle v. State Farm Ins. Cos., Civil Action. No. 08-112 Erie, United States District Court for the Western District of Pennsylvania, 2010 U.S. Dist. LEXIS 89349 (Aug. 4, 2010) (Baxter, U.S.M.J.)