SEPTEMBER 2010 BAD FAITH CASES NO BAD FAITH WHERE INSURER PROVIDES THE INSUREDS OPPORTUNITIES TO CORRECT THEIR INSURANCE POLICY (Allegheny County)

In Addlespurger v. Motorists Mutual Insurance Company, the insureds were issued a homeowner’s policy for their condominium by the insurer.  The policy provided $50,000 coverage for condominium, $50,000 for personal property and $20,000 for the loss of use.  A fire occurred in the condominium, damaging many items around the unit.

A claims specialist advised the insureds that the repairs were not complex and could be finished in approximately one month.  He also said that the insurer would pay for the insureds to stay at a furnished apartment for the month, but the insureds instead decided to stay at a more expensive hotel.  For approximately four months, the insureds and the claims specialist could not agree on estimates for repairs and temporary living expenses, but the insurer did tender thousands of dollars to the insureds in multiple payments.

Around nine months after the fire, the parties met to present their final estimates, and the insureds’ estimate was about $15,000 greater than the insurer’s.

The insureds filed a claim against the insurer, alleging that the insurer acted in bad faith in refusing and delaying payment of their benefits.  The court noted that in Pennsylvania, a plaintiff must show that “the insurer (1) did not have a reasonable basis for denying benefits under the policy and (2) knew or recklessly disregarded its lack of a reasonable basis in denying the claim” (Condio v. Erie Ins. Exchange, 2006 PA Super 92, 899 A.2d 1136, 1143 (Pa. Super. 2006).  Here, it determined that the insurer did not act unreasonably in delaying payment with ill will or self-interest, as the evidence established that the it acted reasonably in responding promptly to communication and did not act in bad faith.  Therefore, the court ruled in favor of the insurer.

Date of Decision:  April 16, 2010

Addlespurger v. Motorists Mut. Ins. Co., Civil Action No. G.D.05-001524, Common Pleas Court of Allegheny County, Pennsylvania, Civil Division, 2010 Pa. Dist. & Cnty. Dec. LEXIS 137 (Pa. County Ct. April 16, 2010) (James. J.)