SEPTEMBER 2010 BAD FAITH CASES NO REINSTATEMENT OF BAD FAITH CLAIM IN MOTION FOR RECONSIDERATION WHEN INSUREDS FAIL TO ADDRESS BAD FAITH CLAIMS IN THEIR INITIAL COMPLAINT (Philadelphia Federal)
In 3039 B. Street Associates, Inc., v. Lexington Insurance Company, the insureds had a policy with the insurer for a property where it conducted its business. One day, a frozen sprinkler pipe at the property burst, causing a flood. The insurer paid the undisputed flooding damages but refused to pay for other disputed damages.
The insureds filed a claim against the insurer for breach of contract and bad faith. They alleged that the insurer (1) withheld payment on the Policy for an unreasonable length of time; and (2) knowingly and recklessly disregarded a reasonable basis to pay real and personal property damages after frozen water caused the sprinkler pipe to explode in their commercial real estate property.
The insurer responded by arguing that (1) its investigation of the claim was proper and reasonable; (2) the insureds were paid the undisputed amount; and (3) pursuant to the Policy’s appraisal provision, the parties agreed to resolve continuing damages disputes through appraisal, which were since paid. The court granted the insurer’s motion for summary judgment on the bad faith claims, and the insureds then filed a motion for reconsideration.
In its motion, the insureds listed eight issues for the court to consider, but these were all issues that either the court had ruled on in its previous opinion or new issues that were not allowed to be raised in a motion for reconsideration. For example, in their initial bad faith claim and subsequent pleadings, the insureds failed to argue that the insurer acted in bad faith by failing to make advance payments on the policy, but they raised that issue on the motion for reconsideration. Therefore, even though the court did make a factual error in its initial opinion by incorrectly stating that the insurer had advanced the insureds $50,000, the court’s legal conclusions were not impacted by the error because the insureds did not argue that the failure to advance money was a bad faith violation. The court therefore granted the insureds’ motion for reconsideration to the extent that the factual error stating that the insurer advanced them $50,000 upon request would be corrected, but it denied the motion in all other respects and the bad faith claim was not reinstated.
Date of Decision: August 27, 2010
3039 B St. Assocs. v. Lexington Ins. Co., Civil Action No. 09-1079, 740 F. Supp. 2d 671, United States District Court for the Eastern District of Pennsylvania, 2010 U.S. Dist. LEXIS 89533 (Aug. 27, 2010) (Robreno, J.)