U.S. District Court of New Jersey reiterates that an insurer’s mistake is not bad faith.

The insured submitted a claim for a leaking roof as the result of a storm, which lead to mold issues in the home. While the insurer initially denied coverage for the mold remediation, two weeks later, it issued a check for the full amount of mold remediation payment available under the policy. The insured brought a breach of contract and bad faith claim against the insurer. The District Court granted the insurer’s motion for summary judgment as the plaintiff had admitted that the full payment represented the insurer’s entire duty under the contract. As for the bad faith claim, the District Court noted that the only evidence the plaintiff raised was that the insurer was mistaken in initially denying the claim for mold remediation. Reiterating the law that “neither negligence nor mistake is sufficient to show bad faith,” the court granted the insurer’s motion for summary judgment. As this holding demonstrates, insurers should not be afraid to correct errors it discovers in its claims handling as mistake alone is not enough to prove a claim for bad faith.

_{Case Law Alerts, 4^th Quarter, October 2016. Case Law Alerts is prepared by Marshall Dennehey Warner Coleman & Goggin to provide information on recent developments of interest to our readers. This publication is not intended to provide legal advice for a specific situation or to create an attorney-client relationship. Copyright © 2016 Marshall Dennehey Warner Coleman & Goggin, all rights reserved. This article may not be reprinted without the express written permission of our firm.}