Legal Updates for Coverage and Bad Faith

Edited by Allison L. Krupps, Esq.

Court Dismisses Breach of Contract and Bad Faith Claims Based on One-year Suit Limitation Clause.   

Long v. Farmers New Century Ins. Co., 5:15-cv-06724 (E.D. Pa. March 30, 2017)

The United States District Court for the Eastern District of Pennsylvania granted Farmers’ motion for judgment on the pleadings and dismissed the plaintiff’s breach of contract and bad faith claims. This case arose from a property damage claim under the plaintiff's Farmers' homeowners policy following a hail storm. One year after the storm occurred, the plaintiff’s public adjuster notified Farmers of the damage and made a claim for benefits. The next day--the one-year anniversary of the loss--Farmers acknowledged the claim, stated its position that the plaintiff had failed to promptly make a claim, and reminded the plaintiff that any suit against Farmers must be filed within one year of the date of the loss, as required by the suit limitation clause contained in the policy. Farmers subsequently determined that the damage was covered by the policy and issued payment. The plaintiff disagreed with Farmers’ assessment of the damages and demanded that Farmers participate in the appraisal process set forth in the policy. Farmers declined to engage in the appraisal process, and the plaintiff sued for breach of contract and bad faith. Farmers argued in opposition that the one-year suit limitation clause applied and that the plaintiff had failed to timely file the lawsuit. The court considered that the suit limitation clause was unambiguous, that this type of policy provision is valid and enforceable and that Farmers had not waived and was not otherwise estopped from relying on this defense. Thus, the court held that the breach of contract claim was barred by the suit limitation clause. With respect to the bad faith claim, the court held that, given the language of the policy and the 15-month delay in demanding appraisal, it was reasonable for Farmers to assume that the request for appraisal was untimely. The court, therefore, granted the motion and dismissed the breach of contract and bad faith claims.    

Court Finds No Bad Faith Where Multiple Representatives Were Assigned to the Claim.

Yatsonsky v. State Farm Fire & Cas. Co., 3:15-cv-01777 (M.D. Pa. Dec. 5, 2016)

The United States District Court for the Middle District of Pennsylvania granted State Farm’s Motion for Summary Judgment with respect to the plaintiff’s statutory bad faith claim. This case arose from a property damage claim under a homeowners insurance policy after a pipe burst inside the plaintiff’s home, causing extensive damage. To support her bad faith claim, the plaintiff argued that State Farm had assigned an inordinate number of representatives to her claim (13 total) and that it had refused to timely pay her the full value of the loss. The court considered that the plaintiff had not produced expert evidence with respect to State Farm’s investigation and had not presented any competent evidence from which a reasonable jury could find that the number of representatives assigned to the claim established bad faith. The court also held that the fact that State Farm had obtained multiple estimates over a seven-month period did not establish bad faith. Thus, State Farm’s motion for summary judgment was granted.

PA Supreme Court: UIM Form in Compliance With MVFRL Even with Minor Language Deviations.

Ford v. American States Ins. Co., No. 13 WAP 2016 (Pa. Nov. 2, 2016)

The Supreme Court of Pennsylvania granted allowance of appeal to determine whether an insurer’s underinsured motorist (UIM) coverage rejection form “specifically complies” with Section 1731 of the Motor Vehicle Financial Responsibility Law (MVFRL) if the form is not a verbatim reproduction of the form found in Subsection 1731(c) but differs in an inconsequential manner.  The plaintiff’s mother had signed a UIM rejection form at the policy’s inception. The plaintiff was subsequently involved in a motor vehicle accident and submitted a claim for UIM coverage under her mother’s policy. American States denied the claim since the mother had previously signed the rejection form. The plaintiff argued that Subsection 1731(c.1) requires that the rejection form “specifically comply” with Section 1731 or the form is void. The issue was whether a rejection form “specifically complies” when it contains certain minor deviations, i.e., use of the word “motorists” instead of “motorist” and the addition of the word “motorists” to another portion of the form that is not included in the statute. The court held that a UIM coverage rejection form specifically complies with the MVFRL even if it contains de minimis deviations from the statute. The court considered that the slight alterations of the statutory language did not render the form ambiguous.