Monday, July 5, 2010

Summary Judgment in Favor of Carrier in Recent Eastern District Court Bad Faith Decision

The Eastern District of Pennsylvania handed down a recent bad faith decision in the case of 3039 B Street Associates, Inc. v. Lexington Insurance Company, PICS Case No. 10-1892 (E.D. Pa. May 3, 2010, Robreno, J.).

In this case, the Plaintiffs' commercial real estate and personal property was damaged by water after a sprinkler pipe burst. The Plaintiffs alleged bad faith conduct on the part of the carrier and requested punitive damages based on defendant Lexington Insurance Company's delay in payment of its claims by conducting a protracted investigation. Lexington moved for summary judgment requesting that plaintiffs' claim be dismissed.

Applying Pennsylvania law, the court ruled that the Plaintiffs could not make a claim under the Unfair Insurance Practices Act since the statute does not provide for a private right of action.

In terms of the 42 Pa.S.C.A. §8371 bad faith claim, relying upon the factors in Polselli v. Nationwide Mut. Fire Ins. Co. , 23 F.3d 747 (3d Cir. 1994), the court found that the carrier had a reasonable basis for denying the claim. The policy set out a procedure for adjusting claims, which was followed by the carrier. The parties were in close communication from the date the claim was submitted and the carrier was responsive to the insured's inquiries.

The court also noted that the Plaintiffs failed to provide defendant with information material to the satisfaction of their claim. Plaintiffs' did not file a proof of loss within the 30 days provided in the policy; rather, four months passed until the proof of loss was submitted. The court also noted that the carrier acted promptly after this information was received.

Believing the carrier had acted reasonably in investigating the claim, the court granted the carrier's summary judgment motion and dismissed the claims presented.

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