Wednesday, June 4, 2014

Here's a Thought: If There Ain't No Coverage, There Ain't No Bad Faith

In their recent "non-precedential" decision (why do they mark them "non-precedential" on occasion?!) in the bad faith case of Yera v. Travelers Ins. Co., of Am., 1398 EDA 2013 (Pa. Super. April 22, 2014)(Ford Elliott, P.J.E., Ott, J., Strassburger, J.) (Opinion by Ott, J.)(Concurring and Dissenting Op. by Strassburger, J.), the Pennsylvania Superior Court affirmed a trial court’s finding that the homeowner’s insurance  carrier for the Plaintiff did not act in bad faith by waiting six (6) months to deny the Plaintiff’s fire loss claim as there could be no bad faith claim where there was an underlying decision that the carrier need not afford any coverage under the policy in any event.  

By way of background, the Plaintiff owned an apartment building that was insured by Travelers.   The building was destroyed by fire.   Travelers denied the claim because there was not automatic sprinkler system in the building at the time of the fire as required by a protective safeguard endorsement in the policy of insurance. 

After the Plaintiff filed a lawsuit seeking to recover insurance benefits from Travelers under the policy and alleging bad faith, the trial court ruled that no coverage was required as the building did not have a sprinkler system as required by the terms of the insurance policy.   Travelers was granted summary judgment.  

On appeal, the Plaintiff argued that the trial court had erred because the policy provision was ambiguous and therefore unenforceable.  Further, the Plaintiff asserted that Travelers’ actions supported the Plaintiff’s bad faith claims.  

The Superior Court rejected the Plaintiff’s arguments on appeal.  The court found that because Travelers did not improperly deny the Plaintiff’s claim under the policy provisions at issue, the general definition of bad faith was not met.   Stated otherwise, the Superior Court more specifically ruled that Travelers’ investigation practices did not result in an improper delay in the payment of the Plaintiff’s claim because no payment was due under the application of the policy provisions to the facts presented.   Accordingly, the lower court’s decision in favor of the carrier was affirmed.  

Anyone wishing to review this decision, may click this LINK.

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