Can A Bad Faith Claim Be Pled Where There is a Finding of No Coverage Due Under Policy?

In the case of Frantz v. Nationwide Ins. Co., No. 3:18-cv-0509 (M.D. Pa. May 15, 2018 Caputo, J.), Judge A. Richard Caputo of the Federal Middle District Court of Pennsylvania appeared to part ways somewhat from the notion that a bad faith claim cannot exist in a matter where there is otherwise no insurance coverage due for a variety of reasons.  

In this case, the court dismissed the insured’s breach of contract claim after finding that no insurance coverage was due under the circumstances presented.  Nevertheless, the court still gave the Plaintiff leave to file an Amended Complaint asserting common law and statutory bad faith claims. 

In his Opinion, Judge Caputo cited the standard of review requiring that a bad faith Plaintiff has to show that there was no reasonable basis to deny coverage and that the insured knew or recklessly disregarded this fact.  

However, the court then set forth another standard, indicating that “[a] plaintiff may also make a claim for bad faith stemming from an insurer’s investigative practices, such as a ‘lack of a good faith investigation into facts, and failure to communicate with the claimant.’”  

It appears that the amendment to the Complaint was allowed based upon this second standard, which was treated here as an independent basis for a §8371 bad faith claim even if no coverage is actually due under the policy.  

Judge Caputo did otherwise reaffirm that §8371 does not cover alleged bad faith in soliciting a policy and, therefore, did dismiss that claim in this matter.  

I do not have a copy of this decision handy but the docket number is provided above.

I send thanks to Attorney Lee Applebaum of the Philadelphia law firm of Fineman Krekstein & Harris and the writer of the Pennsylvania and New Jersey Insurance Bad Faith Case Law Blog for bringing this case to my attention.