Thursday, April 23, 2020

Another Court Rules: No Coverage, No Bad Faith

In the case of NVR, Inc. v. Mutual Benefit Ins. Co., No. 2:19-cv-26-NR (W.D. Pa. March 13, 2020 Ranjan, J.), the court issued another decision in which it was held that, if there is no coverage under a policy, there can be no bad faith as well.

The insured, NVR, was a company that developed and built homes.  When a number of landslides in western Pennsylvania damaged a number of homes, NVR was sued by the homeowners.  NVR filed this lawsuit against the carrier seeking coverage and a defense under insurance policies issued to an engineering company and under which NVR was listed as an additional insured.  However, the coverage under the policy to additional insureds was found to be limited.

In this matter, the court determined that there was no coverage due to NVR as an additional insured and, as such, ruled against NVR on its breach of contract and declaratory judgment claims. The court then ruled that the bad faith claims also failed as a result.

As to the additional insured’s statutory bad faith claim, the court more specifically noted that, where there is no duty to defend, there can be no statutory bad faith claim against the carrier.

NVR attempted to avoid a total dismissal by asserting that it still had a valid common law bad faith claim to pursue.

However, the court noted that the only common law bad faith cause of action available in Pennsylvania arises out of claims pertaining to the insurance contract itself.  The court noted that where, as here, a contract claim is found to be invalid, then the common law bad faith claim must also be dismissed as well.

Anyone wishing to review a copy of this decision may click this LINK.

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

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