No Coverage -- No Bad Faith

In the case of Berkley Specialty Ins. Co. v. Masterforce Constr. Corp., No. 4:19-CV-01162 (M.D. Pa. Jan. 26, 2021 Brann, J.), the court ruled that, there can be no valid bad faith allegations against a carrier where no coverage is due, or where coverage is a close question based upon unsettled law.

In this decision, the court addressed a split of authority based upon Pennsylvania Superior Court precedent and Third Circuit Court of Appeal precedent on whether coverage is required to be provided for damages flowing from faulty workmanship in construction cases, even if the faulty workmanship itself is not covered.

Judge Brann relied upon Third Circuit precedent emphasizing that all reasonably foreseeable damages resulting from faulty workmanship do not constitute an “occurrence” whether that is damage to the product being constructed or damages to the property beyond the scope of the construction contract resulting from that faulty workmanship.

The court held that no coverage was due to replace a roof in this matter that had allegedly been improperly constructed. The court additionally found that there was no coverage due to areas of the roof damage that was outside the scope of the contracted roof work, which also had to be replaced as a result of the allegedly faulty construction, as these third party property damages were reasonably foreseeable.

As such, the court granted judgment on the pleadings in favor of the insurer as to coverage.

On the insured’s bad faith claim, the court also granted judgment on the pleadings after observing that the carrier had properly denied benefits and, therefore, the carrier had a reasonable basis for the denial of the benefits, which confirmed that the insured could not prove bad faith. The court additionally held that, where a carrier has no duty to indemnify, or where the duty to indemnify is debatable, it cannot be said that the carrier had no reasonable basis to deny the benefits in question. As such, the bad faith claim was dismissed for this additional reason as well.

Anyone wishing to review a copy of this decision may click this LINK.  The compantion Order can be viewed HERE.


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