Plaintiff's Failure To Uphold His End of The Bargain In An Insurance Contract Results in Dismissal of His Bad Faith Case

In the case of Guerrier v. State Farm, No. 19-2435 (E.D. Pa. June 6, 2022 Pratter, J.) (Mem. Op.), the court granted the carrier’s Motion for Summary Judgment and found that State Farm did not act in bad faith by instituting a subrogation action against its insured when the insured failed to notify the carrier about an auto accident and failed to respond to the carrier’s request for information seeking to confirm the insured’s liability coverage.  In light of this ruling the plaintiff's case was dismissed.

Judge Gene E.K. Pratter of the Eastern Federal District Court of Pennsylvania opened her Opinion by aptly stating that "[a] contract is a legal instrument designed to ensure each party holds up his end of the bargain.  When one party fails to do so, he cannot expect the other party to pick up his slack and then blame that other party for failing to do so."

Here, the Plaintiff-insured was found to have failed to uphold his end of the bargain and, as such, his case was dismissed by the court.

As noted, this matter arose out of a motor vehicle accident. At the time, the Plaintiff in this matter was insured by State Farm, although he was driving a loaner vehicle while his insured vehicle was being repaired. The carrier covering the loaner vehicle had denied coverage.

The court confirmed that, under the terms of the State Farm policy, the Plaintiff was required to give the carrier notice of the accident “as soon as reasonably possible.” The Plaintiff did not report the accident to State Farm.

However, the occupants of the other vehicle, which was also insured by State Farm did file a claim. State Farm then contacted the Plaintiff in this coverage case to confirm whether he had auto liability coverage but the Plaintiff failed to respond. As a result, State Farm initiated subrogation proceeds for the benefits it paid to the occupants of the other vehicle, and the carrier ultimately obtained a default judgment. The Plaintiff later learned of the default judgment when he was denied a renewal of his driver’s license due to nonpayment of the judgment.

The Plaintiff then filed this action for breach of contract and bad faith and other claims. The Plaintiff argued that State Farm had the information it needed to know that he was one of the companies insureds when the occupants of the other vehicle filed their insurance claim.

In this case, the court granted State Farm’s Motion for Summary Judgment. The court found that no reasonable jury could conclude that State Farm acted in bad faith.

Rather, the court held that the Plaintiff breach his obligation under the insurance policy to notify State Farm about the accident as soon as practicable.

The court also found that State Farm acted reasonably under the circumstances by contacting the Plaintiff to confirm his insurance coverage. When the Plaintiff failed to respond, State Farm assumed that he was uninsured and proceeded accordingly.

Moreover, the court noted that, once the Plaintiff did contact State Farm, the carrier promptly investigated the situation and then discontinued the subrogation action after confirming that the Plaintiff’s loaner vehicle qualified as a substitute vehicle under his policy.

Based on these findings, the court granted State Farm's motion for summary judgment and dismissed the Plaintiff's case.    

Anyone wishing to review a copy of this decision may click this LINK.  The Court's companion Order can be viewed HERE.


Source: “Digest of Recent Opinions.” Pennsylvania Law Weekly (July 5, 2022).

Source of image:  Photo by Pedro de Silva on www.unsplash.com.

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.