Court Addresses Insurance Coverage Issues In Case Involving Fire Loss To Building In Process of Being Renovated

In the case of Jinyin Temple of Sino Esoteric Buddhism, Inc. v. Ohio Cas. Ins. Co., No. 18-CV-6593 (C.P. Lacka. Co. March 1, 2023 Nealon, J.), the court denied various Motions for Summary Judgments filed in an insurance coverage action based upon a fire loss involving the Plaintiff’s property.

According to the Opinion, the case involved representatives of a Buddhist temple that had purchased a former Poconos resort with plans to convert the property into a retreat center. The Plaintiff had acquired “builders’ risk - rehabilitation and renovation” insurance coverage from the Defendant insurance companies based upon the recommendation of the Defendant insurance agency.

After the building at issue was destroyed in a fire, the insured submitted a claim to the carrier pursuant to the coverages for direct physical loss to an “existing building” and “building materials” while “in the course of rehabilitation or renovation.”

The insurance companies denied that the fire loss claim on various grounds. In response, the Plaintiff filed this lawsuit for breach of contract and bad faith. In the event that it was determined that no coverage existed, the Plaintiff also asserted a negligence claim against the insurance agency for allegedly failing to recommend and procure an appropriate insurance policy.

As noted, the cross Motions for Summary Judgment were denied, the court found that issues of fact precluded the entry of summary judgment on the motions filed by both the Plaintiff and the various Defendants.

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

Storm Damage Claim Dismissed Due to Lack of Prompt Notice to Carrier

In the case of Oneida Plaza, LLC, v. Ohio Security Ins. Co., No. 2:20-CV-04485-AB (E.D. Pa. Jan. 27, 2022 Brody, J.), the court granted an insurance company’s Motion for Summary Judgment in a property owner’s breach of contract claim arising out of storm damage.

According to the Opinion, the insured reported the claim to the carrier approximately eight (8) months after the damage allegedly occurred.

The court in this matter granted the carrier’s Motion for Summary Judgment which was based upon the carrier’s denial of coverage due to the Plaintiff’s failure to promptly report the claim.

The court found that the Plaintiff’s delay of eight (8) months in reporting the claims was unreasonable as a matter of law.

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

Source: “Digest of Recent Opinions.” Pennsylvania Law Weekly (Feb. 24, 2022).

Source of image:  Photo by Alex Andrews from www.pexels.com.

Limitation of Actions Provision in Property Insurance Policy Upheld and Applied to Dismiss Claim

In the case of Gonzales v. Nazareth Mut. Ins. Co., No. 412-CV-2019 (C.P. Monroe Co. July 13, 2020 Williamson, J.), the court upheld a limitation of action provision contained in a property insurance policy.

According to the Opinion, the Plaintiff owned a rental property that was insured by the carrier. After the Plaintiff discovered damage on the property, a claim was submitted to the insurance carrier for a recovery. The carrier denied the claim because the damage had been caused by a former tenant, which loss was not covered under the policy. 

Over two (2) years later, the Plaintiff filed an initial action against the carrier alleging bad faith. A year after that, the Plaintiff sought to amend the Complaint to add a breach of contract action.

The Defendant carrier filed a Motion for Judgment on the Pleadings in which it argued that the bad faith claim was untimely because the policy contained a two (2) year statute of limitations provision. 

The court agreed and granted the Motion for Judgment on the Pleadings. The court noted that the addition of a breach of contract claim would not necessarily create an additional cause of action because the bad faith claim was based upon the same facts and theory as the breach of contract claim. The court upheld and found the two (2) limitation period contained in the insurance policy to be valid. 

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

Source: “Digest of Recent Opinions.” Pennsylvania Law Weekly (Aug. 18, 2020).

"Threadbare" Facts Found Not To Support Insurance Bad Faith Claim

In the case of Diaz v. Progressive Advanced Ins. Co., No. 5:19-CV-06052-JDW (E.D. Pa. Feb. 21, 2020 Wolson, J.), the Eastern District Federal Court dismissed a first party property damage bad faith case under a finding that the Plaintiff did not state a valid cause of action based upon a pleading of  “threadbare” facts.

The court noted that the Plaintiff basically asserted in the Complaint that he had a policy with the carrier, that his car was damaged in a vandalism event, that he had submitted a proof of loss, that he had been truthful throughout the investigation, and that the carrier denied the claim. The court noted that these allegations did not establish any plausible claim of bad faith.

The court also confirmed that there is no common law bad faith cause of action in Pennsylvania for refusing to pay benefits or as to claims handling. It is noted that the Plaintiff did not oppose this part of the Motion to Dismiss. 

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

I send thanks to fellow blogger, Attorney Lee Applebaum of the Philadelphia law offices of Fineman Krekstein & Harris, for bringing this case to my attention. Attorney Applebaum is also the creator and writer of the excellent Pennsylvania and New Jersey Insurance Bad Faith Case Law Blog which can be viewed HERE.

Judge Conner of Middle District Grants Bifurcation and Stay of Bad Faith Claims in Property Insurance Case

In the case of McFarland v. Harford Mut. Ins. Co., No. 1:18-cv-1664 (M.D. Pa. July 25, 2019 Conner, J.), the court addressed a Motion to Sever and Stay a bad faith claim in an insurance dispute over property damage caused by the collapse of a retaining wall. 

Judge Conner initially noted in his Opinion that Motions to Sever re governed by Federal Rule of Civil Procedure 21 and that Motions to Bifurcate are governed by Federal Rule of Civil Procedure 42(b).  

The court noted that, unlike bifurcation of claims under Rule 42(b), severance under Rule 21 creates independent action resulting in separate judgments.   The court otherwise noted that severance is appropriate when the claims are “discrete and separate,” that is, each claim is capable of resolution without effect on the other.  

Judge Christopher C. Conner
M.D. Pa.

Judge Conner noted that, while Motions to Sever and Motions to Bifurcate in the federal court are found under separate rules, both are typically decided by reviewing the same factors including the similarity of issues, the type of evidentiary proof required by the claims presented, issues of judicial economy, and whether either party will be unduly prejudice by a separation of the claims presented.  

In his ­Opinion, Judge Conner reviewed a number of state and federal court decisions addressing a Motion to Sever and Stay a bad faith claim from an underlying coverage action.  

In the end, the court in McFarland ruled that the issues in this case underlying the coverage dispute was deemed to be separate and distinct from those issues implicated by the bad faith claim.   The court noted that the breach of contracting for property insurance coverage involved straightforward issues such as causation, damages, and contract interpretation.  

In contrast, the court noted that bad faith claims deal with more “elusive concepts” like motive, internal claims handling practices, and whether the carrier knowingly or recklessly disregard a lack of a reasonable basis for the denial of coverage.  

The court also reaffirmed that a bad faith claim requires a higher evidentiary showing of clear and convincing evidence.  

After also considering other factors, including the interest of judicial economy, the court ruled  that, in addition to agreeing to bifurcate the bad faith claim, the court also ruled to stay discovery on that claim.   The court noted that discovery in the bad faith claim would be stayed until the breach of contract dispute was resolved.  

Judge Conner stated that he was “cognizant that [his] determination runs counter to certain district court decisions in this circuit denying severance or bifurcation of insurance breach of contract and bad faith claims.”  

Nevertheless, the court in McFarland noted that the decision in this regard to order separate discovery and/or trials lies within each court’s broad discretion and must be determined on a case-by-case basis.  

Anyone wishing to review a copy of the Opinion in this decision may click this LINK.  The companion Order can be viewed at this LINK.

I send thanks to Attorney Peter J. Speaker of the Harrisburg, Pennsylvania office of Thomas Thomas & Hafer, LLP for bringing this case to my attention. 

Motion to Dismiss Federal Court Breach of Contract and Bad Faith Claims Regarding Fire Loss Granted

In the case of Bloxham v. Allstate Insurance Company, No. 3:19-CV-0481 (M.D. Pa. May 2, 2019 Caputo, J.), the court granted a Motion to Dismiss in a property damage fire loss breach of contract bad faith claim against the carrier, but allowed the Plaintiff the right to file an Amended Complaint.  

According to the Opinion, this case involved a central issue of whether the insureds resided at a property when a fire loss occurred.  

Given this dispute, the carrier denied coverage after concluding that the insured did not reside at the property.    The carrier also pointed to certain alleged misrepresentations that were allegedly made by the insureds in connection with the claim.  

The insureds responded with a lawsuit for breach of contract and bad faith.  

In the Complaint, the Plaintiffs asserted that the property was in fact “occupied” at the time of the fire as the Plaintiffs were completing ongoing repairs and renovations to the dwelling when the loss occurred.

Judge Caputo agreed with the defense argument that, because “Plaintiffs allege not that they resided at the property, but only that they ‘occupied’ the property at the time of the loss as a result of ‘ongoing and continuous repairs and renovations to the dwelling’… that the Plaintiffs had failed to state a breach of contract claim.”  

With regards to the bad faith claims, the court found that the Plaintiff’s allegations in this regard were conclusory in that these allegations offered no facts supporting the sweeping legal allegations of bad faith.  

As noted, the Plaintiff was granted the right to amend their Complaint by the court.

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

I send thanks to Attorney Lee Applebaum of the Philadelphia law firm of Fineman, Krekstein & Harris.  Attorney Applebaum is also the writer of the excellent Pennsylvania and New Jersey Insurance Bad Faith Case Law blog.  

Entrustment Clause of Property Damage Policy Upheld To Preclude Coverage For Acts of Vandalism To Rental Property

In the case of KA Together, Inc. v. Aspen Specialty Ins. Co., No. 18-CV-142 (E.D. Pa. Jan. 24, 2019 Slomsky, J.), the court granted a Defendant carrier’s Motion for Summary Judgment on a property damage insurance claim presented by the Plaintiff for water damages.  

According to the Opinion, the Plaintiff alleged claims for breach of contract and bad faith stemming from a Defendant’s denial of an insurance claim made by the Plaintiff for losses at the Plaintiff’s property.   The Plaintiff had filed the insurance claim for water damage caused by two (2) individuals who had been residing in a third floor apartment on the property.  

The Defendant carrier filed a Motion for Summary Judgment asserting that the Plaintiff’s claims were barred by the “entrustment exclusion” of the insurance policy at issue, which expressly excluded coverage for all losses resulting from dishonest or criminal acts by person to whom the Plaintiff entrusted the property.  

The Plaintiff opposed the Motion for Summary Judgment by arguing that the entrustment exclusion did not apply because the Plaintiff never entrusted the property to the two (2) individuals responsible for causing the water damages.  

By way of further background, the property at issue was a mixed commercial residential building.   There was a rental apartment of the third floor.   The carrier insured the property with a commercial property policy which, as noted, included an “entrustment exclusion” which allowed the carrier to deny coverage for any losses resulting from dishonest or criminal acts by the insureds or anyone to whom the insured entrusted the property for any purpose.  

According to the Opinion, at some point, the person who had signed a Lease for the third floor apartment had his girlfriend move into the apartment.  Thereafter, the tenant and his girlfriend were arrested on separate criminal charges and removed from the property.   

The manager of the property was then made aware that another person claimed that he had signed a sublease for the apartment with the girlfriend.   That person was told that the Lease Agreement with the girlfriend would not be accepted by the landowner as the girlfriend had no authority to sublease the property to that person.  

After that person was asked to leave the premises, the landowner received a phone call the day after the person vacated the premises from the business that operated in the same building at the first and second floor, claiming that there is water flowing and flooding down into the office and store.   

When the manager went to the property, he found that there were three (3) sources of running water with the drains purposefully blocked in the third floor apartment.   The manager called the police and filed an incident report.   Thereafter, the insurance claim was submitted to the carrier.  

The landowner believed that the damage was covered under the policy as an act of vandalism. However, as noted above, the carrier relied upon the entrustment exclusion to deny coverage.   

The court found that the entrustment exclusion was not ambiguous and must be enforced.   The court emphasized that the entrustment exclusion broadly applies to dishonest or criminal acts by “anyone to whom [the landowner] entrust[s] the property for any purpose.”   The court ruled that, under the plain meaning of the policy, the carrier is entitled to summary judgment under the exclusion at issue.  

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

There Can Be No Bad Faith Where Policy Was Properly Cancelled

In the case of Chad & Ashley, Inc. v. White Pine Ins. Co., No. 1110-CV-2016 (C.P. Lawrence Co. Dec. 19, 2018 Cox, J.), the court granted an insurance company’s Preliminary Objections seeking the dismissal of a Plaintiff’s claims for breach of contract and bad faith in a property damage case. 

According to the Opinion, the Plaintiff brought this action against the carrier for breach of contract and bad faith due to the carrier’s alleged failure to cover a total loss of the Plaintiff’s property.  

The court confirmed that the record before it established that the carrier had sent the Plaintiff a cancellation notice which confirmed an end date of the insurance policy that was approximately two (2) weeks prior to the date of the loss.  

Plaintiff’s counsel attempted to argue that the cancellation notice could be interpreted to instead provide the Plaintiff with a fifteen (15) day notice such that the policy would still be in effect slightly beyond the date of the loss.  

The court disagreed with the Plaintiff’s reading of the cancellation notice.   The court also noted that the insurance contract itself provided only for a ten (10) day period of notice.   As such, the court granted the Defendant’s Preliminary Objections and dismissed the breach of contract claim.

Relative to the bad faith claim, the court noted that, because the insurance contract was not in effect at the time of the loss, the Plaintiff was unable to show the first element of a bad faith claim, i.e., that the insurer did not have a reasonable basis to deny benefits under the policy.   As such, the bad faith claim was dismissed as well. 

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

 

Source:  “Digest of Recent Opinions.”  Pennsylvania Law Weekly (March 12, 2019).

Federal Court Rules That Trial Judges Should Use Common Sense in Evaluating Motions To Dismiss in Bad Faith Cases

In the case of 1009 Clinton Properties, LLC v. State Farm Fire & Cas. Co., No. 18-5286, 2019 WL 1023889 (E.D. Pa. March 4, 2019 Kenney, J.), the court issued a lengthy Opinion addressing a Motion to Dismiss an insured’s bad faith claim in a property damage loss case.  

Among the allegations was that the carrier allegedly falsely represented to the Plaintiff that the loss was not entitled covered under the policy, that the carrier failed to complete a prompt and thorough investigation of the claim before asserting that the claim was not covered, and that the carrier unreasonably withheld policy benefits without a reasonable factual explanation.  

Of note is the court’s analysis indicating that, in reviewing Motions to Dismiss standards under the Federal Rules of Civil Procedure, that the trial court’s “must do away with a robotic reading of Twombly and Iqbal and instead use its common sense when addressing whether a bad faith claim can survive a Motion to Dismiss.  When the Court applies its common sense in analyzing a bad faith claim, here, it becomes apparent that Plaintiff’s bad faith claims survives Defendant’s Motion to Dismiss.”   

After reviewing the steps required in analyzing a Motion to Dismiss along with the basis elements of a bad faith claim, the court ruled that the Motion to Dismiss should be denied under the facts presented in this matter. 

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 and from the Philadelphia law firm of Fineman, Krekstein & Harris for bringing this case to my attention.  
 

No Coverage, No Bad Faith

In the case of Gerow v. State Auto Prop. & Cas. Co., No. 3:17-cv-203 (W.D. Pa. Oct. 11, 2018 Gibson, J.), the federal court held that, where there is a findig of no coverage under a policy, a court is required to enter judgment in favor of the carrier on the companion bad faith claim. 

This matter arose out of a property damage case from a burst water pipe.  

The insurance policy at issue required continued residency as a condition for the coverage.   The facts confirmed that the insureds were not residing at the property at the time the water pipe burst. 

When the carrier refused to pay based upon the residency requirement under the policy, the insured sued for breach of contract and bad faith.  

After ruling that there was no breach of the policy, the court went on to dismiss the Plaintiff’s bad faith claim 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  (check it out HERE) and member of the Philadelphia law firm of Fineman, Krekstein & Harris for bringing this case to my attention. 

Judge Munley of Federal Middle District Grants Summary Judgment in Bad Faith Claim

In his recent decision in the case of Yatsonsky v. State Farm Fire & Cas. Ins. Co., 3:15-CV-1777 (M.D. Pa. Dec. 5, 2016 Munley, J.), Judge James M. Munley granted a carrier’s Motion for Summary Judgment in a bad faith claim.

In this matter, the Plaintiff claimed that the carrier acted in bad faith by assigning an inordinate number of representatives to handle her claim.  The insured additionally asserted that the carrier refused to timely pay the full value of the Plaintiff’s loss and instead only provided a number of estimates of payments over a seven (7) month period.  

Judge Munley indicated that “it is not bad faith to conduct a thorough investigation into a questionable claim.”  The court found that the Plaintiff in this matter failed to present any evidence that the management of the claim was anything other than attempt to further investigate the water damages allegedly sustained at the Plaintiff’s home in order to determine the value of the claim.  It was additionally indicated that no expert testimony was offered by the Plaintiff pertaining to the insurer’s investigation.  

The court also rejected the Plaintiff’s argument that multiple estimates issued in the claim demonstrated bad faith on the part of the carrier.   In so ruling, the court referenced appellate law for the proposition that “subsequent estimates assign(ing) at a higher value of the claim is not ‘clear and convincing’ evidence that the insurer acted in bad faith in arriving at its initial estimate."

 

Anyone wishing to review this case online may click this LINK.

 

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

 

 

Judge Nealon of Lackawanna County Addresses Allegations of Post-Claim Underwriting by Carrier

In his recent July 26, 2012 Decision in the case of AJT Properties, LLC v. Lexington Insurance Company, No. 08-CV-4252 (C.P. Lacka. Co. July 26, 2012 Nealon, J.), Judge Terrence R. Nealon of the Lackawanna County Court of Common Pleas addressed allegations of post-claim underwriting by a flood insurance carrier.  

In this case, a commercial property owner which suffered flood damage in June of 2006 filed suit against its building and personal property insurance company which had denied coverage based upon a policy exclusion for flood loss occurring on properties located within a Special Flood Hazard Area (SFHA).    The Defendant insurance company filed a Motion for Summary Judgment on the grounds that there was no genuine issue of material fact that the subject property was situated in an SFHA such that the Defendant insurer was allegedly entitled to judgment as a matter of law by virtue of the unambiguous policy language excluding coverage for flood loss in such a zone.  

According to the Opinion, the property at issue was originally inspected in May of 2004 and was determined not to be in an SFHA.   Two months after the insurer had issued the policy to the owner in January of 2006, another property survey was completed in March of 2006 to determine the insurability of the land and that inspection likewise concluded that the property was not in an SFHA district.  

However, after the owner submitted its flood loss claim following a flood in late June of 2006, the insurer retained a new inspector to examine the property’s flood zone classification.  That inspector issued a report concluding that the property was in an excluded SFHA.   Thereafter, the authors of the May of 2004 and March of 2006 flood exposure surveys revisited their original conclusions and now concurred with the insured’s second inspector that the property is in an SFHA.  

Judge Nealon found that, at the time that the owner purchased the insurance policy in early 2006, the insurance company sold flood insurance for properties in SFHA zones, but the owner was not offered the opportunity to purchase such insurance since the parties believed at that time that the property was not in a SFHA, as per the flood exposure inspection conducted on behalf of the insurer in March of 2006.   The court found that there were genuine issues of material fact as to whether the owner would have purchased SFHA flood insurance if the insurer had performed a proper survey in March of 2006 and had advised the owner that the property was located in an excluded SFHA.  

Judge Nealon stated that, depending upon how the jury resolved those factual issues, the insurance company may be equitably estopped from denying coverage based upon its post-claims survey establishing that the property is in an excluded SFHA.   Accordingly, the Court denied the carrier’s Motion for Summary Judgment based upon its SFHA exclusion as well as other arguments put forth by the carrier.  

Anyone desiring a copy of this decision may contact me at dancummins@comcast.net.  

Judge Terrence Nealon of Lackawanna County Addresses Various Issues in Water Damage/Property Loss Insurance Matter

Tort Talkers who do water damage/property loss insurance litigation might be interested in reading a recent Opinion by Judge Terrence R. Nealon in the case of Church of the Forgotten Souls v. NGM Insurance Company, No. 10 - Civil - 7078 (C.P. Lacka. Co. Oct. 6, 2011 Nealon, J.).

In this case, Judge Nealon denied an insured's Preliminary Objections to the insurer's counterclaim/third party complaint alleging fraudulent misrepresentations by the insured, applicability of policy exclusions, failure to cooperate in assessing loss valuation, and applicability of "other insurance" clauses.

Anyone desiring a copy of this Opinion may contact me at dancummins@comcast.net.

Third Circuit Addresses Duty to Defend and Indemnify in Homeowners and Umbrella Policy

In the recent case of State Farm v. Estate of Mehlman, 2009 WL 4827027 (3rd Cir. Dec. 16, 2009), the Third Circuit tackled the issue of whether a carrier, which issued both a homeowner's policy and an umbrella policy, had a duty to defend and/or indemnify the estate of a man who, in a drunken rage, had unsuccessfully attempted to kill the plaintiff before killing himself. This coverage action was related to an underlying negligence suit brought by the plaintiff against the estate of the decedent.

According to the opinion, the Homeowners Policy provided coverage for damages caused by an “occurrence,” and the Umbrella Policy limited coverage to damages caused by a “loss.” The policies defined “occurrence” and “loss” as "accidents." Neither policy defined the term "accident."

Therefore, the question became whether the decedent's drunkeness rendered his otherwise purposeful and repeated acts of trying to kill the plaintiff an "accident" within the meaning of that term in the policies.

The Third Circuit, applying Pennsylvania law, noted that an "accident" has been said to be an "unanticipated event." The Court found that the decendent's intoxication did not render his intentional acts of chasing and repeatedly shooting at the plaintiff an "accident." As such, the Court found that coverage was not triggered under the policy and ruled in favor of the carrier and found no duty to defend or indemnify.

Thanks to Attorney James Beck of the Philadelphia office of Dechert LLP, and writer of the Drug and Device Law Blog (http://druganddevicelaw.blogspot.com/), for bringing this case to my attention.

Property Insurance Coverage Case

In the case of Green Street Associates v. Erie Insurance Exchange, PICS No. 09-1737 (Phila. Co. 2009), a Philadelphia County Court of Common Pleas Judge Howland W. Abramson, after a two day bench trial, rejected four policy exclusions relied upon by Erie and ruled that Erie was required to provide coverage for water damage caused to a commercial building by a dislodged PVC pipe.

The facts revealed that a tenant in the building heard a loud bang and, upon investigating, found the pipe dislodged from the roof drain it was connected to. Rainwater pouring into the building from the roof. Evidence showed that .19 inches of rain fell over the 18 hours prior to the event but there was no rain falling during the 7 hours leading up to the event.

Erie insured the premises under an "Ultrasure Policy." The carrier sent out a forensic engineering expert to investigate on two occasions. He noticed rusting of the pipe and Erie initially denied coverage because the loss was caused by a drain fastener rusting away and, therefore, the loss was deemed to fall under the wear and tear exclusion. Erie also initially relied upon the rain exclusion.

By the time of trial, Erie also asserted that the loss fell under surface water exclusion and the deterioration exclusion as well.

Judge Abramson ruled that Erie failed to sustain its burden of proving the applicability of any of these exclusions. The rain exclusion and surface water exclusions were found inapplicable because it was not raining at the time of the loss. The remaining exclusions were also found inapplicable because, according to the Judge, there was no credible evidence that the stain on the pipe that became dislodged was rust as alleged and there was no credible evidence to show that the pipe became dislodged due to the rust or other wear and tear.

Anyone desiring a copy of this case may secure one from the Legal Intelligencer by calling 1-800-276-PICS, giving the PICS Case Number noted above, and paying a small fee.

I thank Attorney Gerry Connor of the Scranton, PA office of Margolis Edelstein for bringing this case to my attention.