Daily Archive for July 16th, 2008

JULY 2008 BAD FAITH CASES
NO BAD FAITH WHERE INSURER DENIED A CLAIM BASED ON AN UNAMIBIGIOUS EXCLUSION IN THE INSURED’S POLICY RE SURFACE WATER (Third Circuit)

Published on July 16, 2008 in PA - No coverage duty, no bad faith. Closed

In T.H.E. Insurance Company v. Charles Boyer Childrens Trust, the insured’s bad faith counterclaim was based on the insurer’s denial of coverage for water damage that occurred to its property. A rainstorm hit the area and caused a sewer pipe to rupture near the bowling alley property. Water from the broken sewer pipe eventually collapsed the embankment and the water and mud rose to a high level and burst through the bowling alley’s doors. The damages were alleged to be $2 million. The insured filed a claim with its insurer for the damages and the insurer rejected the claim based on a policy exclusion for water damage which includes “surface water” in its list of non-covered causes of damage.

The insurer rejected coverage and filed a complaint seeking a declaratory judgment that the insurance policy it issued to the insured did not cover the damage to the bowling alley. The insured counterclaimed and alleged entitlement to coverage, bad faith, and fraud. Both parties filed motions for summary judgment. The District Court granted the insurer’s motion for summary judgment. The insured appealed to the United States Court of Appeals for the Third Circuit and argued that the exclusion within its insurance policy for damage caused by “surface water” should not apply to its claim.

The Third Circuit court found that while the insured had an all risk policy, the policy had a specific provision expressly excluding this “surface water” damage from coverage. Both the water from the broken sewer pipe and any water from the east parking lot constitute “surface water” within the meaning of the exclusion in the policy. Since the Third Circuit court found there was no dispute that the surface water caused the loss and the language in the exclusion was not ambiguous, the court found that the damage to the bowling alley resulted from an excluded clause under the policy. Therefore the Third Circuit affirmed the District Court’s grant of summary judgment to the insurer.

Date of Decision: March 18, 2008

T.H.E. Ins. Co. v. Charles Boyer Childrens Trust, 269 Fed. Appx. 220, 2008 U.S. App. LEXIS 5729 (3d. Cir. Pa. 2008) (Ambro, J.)

J.M.A.

JULY 2008 BAD FAITH CASES
VENUE FOR BAD FAITH CLAIM FOUND TO BE PROPER WHERE INSURER REGULARLY DID BUSINESS (Philadelphia)

Published on July 16, 2008 in PA - Venue. Closed

Brown brought bad faith and breach of contract claims against the insurer based on the insurer’s failure to cover all the damages that occurred to their property resulting from a storm. A storm caused damage to Brown’s property located in Chester County , specifically the storm caused several large trees to fall on Brown’s property causing damage to their house, deck, roof and gutters.

Brown had a homeowners policy with the insurer for their property. Brown filed a claim with the insurer and the insurer made payment in the amount of $11,653.05 which covered only a portion of the claims for damages made by Brown. Also Brown alleged that the insurer refused to honor other aspects of the claim, which they believe should be covered by their homeowner’s policy.

Brown filed a complaint against the insurer for breach of contract, because the insurer failed to reimburse them for the full value of damages sustained to their property because of the storm, and bad faith because of the insurers alleged intentional denial of their claim. The insurer filed its preliminary objections contending that Philadelphia County was an improper venue for this action.

The trial court granted the insurers’ preliminary objections and transferred the case to Chester County. Brown then filed a notice of appeal to this decision.

The court found since this case involved breach of contract and bad faith actions against an insurance company based on an insurance policy, the applicable venue rule would be Pa.R.C.P. 2179(b). This section 2179(a)(2) specifically states that venue in a personal action against a corporation can lie in a county where the corporation regularly does business. Since the insurer in this case regularly does business in Philadelphia County , that is a proper venue for this action. Therefore the court sustained the insured’s appeal and venue should remain in Philadelphia County and not be transferred to Chester County.

Date of Decision: January 9, 2008

Brown v. Allstate Ins. Co., 2008 Phila. Ct. Com. Pl. LEXIS 2 (C.C.P. Philadelphia Jan. 9, 2008)

J.M.A.