Daily Archive for September 16th, 2014

SEPTEMBER 2014 BAD FAITH CASES: WHERE POLICY CLEARLY EXCLUDES COVERAGE FOR WALL COLLAPSE, WITH NO APPLICABLE EXCEPTION FOR HIDDEN DECAY, THERE CAN BE NO BAD FAITH BECAUSE CARRIER HAD REASONABLE BASIS TO DENY CLAIM (Philadelphia Federal)

Published on September 16, 2014 in PA - No coverage duty, no bad faith. Closed

In White v. Metropolitan Direct Property & Casualty Insurance Co., the insureds suffered a wall collapse, which they originally claimed was “sudden and accidental” and the result of a heavy rain (which was later denied by them). Coverage was denied, and the insureds sued for breach of contract and bad faith.

First, the court found that the policy language of the “weather conditions exclusion” stated that sudden and accidental direct physical loss or damage to the property is not covered in the event of collapse where weather conditions contributed in any way to the collapse. The plaintiffs had originally claimed a weather source for the collapse, and the exclusion applied to a loss if that were the case.

The insureds further claimed that the wall collapse was the result of a structural defect, via use of the wrong type of brick. Such a claim was again subject to an express policy exclusion if defective, faulty, or unsound design, specifications, workmanship, or construction contributed to the collapse.

Lastly, the insureds also claimed decay and deterioration were a source of the collapse, through water infiltration in visibly deteriorated parts of the wall. Again, the policy was clear that only hidden decay would be covered, and because the decay was not hidden, the loss resulting from the collapse was not covered under the hidden decay exception.

After finding no breach of contract, the court addressed the bad faith claim: “The current bad faith claim before the Court cannot get past the initial element—lack of a reasonable basis for denying benefits. As explained in detail above, Defendant’s denial of benefits was not only reasonable, but correct under the Policy language. Absent a showing of an unreasonable denial, Plaintiffs are not entitled to recover on their bad faith claim.”

Date of Decision: July 29, 2014

White v. Metro. Direct Prop. & Cas. Ins. Co., CIVIL ACTION NO. 13-434, UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF PENNSYLVANIA, 2014 U.S. Dist. LEXIS 102959, (E.D. Pa. July 29, 2014) (Buckwalter, J.)

SEPTEMBER 2014 BAD FAITH CASES: INSURER DID NOT PROVE INSURED ENTERED SETTLEMENT IN BAD FAITH OR UNREASONABLY; INSURED DID NOT HAVE TO PROVE BAD FAITH TO RECOVER ATTORNEYS’ FEES (New Jersey Federal)

Published on September 16, 2014 in NJ - Attorney's Fees, NJ - Declaratory Judgment and NJ - Settlement related issues. Closed

In The Travelers Property Casualty Co. of America v. USA Container Co., the insured was subject to suit over a spoiled overseas delivery of corn syrup to a European buyer. The carrier declined coverage, but during settlement negotiations between the insured and plaintiff, did make a limited offer to contribute to a settlement, subject to a right of reimbursement. The insured declined, and settled.

The insurer later claimed it should not have to reimburse the full settlement, in the context of its declaratory judgment action. The court found that the insurer failed to produce evidence that the settlement was entered in bad faith or was unreasonable, and thus it was liable for the full amount.

The court then analyzed the 7 factor test for determining whether the unsuccessful insurer in the declaratory judgment action was liable for attorneys’ fees under N.J. Ct. R. 4:42-9(a)(6), and observed that the insured need not establish bad faith to recover fees; rather, the presence of bad faith was only one factor to consider.

Date of Decision: July 21, 2014

Travelers Prop. Cas. Co. of Am. v. USA Container Co., Civil Action No. 09-1612 (JLL) (JAD), 2014 U.S. Dist. LEXIS 99635 (D.N.J. July 21, 2014) (Linares, J.)