AUGUST 2011 BAD FAITH CASES THIRD CIRCUIT SAYS NO BAD FAITH POSSIBLE WHERE SOLE BASIS FOR CLAIM IS DENIAL OF COVERAGE AND CARRIER WAS CORRECT IN DENYING COVERAGE (THIRD CIRCUIT)
The carrier denied a claim under a homeowner’s policy based upon a subsurface water exclusion. The insured alleged breach of contract and bad faith, asserting that a leak from the home’s plumbing system was not subject to the subsurface water exclusion. The court found that a pipe designed to keep rainwater away from a house was not part of the home’s plumbing system, and therefore the carrier correctly applied the exclusion. The Court observed, citing its prior precedent: “Where the sole basis for a bad-faith claim is the denial of coverage, there can be no bad-faith claim if the insurer was correct as a matter of law in denying coverage.”
Date of Decision: July 28, 2011
Cozza v. State Farm Fire & Cas. Co., No. 10-2811, 2011 U.S. App. LEXIS 15771, U.S. Court of Appeals for the Third Circuit (3d Cir. July 28, 2011) (Fisher, J)
