FEBRUARY 2018 BAD FAITH CASES: NO BAD FAITH CLAIM WHERE DENIAL OF COVERAGE PREDICATED ON ENFORCEABLE POLICY (POLLUTION) EXCLUSION (Philadelphia Federal)
The insureds had an oil tank leak in their basement. They spent $50,000 on repairs and remediation, but the homeowner’s insurer denied the claim under the pollution exclusion. The insureds brought breach of contract and bad faith claims, and the insurer moved for summary judgment.
The insureds argued the policy was ambiguous as to whether oil constitutes a pollutant for purposes of triggering the pollution exclusion. The Court disagreed, finding “considerable relevant evidence” that the oil should be considered a pollutant. This evidence included the insureds having to contact an environmental service firm for remediation, the removal of 13.8 tons of concrete and soil from the home, removal of sill boards and studs, and the presence of benzene compounds (where several other courts explicitly ruled such chemicals as pollutants).
The insureds also argued they should be covered under the policy’s “ensuing loss” provision. The Court disagreed, and held that that provision “provides coverage only to ‘ensuing loss from a covered peril.’” Thus, because the damages from the oil spill were excluded per a policy exclusion, the insurer’s denial of the claim was not frivolous or unfounded. The insured’s bad faith claim therefore failed, and the Court granted summary judgment to the insurer.
