MAY 2013 BAD FAITH CASES: COURT LARGELY PRECLUDES EXPERT TESTIMONY; GRANTS SUMMARY JUDGMENT TO CARRIER BECAUSE DELAY IN PAYMENT WAS NOT IN BAD FAITH AND CARRIER’S INITIAL FAILURE TO PROPERLY ISSUE TAX REMITTANCE CHECK WAS MERE NEGLIGENCE; DIFFERENCE IN VALUATIONS AND TERMS FOR DETERMINING COST NOT BAD FAITH (Philadelphia Federal)

In Mirarchi v. Seneca Specialty Ins. Co., the court heard cross motions for summary judgment from a carrier and its insured, stemming from the insured’s suit for breach of contract and bad faith. The insured alleged that the carrier unreasonably delayed the payment of insurance proceeds after a fire damaged his commercial property.
First, the carrier argued that the insured’s expert should not be permitted because he sought to testify to ultimate issues in the case. The expert was an attorney with experience litigating insurance cases and had no professional insurance experience as an adjustor, appraiser, umpire or other direct industry involvement. The court agreed, finding that large portions of the insured’s expert report should not be admissible. Second, the carrier argued that it did not act in bad faith by delaying its payments or tendering partial payments. The court agreed, finding that a carrier may delay payment until an entire investigation is complete. The court also refused to find that the carrier’s adjuster and construction appraiser conspired to set damages estimates at a low level. Moreover, the court agreed with the carrier that it was reasonable to maintain its estimate even after an independent appraisal submitted a difference figure.
Third, the court agreed with the carrier than an insurer is permitted to modify its standard fire insurance policies to allow recovery of only replacement cost minus depreciation in partial loss situations, as it did in this situation. Fourth, the court held that the carrier could not be held liable for issuing a tax remittance check to the improper parties, resulting in the need for a second check issued to the City. The court agreed that the carrier negligently issued a check to multiple parties instead of just to the City, explaining its reissuance of a new check when the error was discovered. Lastly, the court concluded that the carrier did not breach its insurance contract.
Date of Decision: March 22, 2013
Mirarchi v. Seneca Specialty Ins. Co., 2013 U.S. Dist. LEXIS 40513, U.S. District Court for the Eastern District of Pennsylvania (E.D. Pa. Mar. 22, 2013) (Pratter, J.)
Prior related entry here.