In Atwood v. State Farm Fire & Casualty Company, the plaintiff purchased a homeowner’s policy. The DEA had knocked down the door of plaintiff’s home, and left it unsecured. As the court described it, while plaintiff was “on the lam”, with the home still unsecured, the home was subject to various acts of vandalism. Defendant and other family members were ultimately arrested and the home was subjected to a forfeiture proceeding. The carrier had yet to make a decision about coverage, though the insured complied with the policy, but was unable to salvage any personal property or recover any stolen property.

The insured brought a bad faith claim, alleging three basic factual claims, but the court only considered the third item as potentially putting out the basis for a bad faith claim: “Plaintiff claims that Defendant acted in bad faith “when it waited nearly ten (10) months before first informing Plaintiff why his claim has not been finalized.”

First and foremost, the court found the flaw in plaintiff’s argument to be that the carrier had not denied the claim. The carrier adduced that there was a post-indictment restraining order that prohibited the carrier from paying out any proceeds on the policy in excess of the mortgage lien. The carrier promptly put the insured on notice it was withholding funds in accord with the restraining order, and the insured was further informed by the U.S Attorney’s office of a hold on the funds for potential forfeiture. Thus, there was no allegation of an absence of a reasonable basis to deny coverage as coverage had not been denied; the was no proper pleading that the carrier’s investigation was not done in good faith; nor any adequate claim of a failure to communicate. Moreover, the carrier apparently “had a reasonable basis to delay its final coverage decision in light of the pending criminal motion, and that this position was adequately communicated to Plaintiff.”

However, dismissal of the bad faith claim was without prejudice, permitting plaintiff, who was proceeding pro se, the future ability to amend his claim once the insurer make a final coverage decision. Similarly, the court dismissed the claim for attorney’s fees without prejudice, based on the fact that plaintiff had no attorney, in case he obtained counsel in the future and could make out the merits of a claim that would allow for attorney’s fees.

Date of Decision: August 27, 2013

Atwood v. State Farm Fire & Casualty Company, CIVIL NO. 1:13-CV-1000, 2013 U.S. Dist. LEXIS 121319 (M.D. Pa. Aug. 27, 2013) (Rambo, J.)