SEPTEMBER 2014 BAD FAITH CASES: BAD FAITH CLAIM NOT TIME BARRED BASED ON DATE OF DENIAL TRIGGERING CAUSE OF ACTION; COMMON LAW BAD FAITH CLAIM SUBSUMED IN BREACH OF CONTRACT CLAIM, WHICH HAD BEEN DISMISSED ON BASIS OF CONTRACTUAL LIMITATIONS PERIOD (Philadelphia Federal)

In Blackwell v. Allstate Insurance Company, the court found that the contractual one year period for bringing a claim under a homeowners policy barred the insureds breach of contract claim; however, the statutory bad faith claim was not barred by that contractual term, nor, on the face of the complaint, was it barred by the applicable two year statute of limitations.

Pennsylvania courts apply a two-year statute of limitations to insurance statutory bad faith claims. In general, courts must look to the date on which the insurer allegedly first denied the insured’s claim in bad faith when determining that the statute began to run. In this case, the insured alleged that the insurer denied his claim for the replacement value of his damaged furnace, in November 2012. Suit was filed one year later.

Even though the insured alleged that “some bad-faith conduct occurred more than two years before the Complaint was filed (e.g. [the insurer’s] failure to properly investigate the claim),” the court refused to dismiss the claim as time barred. The denial was without prejudice to the insurer if facts were developed that would permit asserting the defense at a later stage in the case. [Compare to a recent state trial court decision breaking out investigation claims for statute of limitations purposes.]

Finally, the court dismissed the common law claim for breach of the duty of good faith, as this is an implied duty arising out of a contract, and except in exceptional circumstances is subsumed in the breach of contract claim. The insured did not plead any such circumstances, “such as conduct separate and apart from the conduct underlying the breach of contract claim…,” and the common law bad faith claim was dismissed as a separate claim.

Date of Decision: September 3, 2014

Blackwell v. Allstate Ins. Co., CASE NO. 14-878, 2014 U.S. Dist. LEXIS 123067 (E.D. Pa. September 3, 2014) (Rufe, J.)