JANUARY 2013 BAD FAITH CASES: COURT APPLIES NEW YORK LAW AND DENIES BAD FAITH CLAIM BECAUSE SUCH A CLAIM IN NEW YORK IS BASED IN CONTRACT AND THE BURDEN OF PROOF IS VERY HIGH (Philadelphia Federal)

In Fairsea v. Philadelphia Indemnity Insurance Co., the court heard a carrier’s motion to dismiss an insured’s bad faith claim stemming from the carrier’s denial of benefits under a policy insuring damage to the insured’s property. Because the insured property was located in New York and the carrier was located in Philadelphia, the court applied conflict of law rules, reasoning that New York law is applicable. The insured disagreed, arguing that Pennsylvania’s bad faith statute should apply because the location of the carrier’s tortious bad faith conduct was in Philadelphia.

The court applied New York law, reasoning that the location of the insured property was in New York. The court also deferred to New York’s policy rationales for not codifying its bad faith remedy, which is based in contract and requires an extremely high burden of proof. As such, the court granted the carrier’s motion to dismiss.

Date of Decision: December 14, 2012

Fairsea v. Phila. Indem. Ins. Co., NO. 12-0595, 2012 U.S. Dist. LEXIS 177914, U.S. District Court for the Eastern District of Pennsylvania (E.D. Pa. Dec. 14, 2012) (Tucker, J.)