MAY 2009 BAD FAITH CASES
BAD FAITH CLAIM MAY PROCEED WHERE ALLEGED MISHANDLING OCCURRED AFTER POLICY ISSUED (Western District)

In Williams v. Allstate Insurance Company, the insured refinancing their mortgage. They allege that they called Allstate and entered an binding oral agreement to increase the homeowner’s insurance policy in light of the refinancing, from $60,000 to $100,000. This involved, among other things, a telephone call between the insured and an associate agent who advised the insured that she would take case of the paperwork and that a bill reflecting the increased premium would be sent in the mail.” Shortly thereafter the home was destroyed in an electrical fire and Allstate only agreed to pay the $60,000, and not the $100,000.

The insureds claimed that the carrier was aware of the change in house value, that the request to increase the policy limits was reasonable, and that the promise described above had been made. The insureds claim that Allstate only spoke with its own agent about what occurred, never deposed the insureds to compare credibility over the claim, and delayed in handling the claim.

In moving to dismiss the bad faith portion of plaintiffs’ case, Allstate claimed that the allegedly bad faith representations concerning the amount of coverage occurred prior to the claim for benefits and relates solely to the sale of a policy.

The court found that the complaint alleged matters beyond the conduct preceding the sale of the policy, “but rather involve events that occurred after a claim was made and how the claim was handled.” The motion to dismiss was denied.

Date of Decision: March 10, 2009

Williams v. Allstate Ins. Co., No. 8-1160, 2009 U.S. Dist. LEXIS 19337 (W.D. Pa. Mar. 10, 2009) (Ambrose, C.J.)