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Eastern District Court Grants Summary Judgment to Insured on Bad Faith Claim

Judge McHugh of The United States District Court for the Eastern District of Pennsylvania recently granted summary judgment in favor of an insured on a claim for insurance bad faith, after concluding that an insurer unreasonably delayed payment of a property damage claim in reckless disregard of its insured’s interests. See Shawnee Tabernacle Church v. GuideOne Ins., 2019 WL 1773380 (E.D. Pa. April 23, 2019).

In Shawnee, an insured church and daycare center filed a claim with their insurer for water damage. The policy under which they were insured excluded coverage for water damage unless the property was under construction or renovation. The court found that the insurer initially delayed payment based upon the policy exclusion despite knowing that the church was under renovation and that there was serious economic pressure on the insureds while the claim was pending. The court found that the assigned claim professional then ceased communications with the insureds, ignored his supervisor’s instructions to resolve the claim, and ignored the file in its entirety for an undisputed six month period. After the delay, the insurer resolved the claim using information that the court found the insurer had possessed during the entire duration of the claim.

The insureds subsequently filed a claim against the insurer for breach of contract and bad faith, and moved for summary judgment. In granting the insureds’ motion, the Court held that the insurer’s six-month period of inactivity and delay constituted bad faith. The Court determined that the insurer “abandoned the investigation and resolution of plaintiffs’ claim…and further delayed a determination of coverage…despite the fact that it possessed all relevant information….” Further, the court stated that insurer’s “virtually nonexistent” work on the claim constituted recklessness given the magnitude of the loss and economic pressure on the insured.