Articles & Updates

“Red Flags” Provide “Ample Basis for Denial” of Theft Claim

May 17, 2021 | Articles & Updates

The Western District of Pennsylvania recently granted an insurer’s motion for summary judgment to dismiss a bad faith claim after finding that the insurer did not act in bad faith by investigating “red flags.” See Howell v. Progressive Ins. Co., No. 2:19-cv-1111 (W.D. Pa. May. 11, 2021).

In Howell, the insured reported her vehicle had been stolen, and the insurer opened a claim for the reported theft. The insured reported that prior to the theft she had stopped at a grocery store to shop for her grandmother with the intent of subsequently delivering the groceries to her. The insured reported that she left her key fob in the car when she went into the grocery store. A parking lot surveillance video showed that an individual peered into two other vehicles before entering and driving away with the insured’s vehicle.

The insurer’s investigation revealed the insured had been having mechanical problems with the vehicle, and that the insured tried to trade in her vehicle at various dealerships, but was unable to complete the sale due to negative equity on the vehicle and credit issues. Furthermore, the insured had not been driving the vehicle for the month before the alleged theft due to the mechanical issues and instead rented a vehicle, which the insured drove to work on the day of the alleged theft. Additionally, the vehicle had intentionally been set on fire 21 minutes after the alleged theft. The insurer had requested additional information from the insured that it deemed necessary to complete its investigation, but the insured “was less than co-operative.” The insurer sent a letter to the insured conditionally denying her claim, but noting that the claim would be re-opened if the requested items were provided. The insured thereafter sued the insurer for breach of contract and bad faith. The breach of contract claim later resolved, and the insurer moved for summary judgment on the bad faith claim.

In her lawsuit, the insured alleged that the insurer had no reasonable justification for failing to pay her claim after reviewing the parking lot surveillance video, and thus acted in bad faith. The insured further asserted that the insurer should have known that it was acting unreasonably by failing to pay the claim after viewing the tape.

In granting the insurer’s motion and dismissing the bad faith claim, the Court found that the record fails “to yield an inference that [the insurer] acted frivolously or with an unfound refusal to pay.” The Court pointed to “ample, undisputed record evidence” showing that the insurer, after conducting a thorough investigation of the insured’s claim, had a reasonable basis to deny the claim. The Court identified several “red flags” that were reasonably investigated by the insurer and held that the insured failed to present clear and convincing evidence that the insurer lacked a reasonable basis for denying her claim.