Pa. Federal Bad Faith Suit Against State Farm Dismissed: Revised Repair Estimates Not In Bad Faith

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SCRANTON, Pa.,  Dec. 7 — A federal judge  granted State Farm’s motion for summary judgment on a bad faith claim  in a homeowners insurance dispute, finding that the insured failed to show that State Farm’s issuance of an estimate and revised estimates constituted bad faith as a matter of Pennsylvania law.

Joan Yatsonsky filed a homeowners’ insurance claim with State Farm arising out of water damage from broken pipes at the Yatsonsky’s home.   Within three days of the claim,  State Farm sent a disaster mitigation contractor to examine the property.  A State Farm claims representative also discovered mold in the home and told Yatsonsky that mold was not a covered loss in the policy.

State farm sent Yatsonsky an estimate of the covered damages to her home in the amount of $18,426.34.    She disputed the valuation, and submitted an estimate of damages from her contractor, Grimm Construction, for $43,403.00.  State Farm then revised its original estimate and agreed to pay an additional $15,979.50 based on Grimm Construction’s estimate.  State Farm also agreed to pay for additional mitigation services, but Yatsonsky continued to dispute the amount.

State Farm then met with Yatsonsky and Grimm Construction at the property for an inspection, and the insurer revised its estimate for a second time, mailing Yatsonsky a check for an additional $3,874.36.  The insurer then advised Yatsonsky that she could claim an additional $11,719.32 upon completion of repairs.

The parties failed to resolve their discrepancies in estimates, and Yatsonsky decided to demolish the home and rebuild.  She also sued State Farm  Wayne County, Pa., for breach of contract and bad faith.  State Farm removed the case to  U.S. District Court for the Middle District of Pennsylvania.

State Farm obtained early summary judgment on the breach of contract claim because suit filed beyond the one year limitations period in the policy.  Following discovery State farm sought summary judgment on the bad faith claim as well.

U.S. District Judge James M. Munley granted the motion, ruling:.

“plaintiff fails to present evidence that State Farm’s claims management was anything other than what it claimed:  an attempt to further investigate the water damage at plaintiff’s home to determine the value of her claim…Plaintiff has offered no expert evidence pertaining to State Farm’s investigation.  Plaintiff cites no internal State Farm communication or testimony establishing that State Farm acted out of spite during its investigation.  In sum, plaintiff has presented no competent evidence from which a reasonable jury could find that the number of State Farm employees assigned to her claim establishes bad faith.”

Judge Munley disagreed with Yatsonsky’s claim that multiple estimates issued by State Farm did not constitute bad faith:

 “Contrary to plaintiff’s arguments, the undisputed facts establish that State Farm conducted a detailed investigation over the course of one year.  State Farm inspected plaintiff’s home on five different occasions from January 2014 through June 2014.  During each inspection, State Farm met with plaintiff, or plaintiff’s contractor, and reviewed the damage to plaintiff’s home.  The parties also attempted to reconcile the estimates at these meetings.  Additionally, based on its inspections, State Farm mailed payments to plaintiff totaling $38,280.20 from January 2014 – June 2014.  These $38,280.20 payments are only $5,122.80 less than plaintiff’s initial $43,403 estimate from Grimm construction.. . . In short, plaintiff has failed to produce evidence ‘so clear, direct, weighty and convincing as to enable a clear conviction, without hesitation, about whether or not the defendants acted in bad faith.. . . At most, the available evidence may demonstrate that State Farm’s investigation and estimates were arguably negligent.  The bad faith doctrine, however, is not implicated by mere negligence.  Accordingly, the court will grant State Farm’s motion for summary judgment on plaintiff’s bad faith claim.”

Joan Yatsonsky v. State Farm Fire & Casualty Co., No. 15-1777, M.D. Pa.; 2016 U.S. Dist. LEXIS 167224

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Author: CJ Haddick

C.J. Haddick is a Director with the law firm of Dickie, McCamey, & Chilcote, PC, based in Pittsburgh, Pa. He has advised and represented insurers in insurance coverage and bad faith litigation for more than a quarter of a century, and written and spoken throughout the United States on insurance coverage and bad faith prevention and litigation. He is Managing Director of the firm's Harrisburg, Pa. office. Reach him at chaddick@dmclaw.com or 717-731-4800.

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