Disagreement Over ACV Estimate Insufficient To Support Bad Faith Claim, Judge Rules

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PITTSBURGH, March 2  —  An ACV basis estimate upon which a homeowners’ claims offer was made by State Farm Insurance  did not lack a reasonable basis, a federal judge ruled in dismissing the homeowners bad faith claim.  In Randy Gowton v. State Farm Fire and Casualty Co., U.S. District Judge Cathy Bissoon dismissed Gowton’s bad faith claim against State Farm, finding that the  insured  failed to show that his insurer’s offer to settle “was not supported by a thorough and even-handed investigation.”

Gowton sustained damage to his home in a fire, and submitted an estimate from his contractor to State Farm for a replacement cost benefit of $293,911.80.  After performing its own inspection, State Farm offered just $112,694.50, based on a replacement cost estimate of $187,874.50, less  depreciation of $75,180.15.  Gowton’s policy was payable on an “actual cash value benefits” basis.

Gowton sued State Farm in the Fayette County Court of Common Pleas, and after removing the case to federal court, State Farm moved to dismiss the bad faith count.  A breach of contract count had previously been dismissed by Judge Bissoon on statute of limitations grounds.

Judge Bissoon held that mere disagreement on the value of a claim following a reasonable investigation could not support a claim for bad faith:

“Gowton has failed to allege any facts to suggest that State Farm’s settlement offer lacked a reasonable basis or was not supported by a thorough and even-handed investigation… Significantly, Gowton’s response brief reiterates that he is not alleging that State Farm was dilatory, failed to communicate, performed an unsatisfactory or biased investigation or unreasonably delayed in considering his claim.  Rather, Gowton simply alleges that State Farm’s estimate was per se unreasonable for no other reason than that it differed from his own.. In the absence of any supporting facts from which it might be inferred that the company’s investigation was biased or unreasonable, this type of disagreement in an insurance case is ‘not unusual,’ and ‘cannot, without more, amount to bad faith.”

“This conclusion is bolstered by an examination of the exhibits referenced throughout Gowton’s Amended Complaint.  State Farm performed an initial inspection of the property only two days after the damage occurred and provided a detailed, 38-page estimate within a month thereafter.  State Farm’s estimate contains a room-by-room assessment of the damage; detailed measurements; design drawings; materials analysis; and line by line estimates of the cost and depreciation of the construction materials necessary to rebuild the home.  This is precisely the type of thorough and adequate investigation that vitiates a claim of bad faith.”

Randy Gowton v. State Farm Fire and Casualty Co., et al., No. 15-1164, W.D. Pa., 2017 U.S. Dist. LEXIS 29390 (Bissoon, J.)

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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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