Liberty Mutual Wins Bad Faith Claim In Flood Loss Dispute

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PHILADELPHIA, Nov. 15 – A Pennsylvania federal judge on Nov. 15 dismissed a bad faith claim against Liberty Mutual, finding that a dispute over the amount Liberty Mutual should pay over a flood loss was not sufficient to create a legitimate bad faith cause of action.

In Steven Barnwell, et al. v. Liberty Mutual Insurance Co, No. 16-4739, E.D. Pa.,  2017 U.S. Dist. LEXIS 188427 (Beetlestone, J.), the Barnwells sued Liberty Mutual after a dispute arose over payment for an August 3, 2015 flood loss under the Barnewells’ homeowners policy with the insurer.  The home was under renovation at the time of the loss.

While the insurer made partial payment of the claim, the insureds sought further reimbursement and ultimately filed suit against Liberty Mutual in the U.S. District Court for the Eastern District of Pa.  In the proceeding, Liberty Mutual sought partial summary judgment on the bad faith claims.

U.S. District Judge Wendy Beetlestone granted Liberty Mutual’s motion, observing that a mere dispute over the nature and extent of damage did not constitute bad faith on the part of the insurer:

“Plaintiffs’ do not point to any competent record evidence to subvert the restoration company’s determination that only one marble tile needed to be reinstalled. Plaintiff Barnwell himself testified at the arbitration hearing that only four to six of the tiles were ruined. Even so, neither Plaintiff contacted Liberty to tell it that there was more damage to the floor tiles than the restoration company had identified and that the cost of repair would, accordingly, be higher. Instead, they replaced the entire floor and asked Liberty to pay for it. Under the circumstances, it was not unreasonable for Liberty to deny benefits under the policy.”

Judge Beetlestone also held as a matter of law that Liberty’s positions on food loss and living expense reimbursement of the insureds were not so unreasonable as to create a genuine issue of fact regarding bad faith.

Finally, the Court ruled that Liberty’s withholding of depreciation allowance did not constitute bad faith either:

“By the terms of the policy, Liberty is not obligated to pay depreciation until repair or replacement is complete. Plaintiff has not pointed to record evidence that the repairs are complete or that it has notified Liberty that the repairs are complete. Absent such evidence, it was not unreasonable for Liberty to withhold payment to Plaintiffs for any deductions for depreciation.”

Steven Barnwell, et al. v. Liberty Mutual Insurance Co, No. 16-4739, E.D. Pa.,  2017 U.S. Dist. LEXIS 188427

 

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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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