In Scorpio v. Underwriters at Lloyd's, London, 2012 WL 2010168 (D.R.I. June 5, 2012), the Federal District Court in Rhode Island was confronted with an alleged claim of First-Party Bad Faith denial of a Property Insurance claim. Specifically, the Plaintiff-Policyholder submitted a claim for Property Damage after a building containing six (6) residential apartment units was damaged by rainwater which accumulated on the roof during heavy rain storms during the policy period, on July 24, 2008. Scorpio v. Underwriters at Lloyd's, London, 2012 WL 2020168 *1 (D.R.I. June 5, 2012), Download Scorpio v. Underwriters at Lloyd's, London (D.R.I. No. 10.325, Memorandum and Order Filed June 5, 2012) PUBLIC ACCESS.
The Plaintiff claimed Bad Faith as a result of the Defendant Insurance Company's alleged failure "to properly investigate the claim." Scorpio v. Underwriters at Lloyd's, London, 2012 WL 2020168 *6 (D.R.I. June 5, 2012). The District Court held that the evidence of record disputed every element of this claim.
In its ruling granting Defendant's Motion for Summary Judgment on this Bad Faith claim, the District Court compared the record evidence in that case, to every element of First-Party Bad Faith required by Courts in most jurisdictions, including Rhode Island. First, the Federal Court announced the applicable State Bad Faith standard of liability:
In order for Plaintiff to succeed on her bad faith claim she must “demonstrate an absence of a reasonable basis in law or fact for denying the claim or an intentional or reckless failure to properly investigate the claim and subject the result to cognitive evaluation .” Skaling v. Aetna Ins. Co., 799 A.2d 997, 1012 (R.I.2002).
Scorpio v. Underwriters at Lloyd's, London, 2012 WL 2020168 *7 (D.R.I. June 5, 2012).
Next, the Federal Court compared each relevant item of record evidence to that standard of Bad Faith exposure. Recast in bullet points, the following complete quotation from the Court's opinion illustrates this comparison:
- Defendant's actions do not even approach the bad faith standard.
- The record reflects that Defendant acted in a reasonable manner by timely and appropriately investigating the claim,
- engaging its own expert,
- and reviewing the appropriate information, including Plaintiff's engineer's report, before denying the claim.
- Defendant's denial letter noted the pertinent policy provisions and that the policy provided that a building that is still standing is not considered to be in a state of collapse.
- Defendant's actions, in addition to the Court's conclusion that the collapse provision is ambiguous and thus the claim is fairly debatable, leads this Court to conclude that Plaintiff's bad faith claim cannot survive Defendant's motion for summary judgment.
Scorpio v. Underwriters at Lloyd's, London, 2012 WL 2020168 *7 (D.R.I. June 5, 2012).
This is a "case study," if you will, in the kind of record evidence -- and the kind of conduct in First-Party claim handling -- that can defeat a claim of First-Party Bad Faith in most Courts.
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