Gist of the Action "Doctrine" Bars Pennsylvania Bad Faith Claim.

    In Download Timothy v. State Farm Fire & Casualty (W.D. Pa. August 23, 2012), a Federal Court was faced with four counts of a Bad Faith, Breach of First-Party Insurance Contract claim.  The breach of contract count, and all the other counts, related to the Defendant's low payment and alleged investigation failures concerning tornado and other "weather event" damage claims under a Homeowner's Policy.

    The Federal Court first addressed a count which appeared to advance a common law Bad Faith claim under Pennsylvania law in that case.  The Court dismissed the claim alleged in that count by invoking Pennsylvania's gist of the action "doctrine".  This sounds a lot like other rules applied by other names in other jurisdictions, in which a party will not be permitted to claim tort damages for an alleged breach of contract.  In Florida, for example, this might be called the "economic loss doctrine".

    The Court in that case held:

Specifically, the doctrine serves to bar tort claims:

1) arising solely from a contract between the parties, 

2) where the duties allegedly breached were created and grounded in the contract itself, 

3) where the liability stems from a contract, or 

4) where the tort claim essentially duplicates a breach of contract claim or the success of which is wholly dependent on the terms of a contract.

 Download Timothy v. State Farm Fire & Casualty *3-*4 (W.D. Pa. August 23, 2012).  After concluding its application of the Pennsylvania "gist of the action doctrine" to dismiss the second count in that case, the Federal Court observed that Pennsylvania does not allow for First-Party Bad Faith at common law anyway.

    The Federal Judge then dismissed two other counts under attack for failure to state a claim, which were alleged statutory claims under Pennsylvania's Bad Faith Statute and under Pennsylvania's unfair and deceptive practices act, respectively.  Having dismissed three of the four counts, only the claim for alleged Breach of Contract remained.  Since that claim was for less than the jurisdictional limit, the Federal Court dismissed that claim too, and remanded the case to Pennsylvania State Court for disposition.

Dennis Wall is a featured speaker at this year's National Forum on Bad Faith Litigation in Orlando, Florida on November 28 and 29, 2012.  Readers of this blog can receive a $200.00 discount on registration by entering the code, "BFB 200," at the American Conference Institute's website:  www.americanconference.com/badfaith.

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