Pennsylvania District Court Dismisses Homeowners’ Bad Faith Claim

A federal district court in Pennsylvania has dismissed a bad faith claim brought by homeowners against their insurance company, finding that they had not alleged “concrete facts” to show that the insurer’s actions in investigating or declining to pay their claim had been “frivolous or unfounded” or had been “dishonest or motivated by self-interest or ill will.”

The Case

Joan and Alan Groth alleged that, about a dozen years after a new roof was put on their house, they looked in their attic and discovered that the entire front of their house was saturated and black. The Groths were told that they needed a new roof and made a claim against their homeowner’s insurance company, State Farm Fire and Casualty Company.

After inspection, State Farm’s agent told the Groths that the damage was not covered due to “ongoing damage and neglect” of their roof. The Groths appealed and the insurer sent out two agents to inspect the damage to the home. Following the second inspection, the insurer’s employees told the Groths that “improper installation” of their roof had allowed for exposure to the elements that had resulted in “rot, deterioration and mold.”

The Groths believed that State Farm’s agent had already made up her mind before she had arrived. They also disputed the presence of mold and argued that a “simple observation” of the house showed that their roof had “rapidly deteriorated” and had not suffered long term exposure to the elements, as State Farm had contended. The Groths alleged that they had spent approximately $20,000 to repair their home and that the insurer had refused to pay their claim even though it was covered under their policy.

The Groths sued State Farm. Among other things, the Groths contended that State Farm had acted in bad faith in the manner in which it had investigated the damage, by acting in its interest to the detriment of the Groths, by improperly construing the insurance policy, and by not paying on their claim.

State Farm moved to dismiss the Groths’ bad faith claim.

The Court’s Decision

The court granted State Farm’s motion.

In its decision, the court said that, for purposes of State Farm’s motion, it accepted the following as true:

One of State Farm’s agents initially stopped removal of drywall and when he relented found further damage. That agent, claiming he was an expert – although the Groths implied that he was not – concluded that the roof was not covered because of ongoing damage and neglect. State Farm instructed the Groths to bring their own roofer to an inspection but then would not allow their roofer to talk. At that same inspection, a State Farm agent concluded that the damage was not covered because improper installation of the roof had resulted in rot, deterioration, and mold – but State Farm never did any cultures or tests to check for mold.

The court pointed out that the Groths also had alleged that “a simple observation clearly showed that the entire roof rapidly deteriorated in appearance,” that their claim was “covered under the policy,” and that State Farm had “not provided any reasonable justification for refusing to pay the claim.”

The court ruled that these allegations, to the extent that they did not simply state legal conclusions, did “not contain facts suggestive of proscribed bad faith.”

In the court’s view, there were no concrete facts alleged by the Groths to show that State Farm’s actions in investigating or declining to pay the Groths’ claim were “frivolous or unfounded” or that its actions were “dishonest or motivated by self-interest or ill will.”

Accordingly, the court concluded, the Groths’ had not pleaded sufficient facts to plausibly state that State Farm had acted without a reasonable basis for denying benefits under the policy and that it had known of or had recklessly disregarded its lack of a reasonable basis in denying the Groths’ claim.

The case is Groth v. State Farm Fire & Cas. Co., No. 14-7033 (E.D. Pa. April 17, 2015).