Insurer that Pays Limit of Policy After Appraisal Did not Breach The Covenant of Good Faith & Fair Dealing
Barry Zalma
Sep 20, 2023
Read the full article at https://lnkd.in/g-pQU7pr and see the full video at https://lnkd.in/gV8Yt-F2 and at https://lnkd.in/gjaR-PCv and at https://zalma.com/blog plus more than 4600 posts.
Insurer that Pays Limit of Policy After Appraisal Did not Breach The Covenant of Good Faith & Fair Dealing
Washington Street, LLC (“Washington Street”) appealed a District Court order granting summary judgment to Nationwide Property and Casualty Insurance Company (“Nationwide”), which ended Washington Street’s claims that Nationwide proceeded in bad faith in delaying claim payments following a fire that damaged Washington Street’s property.
In Washington Street, LLC v. Nationwide Property & Casualty Insurance Company, No. 22-3396, United States Court of Appeals, Third Circuit (September 13, 2023) the Third Circuit resolved the dispute.
BACKGROUND
In July 2019, a fire caused by a tenant’s negligence destroyed an apartment building owned by Washington Street. Washington Street promptly submitted a claim for recovery to its insurer, Nationwide. Some six weeks later, in September 2019, Nationwide provided an initial claim estimate and payment, after Washington Street’s attorney complained about the pace of the investigation.
That initial payment ($376,342.95) was, as Nationwide acknowledged, incomplete, as it was subject to change based on additional repairs or damage found. In October 2019, Washington Street provided estimates for repairs not covered in Nationwide’s initial report. Nationwide reviewed those estimates and hired a consultant to review the entire project. The consultant completed his assessment in January 2020, estimating the total cost of repairs to be $635,898.86, after which Nationwide paid an additional $208,555.91, an amount the parties accepted as bringing the total payments to $584,907.68.
Washington Street was dissatisfied with that amount and demanded an impartial appraisal of the total loss. Nationwide cooperated by hiring an appraiser. Washington Street also hired an appraiser, and the two appraisers appointed an “umpire” to resolve any disagreements. In November 2020, the umpire entered an award for Washington Street: $859,670.03 for dwelling loss, $7,720.05 for business personal property, $35,306.40 for debris removal, and $74,200 for loss of income. The total amount exceeded Washington Street’s policy limit of $854,700 for dwelling loss, $60,000 for business income, and $25,000 for debris removal, and Nationwide paid the full policy amount.
During the appraisal, on June 3, 2020, Nationwide filed a subrogation lawsuit against the tenant who had negligently caused the fire. The subrogation investigation began in July 2019, but Nationwide did not inform Washington Street of the lawsuit until January 14, 2021. Eventually, Nationwide obtained a settlement that resulted in Washington Street receiving an additional $15,000, an amount Washington Street described as “fair and acceptable.”
Washington Street sued. After discovery, Nationwide moved for summary judgment and the District Court granted it. The Court held that Nationwide’s handling of Washington Street’s claim was “by no means a model of perfection” but it did not constitute bad faith.
DISCUSSION
Washington Street claims that Nationwide demonstrated bad faith by delaying six weeks to make its first partial payout, failing to make further estimates until Washington Street pressed for progress, hiring a building consultant for the alleged purpose of further delaying the process, making a still-deficient payment six months after the fire, knowingly misrepresenting its appraisal policy, delaying its policy reformation request, and filing its subrogation action prematurely.
Pennsylvania provides a statutory remedy if an insurer acts in bad faith toward the insured. Bad faith requires evidence so clear, direct, weighty and convincing as to enable a clear conviction, without hesitation, about whether or not the defendants acted in bad faith. At the summary judgment stage, the insured’s burden in opposing a summary judgment motion brought by the insurer is commensurately high because the court must view the evidence presented in light of the substantive evidentiary burden at trial.
Nationwide promptly investigated Washington Street’s claim, and its claims specialist visited the burned building soon after the site was deemed safe.
So too, Nationwide’s delay of six weeks in providing the first payment appears reasonable. On August 26, 2019, the claims specialist wrote, the fact is it is a large building and although I have spent days estimating, it has been a slow process. Nationwide’s first payment included a detailed estimate of property damage that was admittedly underinclusive and left the door open for Washington Street to submit further estimates once repairs got underway. Washington Street did not initiate any repairs, however.
The District Court noted, “Nationwide probably could have been more diligent,” but that doesn’t mean that Nationwide’s pace of review was unreasonable, much less that it showed disregard for Washington Street’s contractual rights.
Therefore, Washington Street did not show by clear and convincing evidence – the applicable standard of proof – that Nationwide acted in bad faith in processing Washington Street’s insurance claim.
ZALMA OPINION
The tort of bad faith requires a breach of contract by an insurer that provides clear, direct, weighty and convincing evidence sufficient to enable a clear conviction, without hesitation that the insurer acted in bad faith. The evidence did not exist to establish the required clear and convincing evidence of wrong doing it only reflected a claim that took time and expertise to resolve.
(c) 2023 Barry Zalma & ClaimSchool, Inc.
Please tell your friends and colleagues about this blog and the videos and let them subscribe to the blog and the videos.
Subscribe to Excellence in Claims Handling at locals.com at https://zalmaoninsurance.locals.com/subscribe or at substack at https://barryzalma.substack.com/publish/post/107007808
Go to Newsbreak.com https://www.newsbreak.com/@c/1653419?s=01
Follow me on LinkedIn: http://www.linkedin.com/comm/mynetwork/discovery-see-all...
Daily articles are published at https://zalma.substack.com.
Go to the podcast Zalma On Insurance at https://podcasters.spotify.com/pod/show/barry-zalma/support; Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921; Go to Barry Zalma on YouTube- https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg; Go to the Insurance Claims Library – http://zalma.com/blog/insurance-claims-library/
Please tell your friends and colleagues about this blog and the videos and let them subscribe to the blog and the videos.
Subscribe to Excellence in Claims Handling at locals.com at https://lnkd.in/gfFKUaTf or at substack at https://lnkd.in/gcZKhG6g
Go to Barry Zalma videos at Rumble.com at https://lnkd.in/gV9QJYH; Go to the Insurance Claims Library – https://lnkd.in/gYq44VM
Interpleader Protects All Claimants Against Life Policy and the Insurer
Who’s on First to Get Life Insurance Proceeds
Post 5184
See the full video at https://lnkd.in/gyxQfnUz and at https://lnkd.in/gAd3wqWP, and at https://zalma.com/blog plus more than 5150 posts.
Go to X @bzalma; Go to Barry Zalma videos at Rumble.com at https://lnkd.in/gRthzSnT; Go to Barry Zalma on YouTube- https://lnkd.in/g2hGv88; Go to the Insurance Claims Library – https://lnkd.in/gwEYk.
Interpleader Protects All Claimants Against Life Policy and the Insurer
In Metropolitan Life Insurance Company v. Selena Sanchez, et al, No. 2:24-cv-03278-TLN-CSK, United States District Court, E.D. California (September 3, 2025) the USDC applied interpleader law.
Case Overview
This case involves an interpleader action brought by the Metropolitan Life Insurance Company (Plaintiff-in-Interpleader) against Selena Sanchez and other defendants (Defendants-in-Interpleader).
Key Points
Plaintiff-in-Interpleader’s Application:
The Plaintiff-in-Interpleader...
A Claim by Any Other Name is not a Claim
Post 5182
It is Imperative that Insured Report Potential Claim to Insurers
Read the full article at https://lnkd.in/gfbwAsxw, See the full video at https://lnkd.in/gea_hgB3 and at https://lnkd.in/ghZ7gjxy, and at https://zalma.com/blog plus more than 5150 posts.
In Jeffrey B. Scott v. Certain Underwriters At Lloyd’s, London, Subscribing To Policy No. B0901li1837279, RLI Insurance Company, Certain Underwriters At Lloyds, London And The Insurance Company, Subscribing To Policy No. B0180fn2102430, No. 24-12441, United States Court of Appeals, Eleventh Circuit (August 25, 2025) the court explained the need for a claim to obtain coverage.
Case Background:
This appeal arises from a coverage dispute under a Directors & Officers (D&O) insurance policy. Jeffrey B. Scott, the plaintiff-appellant, was terminated from his role as CEO, President, and Secretary of Gemini Financial Holdings, LLC in October 2019. Following his termination, Scott threatened legal action against Gemini, and ...
A Claim by Any Other Name is not a Claim
Post 5182
It is Imperative that Insured Report Potential Claim to Insurers
Read the full article at https://lnkd.in/gfbwAsxw, See the full video at https://lnkd.in/gea_hgB3 and at https://lnkd.in/ghZ7gjxy, and at https://zalma.com/blog plus more than 5150 posts.
In Jeffrey B. Scott v. Certain Underwriters At Lloyd’s, London, Subscribing To Policy No. B0901li1837279, RLI Insurance Company, Certain Underwriters At Lloyds, London And The Insurance Company, Subscribing To Policy No. B0180fn2102430, No. 24-12441, United States Court of Appeals, Eleventh Circuit (August 25, 2025) the court explained the need for a claim to obtain coverage.
Case Background:
This appeal arises from a coverage dispute under a Directors & Officers (D&O) insurance policy. Jeffrey B. Scott, the plaintiff-appellant, was terminated from his role as CEO, President, and Secretary of Gemini Financial Holdings, LLC in October 2019. Following his termination, Scott threatened legal action against Gemini, and ...
Barry Zalma: Insurance Claims Expert Witness
Posted on September 3, 2025 by Barry Zalma
The Need for a Claims Handling Expert to Defend or Prove a Tort of Bad Faith Suit
© 2025 Barry Zalma, Esq., CFE
When I finished my three year enlistment in the US Army as a Special Agent of US Army Intelligence in 1967, I sought employment where I could use the investigative skills I learned in the Army. After some searching I was hired as a claims trainee by the Fireman’s Fund American Insurance Company. For five years, while attending law school at night while working full time as an insurance adjuster I became familiar with every aspect of the commercial insurance industry.
On January 2, 1972 I was admitted to the California Bar. I practiced law, specializing in insurance claims, insurance coverage and defense of claims against people insured and defense of insurance companies sued for breach of contract and breach of the implied covenant of good faith and fair dealing. After 45 years as an active lawyer, I asked that my license to practice law be declared inactive ...
The Need for a Claims Handling Expert to Defend or Prove a Tort of Bad Faith Suit
© 2025 Barry Zalma, Esq., CFE
When I finished my three year enlistment in the US Army as a Special Agent of US Army Intelligence in 1967, I sought employment where I could use the investigative skills I learned in the Army. After some searching I was hired as a claims trainee by the Fireman’s Fund American Insurance Company. For five years, while attending law school at night while working full time as an insurance adjuster I became familiar with every aspect of the commercial insurance industry.
On January 2, 1972 I was admitted to the California Bar. I practiced law, specializing in insurance claims, insurance coverage and defense of claims against people insured and defense of insurance companies sued for breach of contract and breach of the implied covenant of good faith and fair dealing. After 45 years as an active lawyer, I asked that my license to practice law be declared inactive and became a consultant and expert witness for lawyers representing insurers and lawyers ...
APPRAISAL AWARD SETS AMOUNT OF DAMAGES RECOVERED FROM INSURER
Post 5180
See the full video at https://rumble.com/v6yd2z0-evidence-required-to-prove-breach-of-contract.html and at https://youtu.be/2ywEjs3hZsw, and at https://zalma.com/blog plus more than 5150 posts.
It’s a Waste of Time to Sue Your Insurer if You Don’t Have Evidence
Evidence Required to Prove Breach of Contract
Read the full article at https://www.linkedin.com/pulse/evidence-required-prove-breach-contract-barry-zalma-esq-cfe-rfelc, see the full video at https://rumble.com/v6yd2z0-evidence-required-to-prove-breach-of-contract.html and at https://youtu.be/2ywEjs3hZsw, and at https://zalma.com/blog plus more than 5150 posts.
It’s a Waste of Time to Sue Your Insurer if You Don’t Have Evidence
In Debbie Beaty and Jonathan Hayes v. Homeowners Of America Insurance Company, No. 01-23-00844-CV, Court of Appeals of Texas, First District (August 26, 2025) Debbie Beaty and Jonathan Hayes filed a claim under their homeowner’s insurance policy with Homeowners of ...