Reliance on Expert Opinion Avoids Claim of Bad Faith
Post 5009
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Denying a Church’s Claim Based on an Expert’s Report is not Evidence of Bad Faith
Lakeside Evangelical Congregational Church sued Church Mutual Insurance Company (CMIC), for Breach of Contract and for Bad Faith stemming from CMIC’s alleged failure to provide insurance payments for roof damage caused by hail. CMIC moved to dismiss Count II (the Bad Faith count of its suit).
In Lakeside Evangelical Congregational Church v. Church Mutual Insurance Company, No. 2:24-CV-00859-MJH, United States District Court, W.D. Pennsylvania, Pittsburgh (March 3, 2025) the District Court applied the rule that an insurer relying on an expert report is not acting in bad faith when it denies a claim.
BACKGROUND
Lakeside alleged that the roof of its church sustained wind and hail damage from a June 16, 2022 storm. CMIC denied the claim, based on the opinions of its Forensic Engineer, James Graf, who concluded the damage to the roof was not the result of hail damage; but rather, the balding and blemishes on the roof shingles were consistent with a manufacturing defect, a non-covered cause of loss.
Lakeside alleged because CMIC refused to pay benefits pursuant to the policy, CMIC breached the insurance contract, for which Lakeside claimed damages in the amount of $146,016.72. In addition the First Amended Complaint alleged that CMIC acted in bad faith.
The basis of the church’s suit was that its public adjuster opined that CMIC acted without justification and in disregard of their insureds’ rights under the policy of insurance.
RELEVANT STANDARD
A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged. The purpose of a motion to dismiss is to streamline litigation by dispensing with needless discovery and fact finding.
DISCUSSION
CMIC argued that Lakeside’s Bad Faith claim should be dismissed, because its reliance upon Mr. Graf’s engineering report provides a reasonable basis for its denial of Lakeside’s roof hail damage claim.
To succeed on a bad faith claim, a plaintiff-insured must prove, by clear and convincing evidence:
1. that the insurer did not have a reasonable basis for denying benefits under the policy; and
2. that the insurer knew of or recklessly disregarded its lack of a reasonable basis in denying the claim.
An insurer simply must show that it had a reasonable basis for a coverage decision based on the information available at the time the decision was made. Reliance upon an expert report is a reasonable basis to deny an insurance claim. The insurance company is not required to show that the process by which it reached its conclusion was flawless or that the investigatory methods it employed eliminated possibilities at odds with its conclusion.
The basis for Lakeside’s Bad Faith claim stems solely from CMIC’s decision that hail damage was not the cause of the condition of Lakeside’s roof. Lakeside’s criticism of Mr. Graf’s report derives from Lakeside’s public adjuster, Jason Cortazzo’s, disagreement with the report. Regardless of which, if either, expert opinion is ultimately determined to be correct, for purposes of a bad faith claim, CMIC is entitled to rely upon on its own expert opinion in relation to the decision it made. Under these circumstances and allegations, Lakeside’s Amended Complaint failed to support a bad faith claim.
Accordingly, CMIC’s Motion to Dismiss Count II of the Amended Complaint was granted and dismissed without prejudice.
ZALMA OPINION
To prove a case for the tort of bad faith, as alleged by Lakeside, the insured must show that the insurer wrongfully, maliciously, unreasonably, and recklessly refused the claim. In this case the insurer relied on the expertise of a qualified engineer and the insured relied on the expertise of a public adjuster. Regardless of which expert was correct relying upon a qualified expert’s opinion is evidence of the good faith of the insurer who made its decision based on a competent expert’s opinion creating a genuine dispute between the insured and the insurer.
(c) 2025 Barry Zalma & ClaimSchool, Inc.
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Jury’s Findings Interpreting Insurance Contract Affirmed
Post 5105
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Madelaine Chocolate Novelties, Inc. (“Madelaine Chocolate”) appealed the district court’s judgment following a jury verdict in favor of Great Northern Insurance Company (“Great Northern”) concerning storm-surge damage caused by “Superstorm Sandy” to Madelaine Chocolate’s production facilities.
In Madelaine Chocolate Novelties, Inc., d.b.a. The Madelaine Chocolate Company v. Great Northern Insurance Company, No. 23-212, United States Court of Appeals, Second Circuit (June 20, 2025) affirmed the trial court ruling in favor of the insurer.
BACKGROUND
Great Northern refused to pay the full claim amount and paid Madelaine Chocolate only about $4 million. In disclaiming coverage, Great Northern invoked the Policy’s flood-exclusion provision, which excludes, in relevant part, “loss or damage caused by ....
Failure to Name a Party as an Additional Insured Defeats Claim
Post 5104
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Contract Interpretation is Based on the Clear and Unambiguous Language of the Policy
In Associated Industries Insurance Company, Inc. v. Sentinel Insurance Company, Ltd., No. 23-CV-10400 (MMG), United States District Court, S.D. New York (June 16, 2025) an insurance coverage dispute arising from a personal injury action in New York State Supreme Court.
The underlying action, Eduardo Molina v. Venchi 2, LLC, et al., concerned injuries allegedly resulting from a construction accident at premises owned by Central Area Equities Associates LLC (CAEA) and leased by Venchi 2 LLC with the USDC required to determine who was entitled to a defense from which insurer.
KEY POINTS
Parties Involved:
CAEA is insured by Associated Industries Insurance Company, Inc. ...
Exclusion Establishes that There is No Duty to Defend Off Site Injuries
Post 5103
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Attack by Vicious Dog Excluded
In Foremost Insurance Company, Grand Rapids, Michigan v. Michael B. Steele and Sarah Brown and Kevin Lee Price, Civil Action No. 3:24-CV-00684, United States District Court, M.D. Pennsylvania (June 16, 2025)
Foremost Insurance Company (“Foremost”) sued Michael B. Steele (“Steele”), Sarah Brown (“Brown”), and Kevin Lee Price (“Price”) (collectively, “Defendants”). Foremost sought declaratory relief in the form of a declaration that
1. it owes no insurance coverage to Steele and has no duty to defend or indemnify Steele in an underlying tort action and
2. defense counsel that Foremost has assigned to Steele in the underlying action may withdraw his appearance.
Presently before the Court are two ...
ZIFL Volume 29, Issue 10
The Source for the Insurance Fraud Professional
See the full video at https://lnkd.in/gK_P4-BK and at https://lnkd.in/g2Q7BHBu, and at https://zalma.com/blog and at https://lnkd.in/gjyMWHff.
Zalma’s Insurance Fraud Letter (ZIFL) continues its 29th year of publication dedicated to those involved in reducing the effect of insurance fraud. ZIFL is published 24 times a year by ClaimSchool and is written by Barry Zalma. It is provided FREE to anyone who visits the site at http://zalma.com/zalmas-insurance-fraud-letter-2/ You can read the full issue of the May 15, 2025 issue at http://zalma.com/blog/wp-content/uploads/2025/05/ZIFL-05-15-2025.pdf
This issue contains the following articles about insurance fraud:
Health Care Fraud Trial Results in Murder for Hire of Witness
To Avoid Conviction for Insurance Fraud Defendants Murder Witness
In United States of America v. Louis Age, Jr.; Stanton Guillory; Louis Age, III; Ronald Wilson, Jr., No. 22-30656, United States Court of Appeals, Fifth Circuit (April 25, 2025) the Fifth Circuit dealt with the ...
Professional Health Care Services Exclusion Effective
Post 5073
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This opinion is the recommendation of a Magistrate Judge to the District Court Judge and involves Travelers Casualty Insurance Company and its duty to defend the New Mexico Bone and Joint Institute (NMBJI) and its physicians in a medical negligence lawsuit brought by Tervon Dorsey.
In Travelers Casualty Insurance Company Of America v. New Mexico Bone And Joint Institute, P.C.; American Foundation Of Lower Extremity Surgery And Research, Inc., a New Mexico Corporation; Riley Rampton, DPM; Loren K. Spencer, DPM; Tervon Dorsey, individually; Kimberly Dorsey, individually; and Kate Ferlic as Guardian Ad Litem for K.D. and J.D., minors, No. 2:24-cv-0027 MV/DLM, United States District Court, D. New Mexico (May 8, 2025) the Magistrate Judge Recommended:
Insurance Coverage Dispute:
Travelers issued a Commercial General Liability ...
A Heads I Win, Tails You Lose Story
Post 5062
Posted on April 30, 2025 by Barry Zalma
"This is a Fictionalized True Crime Story of Insurance Fraud that explains why Insurance Fraud is a “Heads I Win, Tails You Lose” situation for Insurers. The story is designed to help everyone to Understand How Insurance Fraud in America is Costing Everyone who Buys Insurance Thousands of Dollars Every year and Why Insurance Fraud is Safer and More Profitable for the Perpetrators than any Other Crime."
Immigrant Criminals Attempt to Profit From Insurance Fraud
People who commit insurance fraud as a profession do so because it is easy. It requires no capital investment. The risk is low and the profits are high. The ease with which large amounts of money can be made from insurance fraud removes whatever moral hesitation might stop the perpetrator from committing the crime.
The temptation to do everything outside the law was the downfall of the brothers Karamazov. The brothers had escaped prison in the old Soviet Union by immigrating to the United...
