BRUNNER et al v. ALLSTATE VEHICLE AND PROPERTY INSURANCE COMPANY

Filing 12

MEMORANDUM AND/OR OPINION. SIGNED BY DISTRICT JUDGE HARVEY BARTLE, III ON 6/4/2024. 6/5/2024 ENTERED AND COPIES E-MAILED.(sg)

IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF PENNSYLVANIA
NEIL BRUNNER, et al.
v.
ALLSTATE VEHICLE AND PROPERTY
INSURANCE COMPANY

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CIVIL ACTION

NO. 24-1293

MEMORANDUM
Bartle, J.

June 4, 2024
This diversity action concerns a dispute over coverage

under a homeowners insurance policy.

Plaintiffs Neil Brunner

and Julie Brunner originally filed this action against their
property insurer, Defendant Allstate Vehicle and Property
Insurance Company (“Allstate”), in the Court of Common Pleas of
Philadelphia County.
court.

Allstate timely removed the action to this

Plaintiffs claim that Allstate’s refusal to pay for

damages caused by a hailstorm is a breach of their insurance
policy and constitutes bad faith under Pennsylvania law.

Before

the court is the motion of Allstate to dismiss the bad faith
claim for failure to meet the plausibility standard for
pleadings under Rule 12(b)(6) of the Federal Rules of Civil
Procedure.

I
For present purposes, the court must accept as true
all well-pleaded facts in Plaintiffs’ Amended Complaint.
Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007).

Bell

The court

may also consider “exhibits attached to the complaint and
matters of public record.”

Pension Benefit Guar. Corp. v. White

Consol. Indus., Inc., 998 F.2d 1192, 1196 (3d Cir. 1993) (citing
5A Charles Allen Wright & Arthur R. Miller, Federal Practice and
Procedure § 1357 (2d ed. 1990)).

When there is a document

“integral to or explicitly relied upon in the complaint,” it may
also be considered as there is no concern of lack of notice to
the plaintiff.

See Schmidt v. Skolas, 770 F.3d 241, 249 (3d

Cir. 2014) (quoting In re Burlington Coat Factory Secs. Litig.,
114 F.3d 1410, 1426 (3d Cir. 1993) (quotation marks omitted)).
The complaint must plead more than “labels and
conclusions.”

Twombly, 550 U.S. 545.

It must plead more than

“a formulaic recitation of the elements of a cause of action” or
“naked assertions devoid of further factual enhancement.”
Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Twombly,
550 U.S. at 555) (internal quotations and alterations omitted).
Instead, it must contain sufficient factual content to state a
claim that is plausible on its face.

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Id. at 678.

II
Sometime prior to the events at issue, Plaintiffs
executed a “House & Home Policy” (the “Policy”) with Allstate.
Plaintiffs attached to their Amended Complaint a document titled
“Amended House & Home Policy Declarations.” 1

According to this

document, the Policy included “Dwelling Protection,” “Other
Structures Protection,“ and “Roof Surfaces Extended Coverage.”
Furthermore, the document lists deductibles for “Windstorm and
Hail” and “All other perils.”
According to the Amended Complaint, on April 1, 2023,
while the policy was in effect, a hailstorm caused damage to the
roof and interior of Plaintiffs’ home and damage to their shed.
Plaintiffs timely notified Allstate of their loss.
Allstate sent Plaintiffs a letter on May 31, 2023.
The letter at the outset denied coverage for all of Plaintiffs
claims:
As part of [Plaintiffs’] claim,
[they] have requested Allstate Vehicle and
Property Insurance Company to provide
coverage for [their] Dwelling roof, Interior
and [their] shed. [Allstate] [is] unable to
provide coverage for these damages because
of the following provision in [Plaintiffs’]
policy.

1.
That document states that the Policy “consists of the
Policy Declarations, any Policy Declarations Addendum,” and ten
additional documents. Plaintiffs did not attach an addendum or
any of these additional documents.
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The letter goes on to include excerpts from the Policy:
Under Dwelling Protection-Coverage
A and Other Structures Protection-Coverage B
of this policy, we do not cover any loss
consisting of or caused by one or more of
the following excluded events, perils or
conditions. Such loss is excluded
regardless of whether the excluded event,
peril or condition involves isolated or
widespread damage, arises from natural, manmade or other forces, or arises as a result
of any combination of these forces . . . .
5. a) Wear and tear, aging,
marring, scratching, deterioration, inherent
vice, or latent defect;
. . .
e) settling, cracking, shrinking,
bulging or expansion of pavements, patios,
foundations, walls, floors, roofs or
ceilings;
. . .
Losses We Cover Under Coverage C:
. . .
2. Windstorm or hail.
We do not cover:
a) loss to covered property inside
a building structure, caused by rain, snow,
sleet, sand or dust unless the wind or hail
first damages the roof or walls and the wind
forces rain, snow, sleet, sand or dust
through the damaged roof or wall;
Allstate then confusingly states that “[t]his letter only
applies to the dwelling roof and shed that contains damages due
to wear and tear which includes granular loss, blistering and
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cracking.”

(emphasis in original).

Thereafter, Allstate goes

on to say that “[f]or the above stated reasons, and any other
exclusions or conditions contained in the policy applicable, we
are unable to provide coverage for the Interior due to the wind
driven water is only covered under your coverage C.”

The letter

does not suggest any prior investigation by Allstate as the
basis for its determination to deny payment.
Upon receiving this letter, Plaintiffs engaged a
third-party contractor, The Exterior Company, to evaluate the
damage to their home.

They attached to their Amended Complaint

a document dated July 20, 2023 that appears to be an estimate of
repair costs.

The document includes detailed pictures of a

slate shingle roof.

The pictures show several broken or cracked

shingles and several shingles with what appear to be deep,
circular depressions.

The document contains an estimate of the

total repair cost of $66,978.01.

The document does not

reference the interior of Plaintiffs’ home or their shed.

The

Amended Complaint does not state whether Plaintiffs provided
Allstate with this document.
Plaintiffs also obtained a Storm Impact Report dated
September 14, 2023 from The Exterior Company.

This report

states that on April 1, 2023, hail of 1.25 inches fell for 5
minutes at Plaintiffs’ home.

The report further notes that

there was wind reaching 73 miles per hour for 6 minutes.
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Plaintiffs provided a copy of the Storm Impact Report to
Allstate.
Allstate thereafter conducted an inspection at
Plaintiffs’ property.
November 15, 2023.

It sent Plaintiffs another letter on

In this letter, Allstate explained that

during the inspection, it was “unable to find physical damage,
or additional damages, sustained from the loss date . . . to
[Plaintiffs’] dwelling roof and shed roof.”

Allstate concluded

that it would not pay for Plaintiffs’ insurance claim.
Plaintiffs filed this suit in the Court of Common
Pleas on February 14, 2024.
court on March 27, 2024.
their complaint.

Allstate removed the action to this

Shortly thereafter, Plaintiffs amended

Allstate moved to dismiss Plaintiffs’ bad

faith claim.
III
The Pennsylvania bad faith statute, 42 Pa. Cons. Stat.
§ 8371, provides that “[i]n an action arising under an insurance
policy, if the court finds that the insurer acted in bad faith
toward the insured,” the court may award interest in the amount
equal to the prime rate of interest plus 3%, award punitive
damages, and assess court costs and attorneys’ fees.
statute does not define bad faith.

The

The Superior Court of

Pennsylvania, in Terletsky v. Prudential Property and Cas. Ins.
Co., explained that bad faith “is any frivolous or unfounded
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refusal to pay proceeds of a policy.”

649 A.2d 680, 688 (Pa.

Super. Ct. 1994) (quoting Black’s Law Dictionary 139 (6th ed.
1990)).
To prevail on a bad faith claim under § 8371, a
plaintiff must prove by clear and convincing evidence that the
insurer: (1) did not have a reasonable basis for denying
benefits under the policy; and (2) knew or recklessly
disregarded its lack of reasonable basis in denying the claim.
Terletsky v. Prudential Property and Cas. Ins. Co., 649 A.2d
680, 688 (Pa. Super. Ct. 1994).

Id.

The statute protects

against any instances of bad faith by an insurer occurring
during its handling of the claim.

O'Donnell ex rel. Mitro v.

Allstate Ins. Co., 734 A.2d 901, 906 (Pa. Super. 1999).

It also

encompasses a broad range of insurer conduct, including
unreasonable delay in evaluating claims, failure to communicate
with the insured, frivolous refusal to pay, inadequate
investigation into the factual basis of the insurance claim, and
failure to conduct legal research concerning coverage.

Smith v.

Allstate Ins. Co., 904 F. Supp. 2d 515, 524 (W.D. Pa. 2012).
An insurer can defeat a claim of bad faith by showing
that it had a reasonable basis for its decision to deny payment
or that it lacked the required intent.

Id.

Regarding the

requisite intent, it is not necessary that the insured’s refusal

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to pay rises to the level of fraud.

Terletsky, 649 A.2d at 688.

However, mere negligence or bad judgment is not bad faith.
Plaintiffs here allege that Allstate acted in bad
faith by engaging in the following conduct:
(a) by sending correspondence falsely
representing that Plaintiff[s’] loss caused
by wind-driven rain was not entitled to
benefits due and owing under the Policy;
(b) in failing to complete a prompt and
thorough investigation of Plaintiff[s’]
claim before representing that such claim is
not covered under the Policy;
(c) in failing to pay Plaintiff[s’] covered
loss in a prompt and timely manner;
(d) in failing to objectively and fairly
evaluate Plaintiff[s’] claim;
(e) in conducting an unfair and
unreasonable investigation of Plaintiff's
claim;
(f) in asserting Policy defenses without a
reasonable basis of fact, including, but not
limited to, "wear and tear" and "sudden and
accidental direct physical loss";
(g) by misrepresenting pertinent facts and
Policy provisions and placing unduly
restrictive interpretations on the Policy,
including, but not limited to "wear and
tear";
(h) in failing to keep Plaintiff[s] or
their representatives fairly and adequately
advised as to the status of the claim;
(i) in unreasonably valuing the loss and
failing to fairly negotiate the amount of
the loss with Plaintiff[s] or their
representatives;
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Id.

(j) in failing to promptly provide a
reasonable factual explanation of the basis
for the denial of Plaintiffs[’] claim,
including, but not limited to, originally
claiming that damage was from wear and tear
and later, once wear and tear was disproved
as the cause of loss, claiming that there
was no damage at all;
(k) by unreasonably withholding Policy
benefits;
(l) in acting unreasonably and unfairly in
response to Plaintiffs[’] claim;
(m) by unnecessarily and unreasonably
compelling Plaintiffs to institute this
action to obtain benefits for a covered
loss.
Allstate argues that its motion should be granted
because Plaintiffs have pleaded only conclusory allegations.
The Amended Complaint, according to Allstate, lacks a factual
basis to make out a claim for bad faith.
Allstate cites three district court cases that
dismissed bad faith claims on the ground that they contained
only conclusory allegations.

See Ream v. Nationwide Prop. &

Cas. Ins. Co., NAIC, No. 2:19-CV-00768, 2019 WL 4254059 (W.D.
Pa. Sept. 9, 2019);

Krantz v. Peerless Indem. Ins. Co., No. 18-

CV-3450, 2019 WL 1123150 (E.D. Pa. Mar. 12, 2019);

Hwang v.

State Farm Mut. Automobile Ins. Co., No. CV 19-927, 2019 WL
1765938 (E.D. Pa. Apr. 22, 2019).

In each of these cases the

only supporting fact was that the plaintiff had an outstanding
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claim.

In Hwang, our colleague Judge Mark Kearney highlighted

the dearth of factual support in the plaintiff’s complaint:
Ms. Hwang does not allege how
State Farm failed to investigate and
evaluate her claim in an objective and fair
manner, subordinated her interest to its
own, or violated its fiduciary duty owed to
her. She does not plead her communications
with State Farm or State Farm's conduct even
though a claim for bad faith is based on
State Farm's conduct in handling her claim.
She does not plead calls or communications
since the February 7, 2019 verbal offer of
$7,000.
Hwang, 2019 WL 1765938, at *3 (emphasis added).
Conversely, Plaintiffs here supported their
allegations with correspondence from Allstate.

In its letter

dated May 31, 2023, Allstate determined that it was “unable to
provide coverage” for Plaintiffs’ roof, interior, and shed
because the Policy contained exceptions for “wind driven water”
and “wear and tear.”

It quoted only portions of the policy

containing exceptions to coverage.

As previously discussed,

Plaintiffs had a deductible for “windstorm and hail.”

The

letter never states that Allstate had conducted any
investigation into Plaintiffs’ claim of windstorm and hail
damage before declining coverage on May 31, 3023.

Moreover,

Allstate never states that it considered the portions of the
policy that cover windstorm and hail damage.

In sum, the letter

makes plausible the allegation in Paragraph 28(b) of the Amended
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Complaint that Allstate “fail[ed] to complete a prompt and
thorough investigation of Plaintiff[s’] claim before
representing that such claim is not covered under the Policy.”
Plaintiffs further contend that Allstate acted in bad
faith once it conducted an investigation of Plaintiffs’
property.

They submit Allstate’s November 15, 2023 letter,

which stated that Allstate was “unable to find physical damage,
or additional damages, sustained from the loss date . . . to
[Plaintiffs’] dwelling and shed roof.”

They also submit the

report of the third-party contractor dated July 20, 2023 which
contained pictures of damaged shingles on Plaintiffs’ roof.
These factual allegations are insufficient to support a
plausible claim that Allstate’s investigation was unreasonable
or that it frivolously denied coverage on November 15, 2023.
“An insurer does not act in bad faith by investigating . . .
legitimate issues of coverage.”

Hyde Athletic Industries, Inc.

v. Contl. Cas. Co., 969 F. Supp. 289, 307 (E.D. Pa. 1997).
Further, Plaintiffs allege no facts showing “recklessness or ill
will” by Allstate once it conducted its investigation.

See id.

at 309.
Plaintiffs remaining allegations are merely
conclusory.

The bad faith claim will be dismissed except as to

the allegation that Allstate denied coverage on May 31, 2024
without any prior investigation into Plaintiffs’ claim (Doc. #6
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at ¶ 28(b)).

Whether Plaintiffs will be able to prove bad faith

must await another day.

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