JOHNSTOWN — Logic has won out in a breach-of-contract case in which a Pennsylvania federal judge categorically sided with the insurance company being sued for denying a policy claim, according to a Philadelphia attorney.
“What was remarkable about this case was that it led to a logical conclusion,” says Samuel Bordoni-Cowley, an associate at Saul, Ewing, Arnstein & Lehr's Philadelphia office.
“It seems like a logical conclusion, but so often in cases like this, weird things happen. Here, we had an insurance company that was being sued for breach because they didn’t go above and beyond to investigate things in denying a policy claim that may not have happened.”
Daniel Felix filed suit against insurer American National after a fire destroyed his home and the company denied his claim. He had declared more than $1 million in losses, including nearly $270,000 in lost contents.
Felix's claim against the company wasn’t his first. A fire at his previous home resulted in him cashing in on a claim for more than $400,000. However, the second fire triggered an immediate investigation by the insurer's special investigation unit.
Felix claimed, among other things, that he had lost a pair of 1.5-carat diamond earrings and a Louis Vuitton purse.
During the trial, the insurance company's attorneys noted that Felix’s ex-fiancée contradicted his statements about the items that he had claimed were lost. In fact, she claimed that she had them in her possession.
Ultimately, that led to American National voiding Felix’s entire policy under a fraud provision in his contract. The company then formally filed suit, accusing him of civil insurance fraud.
Felix then filed counterclaims against the insurer. One of the claims accused American National of bad faith denial of coverage.
Additionally, Felix claimed the insurance company failed to properly conduct its investigation because it had failed to ascertain the color of the Louis Vuitton bag and the type of diamond earrings he allegedly had lost in the fire.
The insurance company responded by filing for partial summary judgment on the bad faith claim.
“His tone started changing to fit his story,” Bordoni-Cowley said. “The insurer found that the claims were not true, and the court ruled that it’s ridiculous to make the insurer investigate things they were not told about.”
The court sided with the insurer and rejected Felix’s contention that American National had an obligation to inquire about items that were neither highlighted in his "proof of loss" form nor mentioned in his statements under oath.
“There’s no bad faith if the insurer rejects the claim on a reasonable basis,” Bordoni-Cowley added. “This sends the message to the insured that they have to be thorough and consistent in laying out in a claim the goods that they designate as lost.”