In Blackwell v. Allstate Insurance Company, plaintiff filed a March 2011 claim with Allstate for property damage due to a water leak, and contractor vandalism.  Allstate covered the claim, and paid for the cost to repair plaintiff’s furnace.  In October 2012, plaintiff realized that the furnace was inoperable, and filed another claim for the replacement cost, alleging the 2011 water damage and vandalism caused the furnace damage.  On November 13, 2012, Allstate denied Plaintiff’s claim, explaining that the twenty months between Plaintiff’s initial claim and the furnace damage barred recovery.  Plaintiff filed suit in November 2013 for breach of contract, common law bad faith and statutory bad faith.

The District Court dismissed the claim for breach of contract.  Under Pennsylvania law, the statutory limitation period generally starts to run from the time of breach, however, the parties agreed to a different limitation period in the policy, as “one year from inception of the loss or damage.”  Since the “inception of the loss or damage” occurred in March 2011, the breach of contract claim filed after March 2012 (a year from the inception of loss) was time barred.  The court also dismissed the common law bad faith claim, since a common law bad faith claim fails to exist independently of a breach of contract claim.  However, the statutory bad faith claim survived, since under Pa. Const. Stat. Ann. § 8371, the time period for the statute of limitations on a bad faith claim begins on the date the insurance company first denied the insured’s claim in bad faith, here November 13, 2012.  As such, plaintiff’s November 2013 filing was timely.

This case is instructive as it evaluates the accrual dates for bad faith claims.  In analyzing bad faith claims, attorneys must take into account the common law and any statutory limitations to evaluate dismissal potentials.

Thanks to Coleen Hill for her contribution to this post. For any questions please contact ">