Wade Clark Mulcahy LLP

In Hudson v. Econ. Fire & Cas. Co., plaintiff Frank Hudson commenced suit against his insurer, Economy Fire & Casualty Company seeking coverage for losses due to a fire which occurred in October 2020. Hudson v. Econ. Fire & Cas. Co., No. CV 23-185, 2024 WL 3585691 at *1 (W.D. Pa. July 30, 2024). Hudson’s home had previously sustained secondary damage from a house fire that occurred at a neighboring home in May of 2020. Id. In April of 2021, Hudson retained an independent adjuster, Bryan Finnicum, to generate a damage loss estimate. Id. Finnicum estimated the replacement cost value at $75,635.98. Id. Defendant Economy Fire & Casualty Company generated its own loss estimate, calculating a replacement cost value of $4,565.01, an actual cash value of $3,946.09, and a net claim value of $2,946.09. Id. Finnicum wrote a letter to Economy Fire & Casualty Company’s counsel stating that its estimate was grossly understated and “a clear attempt to deny coverage for items that were undamaged in the May fire but damaged in the October fire.” Id. And, after Economy Fire & Casualty Company rejected an agreement to obtain a third, separate appraisal, Hudson filed suit for breach of contract and bad faith. Id.

Economy Fire & Casualty Company sought to dismiss the bad faith claim, arguing that Hudson’s claim “essentially amounts to a dispute as to the value of the claimed loss, which does not rise to the level of bad faith conduct.” Id. at 3. The court, however, disagreed, finding that Hudon’s allegations that Economy Fire & Casualty Company’s adjuster failed to reasonably evaluate or review photographs, video footage, and damage estimates in Economy Fire & Casualty Company‘s possession were minimally sufficient to show that Economy Fire & Casualty Company did not have a reasonable basis for denying coverage and “knew or recklessly disregarded its lack of reasonable basis in denying the claim.” Id. Accordingly, Economy Fire & Casualty Company’s motion to dismiss Hudson’s bad faith claim was denied. Id. at 4.

While claims involving a dispute as to the value of a claimed loss generally do not rise to the level of bad faith conduct, an insurer is responsible for adequately investigating and analyzing the evidence in its possession when determining claim value.