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Concurrent Clause Exclusion Basis For Insured’s Bad Faith Claim.

May 24, 2013

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The Pennsylvania Middle District Court recently held that concurrent clause exclusion provisions in insurance policies are unenforceable under Pennsylvania law.  In <a href=";thepage=1"><i>Donahue v. State Farm</i></a>, the plaintiff purchased homeowner’s insurance through State Farm Fire &amp; Casualty Company.  The policy insured the plaintiff’s home and provided a variety of coverage for the plaintiff’s dwelling and personal property.  Additionally, the policy included numerous exclusions.  One exclusion was the “Water Damage” exclusion.  Essentially this exclusion barred coverage for any loss resulting from water or sewage overflow or back-up.  As the insured wanted coverage for such potential losses, a “Back-Up Of Sewer” endorsement was added to the policy.
Subsequently, the plaintiff’s sewer backed-up and caused damage to the plaintiff’s property.  The plaintiff made a claim for coverage.  State Farm denied coverage claiming that the property damage was caused by flood waters, for which coverage was excluded under the policy.
In response to the denial of coverage, the plaintiff instituted a bad faith action against State Farm.  State Farm filed a motion to dismiss.  Ultimately, the Court concluded that the plaintiff had adequately pled a bad faith cause of action.  In reaching its determination, the Court noted that State Farm had based its denial of coverage on concurrent causes.  The Court stated, under Pennsylvania law, “concurrent clause exclusion provisions are unenforceable in the presence of an affirmative grant of coverage.”  Thus, the plaintiff was able to proceed with his bad faith claim against State Farm.
Thanks to Colleen Hayes for her contribution to this post.

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