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In the case of Smith v. Allstate Insurance Company, in the U.S. District Court Eastern District of Pennsylvania, the court found that Allstate's actions supported the plaintiff’s bad faith claim.

This case involves property damage sustained during a hurricane and reported to Allstate under a homeowners policy.

In a twist of fate, Allstate did not deny that the homeowner's losses were covered under its existing policy. Still, there were unreasonable delays and partial denials during the processing of the claim. In the homeowner's complaint, she alleges that Allstate failed to mitigate damages and instead created other consequential damages as a result of its failure to timely process her claim or make full payments.

The plaintiff sued Allstate for breach of contract and bad faith. The insurer quickly filed a motion to dismiss the bad faith claim only. However, their motion was denied.

Before making his decision, Judge Padova of the Eastern District of Pennsylvania reviewed the complaint and the plaintiff’s subsequent pleadings, and after drawing all reasonable inferences in favor of the plaintiff, he concluded that the complaint adequately alleged facts that support that the insurer’s unresponsive, untimely and dilatory conduct, along with its failure to conduct a proper investigation of the claim, and its unsubstantiated coverage denials, all supported the court’s ruling.

The complaint alleged several instances of the insurer’s bad-faith conduct, including the following:

1. Allstate “failed to fairly and adequately evaluate Plaintiff’s claim or make a reasonable effort to negotiate a timely settlement of the claim.”

2. Allstate “assigned multiple claim representatives who were unaware of the history of Plaintiff’s claim, refused to acknowledge receipt of engineering reports submitted by Plaintiff and Ridley Township and failed to acknowledge or respond to proofs of loss that Plaintiff submitted.”

3. Allstate denied the “claim without engaging its own engineering expert.” Plaintiff alleged that she was forced to hire (out-of-pocket) the services of a public insurance adjuster and obtain an Appraisal, which showed that Allstate had drastically undervalued her claim.

4. Allstate “[e]ventually … reversed its coverage determination and provided coverage, admitting that its denials of the claim had been unsubstantiated, but this was not until 5 months after Plaintiff submitted her claim.”

5. “In the meantime, [Allstate] refused to give the plaintiff any substantial advance payment to allow Plaintiff to obtain alternative housing, and ‘Ridley Township compelled the demolition of the [P]roperty.’” “In addition, Plaintiff lost her job as a medical insurance biller because her alternative living arrangements lacked a dedicated, HIPAA-compliant workspace, and she had to sell personal property and use personal funds from her deceased husband’s insurance policy for her living expenses.”

The plaintiff further alleged, that at the time her complaint was filed, Allstate had not fully compensated her for her losses.

Judge Padova did find that some of the Plaintiff’s allegations were conclusory, but others asserted facts that gave rise to a reasonable inference that Allstate had denied Plaintiff the benefits of her Policy in bad faith.

For example, the Complaint generally alleges that Allstate failed to make a reasonable effort to negotiate the timely settlement of the claim,’ it also alleges more specifically that [Allstate] refused to acknowledge that they had received Plaintiff’s and Ridley Township’s engineering reports, as well as receipt of Plaintiff’s proofs of loss, and failed to engage its own third-party engineering expert to counter Plaintiff’s engineering reports.”

Judge Padova also cited Eastern District Judge Surrick’s 2017 Mitchell v. State Farm decision, to address the insurer’s actions in ignoring an insured’s expert reports which in that case supported a bad faith claim, stating:

“Similarly, the general allegation that [the insurer] ‘act[ed] unreasonabl[y] and unfairly in response to Plaintiff’s claim’ is supported by additional factual allegations that [the insurer] assigned multiple claim representatives to Plaintiff’s claim, none of whom were aware of the history of the claim and all of whom refused to respond properly to Plaintiff …, did not make any offer to tender a policy benefit for five months …, and ‘grossly undervalued’ Plaintiff’s claim as was subsequently proven by an appraisal….”

Smith v. Allstate Insurance Company, U.S. District Court Eastern District of Pennsylvania Case No. CV 21-5048, 2022 WL 1460331 (E.D. Pa. May 9, 2022) (Padova, J.)