Defense Law Articles
By Thomas Paschos & Associates
Haddonfield, New Jersey
In Williams v. State Farm Fire & Cas. Ins. Co., No. 16-9028, 2017 U.S. Dist. LEXIS 50261 (D.N.J. Apr. 3, 2017), Plaintiffs sought coverage under their homeowners’ insurance policy issued by State Farm for property damage sustained in a fire loss on January 12, 2016. State Farm denied coverage and Plaintiffs’ filed a Complaint alleging that Defendant’s refusal to pay benefits breached the insurance policy. Plaintiffs also alleged that Defendant breached the duty of good faith and fair dealing in processing Plaintiffs' homeowner's claim.
State Farm filed a Motion to Dismiss as to the bad faith claim. The Court granted the motion and agreed that Plaintiffs had failed to state a cognizable bad faith claim. The Court recognized that New Jersey defines bad faith as: (1) the lack of a “fairly debatable” reason for failing to pay a claim, and (2) knowing or reckless disregarded for the lack of a reasonable basis in denying the claim. The lone allegation in the Complaint as to the second element was Plaintiffs’ assertion that the Insurer had “reckless disregard for the rights of the Plaintiffs.”
The Court held:
Plaintiffs reference a “reckless disregard for the rights of the Plaintiffs” but do so in conclusory fashion, thereby leaving the Court to infer reckless indifference from the fact that Defendant denied coverage; however, the Court declines to make such an inference. Plaintiffs do not provide sufficient factual allegations to suggest an absence of a reasonable basis on the part of Defendant for denying coverage. The mere allegation that Defendant's denial of coverage inferentially establishes bad faith relies on the very speculation forbidden by Twombly and Iqbal. Accordingly, the Court dismisses Plaintiffs' claim for bad faith. . . .