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KILMER v. CONNECTICUT INDEM. CO.

February 28, 2002

HERBERT KILMER AND ELSIE KILMER,: HIS WIFE, PLAINTIFFS,
V.
THE CONNECTICUT INDEMNITY COMPANY, DEFENDANT.



The opinion of the court was delivered by: Vanaskie, Chief Judge.

  MEMORANDUM

Plaintiffs Herbert and Elsie Kilmer have filed this diversity action alleging bad faith liability under 42 Pa.Cons.Stat.Ann. § 8371 on the part of defendant Connecticut Indemnity Company.*fn1 The Kilmers' action is predicated on Connecticut Indemnity's alleged unreasonable delay in investigating the cause of the fire which destroyed their property in Solon, New York, as well as its alleged failure to pay and/or refusal to negotiate the amount of benefits payable under its insurance policy. Connecticut Indemnity disputes Kilmers' allegations and argues that its actions in handling plaintiffs' claim were both reasonable and in good faith and not in violation of the applicable law. Currently pending is Connecticut Indemnity's motion for summary judgment. Because genuine issues of material fact exist as to whether Connecticut Indemnity's alleged actions and omissions were both unreasonable and in bad faith, defendant's motion for summary judgment will be denied.

I. BACKGROUND

On May 17, 1991, the Kilmers purchased 1,220 acres of land in Solon, Courtland County, New York for $700,000. In 1994, the Kilmers sold approximately 1,000 acres of that land to the Gutchess Lumber Company for $600,000, leaving approximately 228 acres, on which was situated the Four Seasons Ski Lodge. The property had not been operating as a ski resort when the Kilmers purchased the land, and it never became operational subsequent to their purchase. In May of 1994, the Kilmers listed the remaining 228 acres of land for sale. The two real estate agents contracted by the Kilmers to sell the property, Larry Birchard and Maureen Adams, who were working out of Binghamton, New York, were unsuccessful in marketing the parcel of land for sale at the suggested asking price.*fn2

On July 28, 1998, the insured ski lodge was totally destroyed by a fire. Subsequent to the fire, on July 29, 1998, Don Roberts, a claims examiner for Connecticut Indemnity, received a telefax communication reporting that there was a total loss of the property in question. On July 30, 1998, Roberts traveled to the scene of the fire in Solon, New York. According to defendant, Roberts inspected and photographed the site and then completed a report detailing his examination of the fire scene. During his visit to the fire scene, Roberts was informed by Mr. Kilmer that the property had not generated any income in the seven years that the Kilmers had owned it. Present at the scene with Roberts and Kilmer were representatives of the Courtland County Sheriffs Department and the McGraw Fire Department (the first to respond to the scene), as well as Gary Kubber, the adjuster to whom Roberts assigned the claim.

On August 4, 1998, Mr. Kilmer prepared and signed the General Adjustment Bureau's Standard Fire Claim Form. On August 7, 1998, Roberts sent a letter to the Kilmers acknowledging receipt of their claim, and stating that Connecticut Indemnity was going to continue to investigate the fire due to possible misrepresentations in the application for insurance, such as the description of the building and the classification of protection assigned to the building. According to defendant, in completing the Kilmers' application for insurance, Kerwick admitted that he had made a few mistakes on the application. In investigating the possibility of misstatements on the application of insurance, Roberts took a statement from Kerwick to determine how the application was completed. In his statement, Kerwick said:

I had no idea what protection class 6 was, and I really took a guess. I also put down that it was a masonry building. I don't know why — Ed Cox did not tell me it was 100% frame, nor did he tell me anything about any protection classes.

(Def.'s Affs. & Exs. in Sup. of Mot. for Summ. J., Ex. D.)

After visiting the fire scene, Roberts had hired a private cause and origin investigator, Dennis Ware, who was allegedly well-known to the Sheriffs Department for his competence in fire investigation. On August 31, 1998, Roberts notified his adjuster, Kubber, that he wanted a status report on Connecticut Indemnity's cause and origin investigation. On September 1, 1998, Roberts received the report from Ware.*fn3 Attached to the report was a copy of Ware's laboratory findings and a statement to Roberts that he was currently in the process of preparing a written report with regard to the destroyed skilodge.

On September 30, 1998, Roberts contacted his coverage counsel, Steven Helmer, Esquire, and informed him that the cause of the fire was determined to be arson, and that the building was considerably over-insured. At that point, Kubber arranged for a background check on Mr. Kilmer.

After reviewing the investigative reports, Roberts requested that Kilmer file a proof of loss. In his deposition, Roberts testified:

(Def.'s B.R. in Supp. of Mot. for Summ. J. at 7.)

As of September 1, 1998, Roberts had allegedly asked Kubber to prepare an "actual cash value" (ACV) estimate of the property. On October 10, 1998, Kubber was directed by Roberts to work up a statement of loss with regards to a possible offer to submit to the Kilmers in the event that Connecticut Indemnity's investigation determined that there was coverage for the loss. At that time, the figures were to be kept in the files of both Connecticut Indemnity and GAB Robbins.*fn4 In his deposition, Roberts testified that, as of October 10-11, 1998, Connecticut Indemnity could not offer the Kilmers a settlement because they needed to gather information necessary for a determination of responsibility for the loss. Roberts testified:

We were still gathering information. And based upon the information that we had both in the fire marshal's report and in the investigations conducted up to that point, it certainly did not appear that we were going to be making him an offer of settlement on October 10th or October 11th of 1998.

(Def.'s B.R. in Supp. of Mot. for Summ. J. at 7.)

On October 23, 1998, Kubber sent the Kilmers a Proof of Loss form to be returned within 60 days. On November 10, 1998, Roberts received the Kilmers' executed Proof of Loss. On November 19, 1998, Roberts contacted Kubber in an effort to confirm in writing how he was going to proceed regarding the proof of loss. On December 8, 1998, Connecticut Indemnity rejected the Kilmers' Proof of Loss. In ...


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