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Borden v. Amica Mutual Insurance Co.

September 30, 2006


The opinion of the court was delivered by: McLAUGHLIN, Sean J., J.


Plaintiffs, Jonathan and Amy Borden ("Plaintiffs" or "Bordens"), filed the instant suit against Defendant Amica Mutual Insurance Co. ("Amica") alleging that Amica acted in bad faith during the adjustment and settlement of a building loss claim resulting from an accidental fire that destroyed the Bordens' home. This case does not involve a denial of benefits or unreasonable delay in the payment of benefits. (See Oral Argument Transcript, 06/05/2005, pp. 14-15). Rather, it is the Bordens' contention that Amica acted in bad faith by offering an unreasonably low figure to resolve the building loss claim and in requesting arbitration to resolve the dispute.

Amica did not dispute its liability under the policy to reimburse the Bordens for the damage to their home and contents resulting from the fire. (Trial Transcript. pp. 38-39).*fn1 Amica also admitted that its obligation under the insurance contract was to pay whatever amount was required to restore the home to its pre-fire condition, including the total elimination of the smell of smoke. This obligation existed whether the Bordens elected to repair the home, demolish and rebuild it, or sell the property and move to another location. (Tr. pp. 38-39, 76). Amica denied, however, that it acted in bad faith throughout the settlement of the damage claim.

This matter came before the Court for a bench trial on Thursday, December 8, 2005. The following constitutes our findings of fact and conclusions of law.


1. On August 30, 2002, the Plaintiffs purchased a home at 4838 Wolf Road, Erie, Pennsylvania, for $720,000. (Trial Transcript, p. 158). On the same date, Defendant, Amica Mutual Insurance Company, issued a "Platinum Choice" Homeowner's Policy, no. 630837-1183, to the Plaintiffs for the time period extending between August 30, 2002 and August 30, 2003. (Tr. P. 37-38; Plaintiffs' Ex. 5). The applicable insurance contract contained policy limits of $577,000 for the building, $432,750 for personal property, and $173,100 for loss of use. (Tr. pp. 70-71; Defendant's Ex. A15). The policy also contained an endorsement which guaranteed the replacement of the Plaintiffs' home, even if the costs exceeded their limit of liability. (Tr. pp. 69-71). The Platinum Choice policy provided the broadest coverage of any Amica insurance policy available in 2003. (Tr. p. 38).

2. On Sunday, February 16, 2003, an accidental fire severely damaged the Plaintiffs' home. The fire originated in the basement of the west part of the house and burned for approximately four hours, completely destroying large portions of the home and causing extensive smoke damage throughout the remainder of the structure. (Tr. pp. 47, 171-72; Plaintiffs' Ex. 3-3).

3. Jon Borden promptly reported the fire to both the proper authorities and to Defendant. (Tr. pp. 40, 161, 163).

4. On the afternoon of the fire, Amica learned, from various sources, that all of the floors in the house were "bowed," there was approximately five feet of water in the basement of the home, the garage had been damaged, a large hole had been cut in the roof by the fire department, and that the home was not habitable. (Tr. pp. 47-48; Plaintiffs' Ex. 3-3, 3-4).

5. The damage to the west portion of the home was so severe that the fire marshal initially sought permission to demolish the entire structure before ultimately deciding to wait until the following day to reassess the damage in the daylight. (Tr. pp. 48, 162).

6. Claims Manager David J. Bennett, an adjuster in Amica's Pittsburgh Regional Claims Office, coordinated the adjustment of the Bordens' claim. (Tr. p.35). Bennett did not regularly handle fire loss claims and had only been to three or four fire scenes in the course of his adjusting career. (Tr. p. 35-36).

7. After being notified of the fire, Amica retained Brian Seifert, the principal of a company known as Visions, Inc. to conduct "board-up" services on the damaged house. Seifert, a volunteer fireman, was hired because he was already on the scene fighting the fire. The board-up service was performed satisfactorily and without issue. (Tr. pp. 42-44, 173, 210).

8. On February 17, 2003, the day following the fire, Claims Manager Bennett retained the services of an independent adjuster, John Schumann, to adjust the claim. Schumann, who operated a firm called Property Claims Services from his home, conducted the vast majority of his work for Amica and, in this case, was admittedly working on Amica's behalf. (Tr. pp. 248-49).

9. Upon being retained, Schumann met with Seifert and conducted an initial walkthrough of the home on February 19, 2003. (Tr. p. 50; Plaintiffs' Ex. 3-1, 3-5). Schumann and Seifert agreed to work together on an initial estimate. (Tr. pp. 251-52).

10. Following this initial walkthrough, Schumann recommended that Amica place a $250,000 reserve on the dwelling coverage. (Tr. p. 50). Schumann met with the Bordens for dinner that evening and explained to them the policy requirements regarding loss presentation. (Tr. p. 176-78; Plaintiffs' Ex. 3-1).

11. Between February 20 and February 26, 2003, Schumann continued to inspect the house, finding significant damage. Schumann noted that floors had collapsed or partially collapsed in three different rooms and that there was smoke damage, soot, and the odor of smoke throughout almost the entire house. (Tr. pp. 261, 268-69; Plaintiffs' Ex. 3-1, 3-5, 3-8). Schumann did not cut test holes in the walls to examine the extent to which fire residue may have been present. Id.

12. Based upon his findings, Schumann prepared an estimate of the damage to the property, reviewed the estimate with Seifert, and submitted it to the Plaintiffs on or about February 26, 2003. (Tr. pp. 181, 208-09, 259, 262, 265-66).

13. The repair estimate prepared by Schumann estimated that the repair cost of restoring the building to its pre-fire condition was $328,999.14. (Tr. p. 262, 292-94; Defendant's Ex. A15). The approach used by Schumann in estimating the repair cost was to attempt cleaning and smoke remediation in areas of the home suffering only minor damage, while demolishing and rebuilding those areas of the home which were severely damaged by fire. (Tr. pp. 314-15; Tr. 12/12/05, pp. 44-45).

14. Smoke remediation technology utilizes several steps to attempt to remove soot residue from a fire-damaged structure without completely demolishing and rebuilding the structure. In a successful smoke remediation, the soot must be cleaned away, whether mechanically, through absorption, or by use of solvent; chemically deodorized, to change the composition of the smoke particles and remove the scent of smoke; and masked, by ...

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