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Gowton v. State Farm Fire and Casualty Co.

United States District Court, W.D. Pennsylvania

March 2, 2017

RANDY GOWTON, Plaintiff,


          Cathy Bissoon United States District Judge

         I. MEMORANDUM

         This matter is before the Court upon a Motion to Dismiss filed by Defendant State Farm Fire and Casualty Co. (“State Farm”) (Doc. 12). For the reasons that follow, State Farm's Motion will be granted.


         On March 22, 2011, Plaintiff Randy Gowton's (“Gowton”) home sustained extensive fire damage. Am. Compl. (ECF No. 11) ¶ 6. At the time, Gowton's property was insured by State Farm pursuant to Homeowner's Insurance Policy Number 38-PT-9631-0 (“Policy”). Id. ¶ 4. The Policy provided for fire damage coverage in the amount of $190, 733.00. Id. ¶ 7. Pursuant to the policy, State Farm was obligated to provide “actual cash value benefits” based on the estimated cost to repair or replace the property, less the cost of calculable depreciation and estimated contractor overhead and profit. Id. ¶ 11; State Farm Policy (ECF No. 11-1).

         Gowton promptly notified State Farm of the damage and submitted a claim for the replacement cost of the destroyed structure. Id. ¶¶ 9, 13. Based on an estimate that he obtained from a company known as Custom Construction & Remodeling, Gowton requested a replacement cost benefit of $293, 911.80. Id. ¶ 13; Contract Proposal (ECF No. 11-3). State Farm, after performing its own inspection, provided only $112, 694.50. Id. ¶ 11. State Farm arrived at this amount by calculating an estimated replacement cost of $187, 874.50 and subtracting a depreciation cost of $75, 180.15. Id.; see State Farm Estimate (ECF No. 11-2).

         State Farm, to date, has only paid $112, 694.35 for the damage to the residence. Id. ¶14. Gowton contends that State Farm's assessment is inaccurate, understated and “bears no reasonable relationship to Plaintiff's true replacement cost.” Id. ¶¶ 13-14. Gowton is seeking to recover the difference between the Policy's limits and the amount actually paid by State Farm.


         “To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.'” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007)). When faced with a motion to dismiss, a court “must accept all of the complaint's well-pleaded facts as true, but may disregard any legal conclusions.” Fowler v. UPMC Shadyside, 578 F.3d 203, 210-11 (3d Cir. 2009).

         Gowton's Amended Complaint asserts a single claim of bad faith.[1] To establish a bad faith claim in Pennsylvania, “a plaintiff must show by clear and convincing evidence that the insurer (1) did not have a reasonable basis for denying benefits under the policy and (2) knew or recklessly disregarded its lack of a reasonable basis in denying the claim.” Post v. St. Paul Travelers Ins., 691 F.3d 500, 522-23 (3d Cir. 2012) (internal quotations omitted). For purposes of an action against an insurer for failing to pay a claim, “such conduct imports a dishonest purpose and means a breach of a known duty (i.e., good faith and fair dealing) through some motive of self-interest or ill will; mere negligence or bad judgment is not bad faith.” Id. at 523 (quotations omitted).

         In his original Complaint, Gowton broadly alleged that “[t]he conduct of the Defendants in refusing to pay the additional amounts due on the Plaintiff's claim under the Policy, constitute bad faith by the Defendants toward the Plaintiff.” Compl. (ECF No. 1-2) ¶ 40. He suggested that State Farm had relied on unsupportable loss calculations, but did not explain how or why those calculations were inadequate. Id. ¶¶ 15, 19. Because “[c]onclusory or bare-bones allegations [of bad faith] will not survive a Motion to Dismiss, ” this Court dismissed Gowton's bad faith claim for lack of specificity. See Memorandum and Order (ECF No. 10) at 5 (quoting Liberty Ins. Co. v. PGT Trucking, Inc., 2011 WL 2552531, at *4 (W.D. Pa. Jun. 27, 2011) (internal quotations omitted)). The Court instructed Gowton to cure his pleading deficiencies by filing an amended complaint containing sufficient factual detail to support his claim. Id. at 5-6.

         In his Amended Complaint, Gowton clarifies that his bad faith claim is based entirely on the difference between the repair estimate that he independently obtained and State Farm's much lower repair estimate. Am. Compl. ¶¶ 12-13. Gowton explains that State Farm's estimate “bears no reasonable relationship to [his] actual loss” because it “is more than $100, 000.00 lower than the true replacement cost price quotation obtained by Plaintiff pursuant to the open market.” Id. ¶ 13. He also avers that State Farm used a depreciation percentage that it “pick[ed] . . . out of the air” in determining how much depreciation to factor into his ultimate payment benefit. Id. ¶ 14. No other facts bearing on the accuracy of State Farm's estimate are provided.

         A similar scenario was recently addressed in Seto v. State Farm Ins. Co., 855 F.Supp.2d 424, 430 (W.D. Pa. 2012). In Seto, as in the instant case, the plaintiffs asserted that State Farm had failed to adequately reimburse them for damage to their home arising from a series of fires. Id. at 426-27. After being informed of the damage, State Farm conducted a prompt inspection, sent a damage estimate, and tendered payment in the amount of $116, 321.67. Id. at 427. Plaintiffs engaged a private contractor and obtained a second damage estimate that was at least $50, 000 higher than that supplied by State Farm. Id. Relying on their own estimate, plaintiffs alleged that State Farm had acted in bad faith by “low-balling” its valuations of numerous components of the destroyed home. Id. at 428.

         The court began its analysis by acknowledging the well-established principle that “Pennsylvania law does not treat as bad faith an insurer's low but reasonable estimate of an insured's losses.” Id. at 430 (citing Brown v. Progressive Ins. Co., 860 A.2d 493, 501 (Pa. Super. 2004)). Rather, the insured must demonstrate that the insurer's estimate bore no reasonable relationship to the actual damage loss, either because the insurer “breached its duty of good faith through some motive of self-interest or ill-will” or because the insurer failed to “conduct[] a review or investigation sufficiently thorough to yield a ...

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