Antitrust Law Daily Wrap Up, STATE UNFAIR TRADE PRACTICES—E.D. Pa.: Homeowners’ deceptive business practices claims against insurer over coverage dispute dismissed, (Jun 20, 2014)

By Linda O’Brien, J.D., LL.M.

Two homeowners failed to sufficiently state fraudulent and deceptive business practices claims against an insurance company for allegedly improperly denying coverage for their water damage claim, the federal district court in Philadelphia has decided (Post v. Liberty Mutual Group, Inc., June 17, 2014, Jones, C.).

Background. In December 2012, Barton and Patricia Post discovered a water leak in their home that caused damage to the framing, ceiling, floors, and walls. The Posts filed a claim with Liberty Mutual under their insurance policy. Liberty denied coverage, stating that the loss was excluded from the policy. The Posts filed suit against Liberty Mutual, alleging fraudulent and deceptive business practices in violation of the Pennsylvania Unfair Trade Practices and Consumer Protection Law (UTPCPL), among other claims. Liberty moved for dismissal.

Malfeasance. The court determined the UTPCPL did not provide a cause of action for bad faith conduct based solely on an insurance company’s refusal to pay a claim. The UTPCPL prohibits any person from engaging in unfair methods of competition and unfair or deceptive acts or practices, and enumerates 20 specific forms of prohibited conduct. Under the provision that deals specifically with contractual obligations, only malfeasance, the improper performance of a contractual obligation, raises a cause of action under the UTPCPL. The plaintiffs contended that, after providing Liberty with reasonable notice of their claim, Liberty failed to conduct an investigation or inspection of the property and improperly performed its contractual obligations to act in good faith in determining the validity of their claim. The mere failure to conduct a post-loss investigation constituted nonfeasance – the failure to perform a contractual duty – which was not actionable, the court noted.

False advertising. The plaintiffs also failed to state a false and deceptive advertising claim under the UTPCPL, according to the court. Although the complaint cited specific language from the insurance policy and certain advertising documents, the plaintiffs failed to set forth any factual allegations that demonstrated their actual reliance on the alleged false advertising at the time of purchasing the policy.

Justifiable reliance. Furthermore, the court found that the plaintiffs failed to state a claim for unlawful conduct under the UTPCPL. To state a claim for fraudulent or deceptive conduct which creates the likelihood of confusion or misunderstanding, a plaintiff must show that he justifiably relied on the defendant’s wrongful conduct and suffered harm as a result of that reliance. In this case, the plaintiffs failed to make any allegations regarding the defendant’s intent to mislead by making false statements and thus failed to state a claim for fraudulent or deceptive conduct, the court concluded.

The case is No. 2:14-CV-238-CDJ.

Attorneys: Benjamin A. Post (Post & Post, LLC) for Barton Post. Lily K. Huffman (Bennett, Bricklin & Saltzburg LLP) for Liberty Mutual Group, Inc.

Companies: Liberty Mutual Insurance Group, Inc.

Cases: StateUnfairTradePractices PennsylvaniaNews