Defense Prevails in Bad Faith/Breach of Contract Case

The lawsuit arose out of the insured's claim for "vandalism," which was made about a year after the insured learned that his tenant was making significant renovations to the leased property in violation of the lease. The tenant had been paying the insured's mortgage. The insured did not make the vandalism claim until the tenant stopped paying the insured's mortgage and the insured was served with a foreclosure notice. Unbeknownst to the insured, the tenant had been taken into custody by the DEA, charged with various offenses related to an inter-state drug ring and, thus, was no longer able to pay the mortgage. The insured then filed a claim with its insurance carrier seeking damages to his real property and loss of rental income. The defense initially advised the carrier that the claim was not "sudden and accidental" and thus not covered. Moreover, the exclusions for "faulty workmanship," "renovation", and "acts of others," etc., also applied. The insured/plaintiff then filed suit in state court for breach of contract. It was removed to federal court in the Western District of Pennsylvania. The judge agreed on summary judgment that the loss was not "sudden and accidental," and that the aforesaid policy exclusions were applicable. He declined to rule on summary judgment that the carrier had been prejudiced by late notice, and he dismissed the bad faith claim because there was no coverage.