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Werlinger v. Clarendon National Insurance Co.8/22/2005
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II.
We review an order on a motion for summary judgment de novo. 'To succeed on a bad faith claim, the policyholder must show the insurer's breach of the insurance contract was 'unreasonable, frivolous or unfounded.'' The insured may not base a bad faith or CPA claim on an insurer's good faith mistake, which occurs when the insurer acts honestly, bases its decision on adequate information, and does not overemphasize its own interest. Just as any other tort, the insured must prove duty, breach of duty, and damages proximately caused by any breach of duty. Harm to the insured is an essential element of every bad faith or CPA claim.
Whether the insurer acted in bad faith is a question of fact. An insurer is therefore entitled to a dismissal on summary judgment if, after viewing the facts in the insured's favor, a reasonable person could only conclude that its actions were reasonable. Alternatively, because harm is an essential element, summary judgment in favor of the insured is appropriate if a reasonable person could only conclude that the insured suffered no harm.
The trial court based its order granting Clarendon summary judgment on the issue of harm. It explained that the question before it concerned whether there was evidence of injury to Mike Warner and his marital property from any alleged act of bad faith by Clarendon. The court concluded that, due to Warner's bankruptcy status, at no time was he subjected to greater liability because of Clarendon's alleged delay in resolving the issue of coverage. It also noted that the Werlingers presented no competent evidence of other injury.
We agree. The Warners suffered no harm as a result of Clarendon's actions. They were shielded from personal liability by their Chapter 7 bankruptcy status. The Werlingers argue, however, that the Warners were harmed by Clarendon's bad faith because they dismissed their Chapter 13 bankruptcy and filed Chapter 7 as a direct result of a letter Warner received from Clarendon, which indicated that his insurance policy may not afford coverage. But the evidence does not show that the Warners' decision to file Chapter 7 was in response to Clarendon's letter. Rather, the Warners' depositions indicate that they filed Chapter 7 because of the accident, the loss of the car, and to pay off all of their other bills.
The Werlingers maintain that the Warners suffered emotional distress as a result of Clarendon's bad faith. Because bad faith is a tort, a plaintiff may seek emotional damages. But there is no competent evidence that the Warners suffered emotional distress as a result of Clarendon's actions. The Werlingers point to evidence that the Warners were emotionally distressed by the accident, but Clarendon did not cause the accident.
The Werlingers argue that there is a presumption of harm once an insured establishes that the insurer acted in bad faith. Although this is true, the presumption of harm is rebuttable. Clarendon established that there was no harm.
It is not necessary for us to decide whether Clarendon acted in bad faith. But we note that it was reasonable for Clarendon to dispute coverage based on the policy definitions and exclusions, Clarendon fulfilled its duty to defend Warner under a reservation of rights, and it sought a timely coverage resolution. Thus, no presumption of harm arose.
Because harm is an essential element of both a bad faith and CPA claim, and there is no evidence that the Warners suffered harm, the Werlingers cannot prevail as a matter of law.
AFFIRMED.
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