In a recent slip opinion in Cutting Edge Tree Professionals, LLC v. State Farm Fire Claims Company, et al., No. 23-cv-3197 2024 WL 53011 (E.D. Pa. Jan 4, 2024) the United States Eastern District of Pennsylvania considered an insurer’s Motion to Dismiss the Complaint. The Court granted the Motion in part and denied the motion in part. The insurer filed a Motion to Dismiss the Complaint alleging (1) the breach of contract claim was time-barred and (2) the plaintiff lacked standing to asset a bad faith claim.

This case involved a homeowner’s claim wherein the insureds had a large tree fall on their property. The insureds contracted with a tree cutting company to perform an emergency tree removal. The contract entered into contained an assignment of benefits clause. The insurer subsequently issued payment to the tree cutting company but for an amount substantially less than the invoice from the company. Subsequently, the tree cutting company filed suit against the insurer alleging breach of contract and statutory bad faith. The insurer filed the subject Motion to Dismiss.

The Court agreed that the breach of contract claim was time barred based on the one year statute of limitations under the policy. Thus, that claim was dismissed, with prejudice. However, the Court determined that the tree cutting company plaintiff did in fact have standing to assert a bad faith claim. It is well-established that the Pennsylvania Bad Faith Statute, 42 Pa. C.S. § 8371, allows bad faith claims to be brought by an insured against an insurer. Further, the Pennsylvania Supreme Court held that “the entitlement to assert damages under § 8371 may be assigned by an insured ot an injured plaintiff and a judgment creditor.” See Allstate Prop. & Cas. Ins. Co. v. Wolfe, 105 A.3d 1181, 1188 (Pa. 2014). The insurer argued that the plaintiff tree cutting company should be precluded from asserting a bad faith claim in this case since they are neither an injured plaintiff nor a judgment creditor.

The Court disagreed and found the facts of this case nearly identical to Royal Water Damage Restoration, Inc. v. Allstate Vehicle and Prop. Ins. Co., no. 21-52551 2022 WL 2985637 (E.D. Pa. July 28, 2022). In that case, the insureds assigned their benefits to a water mitigation company which filed suit against the insurer and included a bad faith claim. In Royal Water the court actually held that the mitigation company could be considered both an injured plaintiff and a judgment creditor. The mitigation company was attempting to recover expenses incurred due to a loss at an insured’s property thus making them an injured plaintiff. Further, due to the assignment of benefits the mitigation company was considered a judgment creditor after the invoices were forwarded to the insurer for payment. A similar result was also reached in a nearly identical case Royal Water Damage Restoration v. State Farm Fire & Cas. Co., No. 22-201 2022 Wl 2345740 (E.D. Pa. June 29, 2022).

Thus, in the instant case, the Court also determined that the plaintiff tree cutting company could be considered both an injured plaintiff and a judgment creditor. Accordingly, the company has standing to pursue a bad faith claim against the insurer.  

Assignment of benefits disputes are a rapidly progressing topic in Pennsylvania first-party property cases. Our attorneys will continue to monitor these issues and disputes as they continue to evolve.

For additional questions, please contact Scott J. Tredwell, Esq., Robert J. Cahall, Esq. and/or Nicole Dovishaw, Esq.

This article was prepared by McCormick & Priore, P.C. to provide information on recent legal developments of interest to our readers.  This publication is in no way intended to provide legal advice or to create an attorney-client relationship.  All Rights Reserved.  This article may not be reprinted without the express written permission of McCormick & Priore, P.C.