Improper Policy Cancellation Does not Support A Statutory Bad Faith Claim

The U.S. District Court for the Western District of Pennsylvania in Devein Dalessio Trucking, LLC v. Progressive Corp. recently held that Plaintiff’s statutory bad faith claim cannot be exclusively based on an allegedly improper cancellation of a policy and granted the carrier’s motion to dismiss. Pennsylvania’s bad faith statute is limited to causes of action arising out of the bad faith handling of claims and does not apply to conduct unrelated to the denial of a claim, such as underwriting or policy cancellation.

In Devein, plaintiff’s insurance policy was cancelled for the following reason: “customer does not meet our acceptable criteria. Customer is unaccountable because of the increase in hazard within the control of the insured. Excessive growth of the numbers of power units.” The plaintiff offered to reduce the number of insured vehicle, but his request was denied and his policy was cancelled. He was unable to obtain other insurance coverage and was forced to stop all business operations. Because Plaintiff’s breach of contract claim was principally grounded on the cancellation of the policy, the Court held plaintiff cannot properly allege a bad faith claim granted the carrier’s motion to dismiss.