Washington Street LLC v. Nationwide Property & Casualty Insurance Co ( 2023 )

NOT PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
_______________
No. 22-3396
_______________
WASHINGTON STREET, LLC,
Appellant
v.
NATIONWIDE PROPERTY & CASUALTY INSURANCE COMPANY
_______________
On Appeal from the United States District Court
For the Eastern District of Pennsylvania
(D.C. No. 2-21-cv-04374)
District Judge: Honorable Joshua D. Wolson
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Submitted Under Third Circuit L.A.R. 34.1(a)
September 11, 2023
Before: JORDAN, BIBAS and PORTER, Circuit Judges
(Filed: September 13, 2023)
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OPINION
_______________
JORDAN, Circuit Judge.
Washington Street, LLC (“Washington Street”) appeals a District Court order
granting summary judgment to Nationwide Property and Casualty Insurance Company

This disposition is not an opinion of the full court and, pursuant to I.O.P. 5.7,
does not constitute binding precedent.
(“Nationwide”), which ended Washington Street’s claims that Nationwide proceeded in
bad faith in delaying claim payments following a fire that damaged Washington Street’s
property. We will affirm.
I. BACKGROUND
In July 2019, a fire caused by a tenant’s negligence destroyed an apartment
building owned by Washington Street. Washington Street promptly submitted a claim
for recovery to its insurer, Nationwide. Some six weeks later, in September 2019,
Nationwide provided an initial claim estimate and payment, after Washington Street’s
attorney complained about the pace of the investigation. That initial payment
($376,342.95) was, as Nationwide acknowledged, incomplete, as it was subject to change
based on additional repairs or damages found. In October 2019, Washington Street
provided estimates for repairs not covered in Nationwide’s initial report. Nationwide
reviewed those estimates and hired a consultant to review the entire project.1 The
consultant completed his assessment in January 2020, estimating the total cost of repairs
to be $635,898.86, after which Nationwide paid an additional $208,555.91, an amount the
parties accepted as bringing the total payments to $584,907.68.2
1
In December 2019, Washington Street realized that, due to its insurance agent’s
error, its policy did not cover lost business income. Washington Street informed
Nationwide of this error and Nationwide took more than eleven months to process the
policy reformation and credit Washington Street the $60,000 it was owed in business
income loss. Washington Street’s agent said, “this entire claim by far is the worst I’ve
ever experienced.” (App. at 1335.)
2
The factual record contains these numbers (see App. at 571 ¶¶ 17-18; 937-40
¶¶ 17-18; 1570) but $376,342.95 (the initial payment) plus $208,555.91 (the
2
Washington Street was dissatisfied with that amount and demanded an impartial
appraisal of the total loss. Nationwide cooperated by hiring an appraiser. Washington
Street also hired an appraiser, and the two appraisers appointed an “umpire” to resolve
any disagreements.3 In November 2020, the umpire entered an award for Washington
Street: $859,670.03 for dwelling loss, $7,720.05 for business personal property,
$35,306.40 for debris removal, and $74,200 for loss of income. The total amount
exceeded Washington Street’s policy limit of $854,700 for dwelling loss, $60,000 for
business income, and $25,000 for debris removal, and Nationwide paid the full policy
amount.
During the appraisal, on June 3, 2020, Nationwide filed a subrogation lawsuit
against the tenant who had negligently caused the fire. The subrogation investigation
began in July 2019, but Nationwide did not inform Washington Street of the lawsuit until
January 14, 2021. Eventually, Nationwide obtained a settlement that resulted in
Washington Street receiving an additional $15,000, an amount Washington Street
described as “fair and acceptable.” (See App. at 892, 1584.)
supplemental payment) equals $584,898.86, not $584,907.68, the small difference being
in Washington Street’s favor.
3
After retaining its appraiser, Nationwide demanded that Washington Street
“provide an itemized list of matters [it] intend[ed] to submit to policy appraisal[,]” and it
threatened to refuse appraisal of unlisted items pursuant to its policy. (App. at 324.)
Such a list was not a stated prerequisite to appraisal. After the joint appraisal began,
Nationwide sent Washington Street’s file to another claims professional, who continued
to demand an itemized list, but the appraisal proceeded anyway, even though Washington
Street’s attorney refused Nationwide’s demand.
3
Washington Street filed a bad faith insurance action under 42 Pa. Cons. Stat.
§ 8371, as well as a claim for common law breach of contract based on bad faith.4 It
alleged that Nationwide repeatedly and purposely delayed its insurance payouts and
policy reformation, misrepresented the policy’s appraisal prerequisites, and illegally
initiated a subrogation action before Washington Street was made whole, all of which
caused Washington Street severe economic harm.
After discovery, Nationwide moved for summary judgment and the District Court
granted it. The Court held that Nationwide’s handling of Washington Street’s claim was
“by no means a model of perfection” but it did not constitute bad faith. (App. at 1568-
69.) Washington Street has timely appealed.
II. DISCUSSION5
Washington Street makes the same arguments here as it did in the District Court.
It claims that Nationwide demonstrated bad faith by delaying six weeks to make its first
partial payout, failing to make further estimates until Washington Street pressed for
4
Washington Street, a Pennsylvania limited liability company, filed its suit in
Pennsylvania state court, and Nationwide, an Ohio corporation, removed the case to the
District Court. (App. at 393-96.)
5
The District Court had jurisdiction under 28 U.S.C. §§ 1332 and 1441. We have
jurisdiction pursuant to 28 U.S.C. § 1291. “To warrant summary judgment, the movant
must show that, viewing the evidence in the light most favorable to the nonmoving party,
‘there is no genuine issue as to any material fact and the movant is entitled to judgment as
a matter of law.’” Daniels v. Sch. Dist. of Phila., 776 F.3d 181, 192 (3d Cir. 2015)
(quoting Fed. R. Civ. P. 56(a)).
4
progress, hiring a building consultant for the alleged purpose of further delaying the
process, making a still-deficient payment six months after the fire, knowingly
misrepresenting its appraisal policy, delaying its policy reformation request, and filing its
subrogation action prematurely. In light of the record, none of those allegations has
enough support, in isolation or in the aggregate, to demonstrate bad faith, and the District
Court did not err in so holding.
Pennsylvania provides a statutory remedy if an “insurer [acts] in bad faith toward
the insured.” 42 Pa. Cons. Stat. § 8371. To prevail on a bad faith claim, a plaintiff must
demonstrate “by clear and convincing evidence, (1) that the insurer did not have a
reasonable basis for denying benefits under the policy and (2) that the insurer knew or
recklessly disregarded its lack of a reasonable basis in denying the claim.” Rancosky v.
Wash. Nat’l Ins. Co., 170 A.3d 364, 377 (Pa. 2017). That “requires evidence so clear,
direct, weighty and convincing as to enable a clear conviction, without hesitation, about
whether or not the defendants acted in bad faith.” Post v. St. Paul Travelers Ins. Co., 691
F.3d 500, 523 (3d Cir. 2012) (internal quotation marks omitted). “At the summary
judgment stage, the insured’s burden in opposing a summary judgment motion brought
by the insurer is commensurately high because the court must view the evidence
presented in light of the substantive evidentiary burden at trial.” Nw. Mut. Life Ins. Co. v.
Babayan, 430 F.3d 121, 137 (3d Cir. 2005) (internal quotation marks omitted).
Consequently, to overcome a bad faith insurance claim, all an insurer defendant must do
is present “evidence of a reasonable basis for [its] actions or inaction.” Gibson v. State
5
Farm Mut. Auto. Ins. Co., 994 F.3d 182, 191 (3d Cir. 2021). Delay is relevant in
determining whether an insurer acted in bad faith, but “a long period of delay between
demand and settlement does not, on its own, necessarily constitute bad faith.” Seto v.
State Farm Ins. Co., 855 F. Supp. 2d 424, 430 (W.D. Pa. 2012) (internal quotation marks
omitted).
Washington Street claims that “[f]rom July 14, 2019[, the date of the fire,] through
August 13, 2019,” Nationwide did not contact Washington Street. (Opening Br. at 22.)
But that assertion does not consider that less than a month passed between those dates,
and, as Washington Street admits, that the fire chief did not release the building for
inspection for two to three weeks after the fire. Washington Street’s complaints of an
initial delay also ignore its own concession that Ruth Jones, its sole member, “spoke with
[a Nationwide claims specialist] several times … in the days following the fire.” (App. at
1424.) Nationwide promptly investigated Washington Street’s claim, and its claims
specialist visited the burned building soon after the site was deemed safe.
So too, Nationwide’s delay of six weeks in providing the first payment appears
reasonable. On August 26, 2019, the claims specialist wrote, “The fact is it is a large
building and although I have spent days estimating, it has been a slow process.” (App. at
76.) Nationwide’s first payment included a detailed estimate of property damage that
was admittedly underinclusive and left the door open for Washington Street to submit
further estimates once repairs got underway. (See App. at 1082.) Washington Street did
not initiate any repairs, however.
6
Next, Washington Street claims that “Nationwide, despite knowing that its initial
estimate and payment was incomplete, failed to take any further action to attempt to
complete its investigation and estimate.” (Opening Br. at 26.) On the facts, however,
that too does not appear unreasonable. The claims specialist believed that his estimate
covered all apparent damage and that only demolition would reveal damage to hidden
components like the HVAC system. (App. at 773-74.) That may have been incorrect,6
but “bad judgment is not bad faith.” Northwestern, 430 F.3d at 137 (internal quotation
marks omitted). Once Washington Street’s attorney sent the supplemental damage
estimates, Nationwide’s claims specialist attempted to synthesize them with his own, but,
“[g]iven the nature of the quotes and the lack of progress,” he determined that another
building consultant was required. (App. at 1056.) Again, while that may have resulted in
some inefficiency, the decision does not appear to be unreasonable.7 The policy
reformation delay came after Nationwide had already paid Washington Street
$584,907.68, and it eventually agreed to reform the policy and paid Washington Street
the full policy amount. As the District Court noted, “Nationwide probably could have
been more diligent,” but that doesn’t mean that Nationwide’s pace of review was
6
Nationwide’s building consultant did provide estimates for items missing from
the claims specialist’s report (e.g., HVAC system) to arrive at his $635,898.86 number.
(See App. at 1246, 1327; 571 ¶ 19; 940 ¶ 19.)
7
There is no basis on the record to show that the decision to hire the consultant
was made in bad faith. The assertion that it was done for delay is conclusory.
7
unreasonable, much less that it showed disregard for Washington Street’s contractual
rights. (App. at 1577.)
Washington Street contends that Nationwide misrepresented its appraisal
prerequisites by requiring “an itemized list” and warning that it would not appraise
otherwise. (App. at 324.) But Washington Street concedes that the appraisal still took
place and that Nationwide abided by the umpire’s award, which ignored the itemized-list
“requirement.” As the District Court noted, “the maximum delay that Nationwide’s
request caused was six weeks from the appraisers’ site visit to the day Washington Street
refused to provide an itemized list.” (App. at 1579.)
Finally, while Nationwide may have violated the made-whole doctrine, which
requires that “an insured recover the full amount of its losses before an insurer may
pursue recovery under its subrogation rights,” Pro. Flooring Co., Inc. v. Bushar Corp.,
Inc., 152 A.3d 292, 302 (Pa. Super. Ct. 2016), that in itself does not establish bad faith
here. In fact, Washington Street does not show that the subrogation action prejudiced it
or delayed the policy payouts; instead, Washington Street described the subrogation
claim settlement as “fair and acceptable.” (See App. at 1582, 1584.)
In sum, Washington Street has not shown by clear and convincing evidence – the
applicable standard of proof – that Nationwide acted in bad faith in processing
Washington Street’s insurance claim.8
8
For the same reasons, Washington Street’s common law breach of contract
claims fail. “Pennsylvania law recognizes a claim in contract for an insurer’s breach of
its fiduciary obligations to its insured, and an insured’s right to recover compensatory
8
III. CONCLUSION
Based on the foregoing, we will affirm the District Court’s grant of summary
judgment.
damages under that claim for injuries sustained as a result of that breach.” Wolfe v.
Allstate Prop. & Cas. Ins. Co., 790 F.3d 487, 497 (3d Cir. 2015). As with statutory bad
faith, however, “[e]vidence showing only ‘bad judgment’ is insufficient for liability” for
common law breach of fiduciary obligations. Id. (citation omitted) Moreover, the
District Court concluded that the record does not support Washington Street’s claim of
financial loss flowing from Nationwide’s conduct. (App. at 1583-85.)
9