Filed Under:Claims, Litigation

Making additional repairs without insurer's OK may not be covered

Pennsylvania court rejects bad faith claim filed by one couple after their home was flooded. Here's why.

Although an insurer may authorize repairs, when a property owner decides to do more extensive restoration, the carrier may refuse coverage. (Photo: Shutterstock)
Although an insurer may authorize repairs, when a property owner decides to do more extensive restoration, the carrier may refuse coverage. (Photo: Shutterstock)

The home owned by Steven Barnwell and Bambi Stetler flooded while it was being renovated. The next day, they reported the flood to Liberty Mutual Insurance Company, their homeowner's insurer.

Liberty hired a restoration company to prepare an estimate of the damage. That company noticed that one marble tile was loose in the kitchen but concluded that the remaining tiles and subfloor were secure, so it provided an estimated amount to repair the loose tile.

Related: How to accurately calculate repair, replacement costs

Liberty paid Barnwell and Stetler based on that estimate and sent them a settlement letter that required them to contact Liberty before beginning any work should their contractor's estimate of the work exceed Liberty's estimate.

Barnwell and Stetler didn't contact Liberty regarding any additional costs for the tile work. Rather, they replaced the entire marble kitchen floor and then asked Liberty to pay for it.

Liberty declined, and Barnwell and Stetler sued, alleging breach of contract and bad faith. The bad faith claim was based on Liberty's refusal (1) to pay to replace the entire marble kitchen floor, (2) to pay for a two-bedroom suite while repairs were being made, (3) to pay for additional costs for food while they stayed in a hotel, and, (4) to pay for depreciation.

Liberty moved for partial summary judgment on the bad faith claim.

Related: Keys to successful property insurance recoveries following natural disasters

The district court's decision

The district court granted Liberty's motion. First, the court found no evidence subverting the restoration company's determination that only one marble tile had to be reinstalled. In fact, the district court noted that Barnwell had testified that only four to six of the tiles were ruined.

Moreover, the district court pointed out, neither Barnwell nor Stetler had contacted Liberty to tell it that there was more damage to the floor tiles than the restoration company had identified and that the cost of repair would, accordingly, be higher. Instead, the district court said, they replaced the entire floor and asked Liberty to pay for it. Under the circumstances, the district court held, “it was not unreasonable for Liberty to deny benefits under the policy.”

Related: The trouble with estimating additional living expenses (ALE)

No coverage for upgraded hotel

The district court also rejected the lodging-based claim made by Barnwell and Stetler seeking to have Liberty pay the difference between what it paid for the two-bedroom suite it originally found for them and the cost at the hotel to which they ultimately moved.

The district court explained that, as Liberty investigated the damage and repairs were made, Barnwell, and Stetler and their two children stayed in a hotel. Initially, Liberty housed the family in a two-bedroom suite, but they requested a transfer to a better location. The district court said that because no two-bedroom suites were available in that location, the family moved into a one-bedroom suite at Home2 Suites, saying that it was closer to the children's school.

The district court found no provision in the insurance policy obligating Liberty to pay the difference between what it had paid and the hotel room to which the family had ultimately moved.

Related: Covering additional living expenses: luxury or necessity?

Next, the district court rejected the claim by Barnwell and Stetler that Liberty pay them money for food because there was no full kitchen in new suite and they could not cook. The district court noted that a vendor retained by Liberty had reported that the suite did contain a full kitchen.

The district court was not persuaded by an “out-of-context” and “unexplained photo of a hot plate” offered by Barnwell and Stetler without any evidence suggesting that Liberty had this photo, that its vendor had this photo, or even that this photo was from the Home2 Suite in which they stayed.

The evidence, the district court ruled, did “not support an inference that Liberty did not have a reasonable basis for refusing to pay” for Barnwell and Stetler's food.

Finally, the district court also rejected the depreciation-based claim asserted by the homeowners.

Related: RCV vs. ACV: Know these loss claim settlement caveats

The district court pointed out that Liberty had made several payments to Barnwell and Stetler over the course of its investigation, each of which included deductions for depreciation. In particular, Liberty deducted $1,867.54 in depreciation from its property damage payment as well as $2,346.45 and $1,358.33 from its payments covering personal property damage and appliances, respectively.

The district court found “no evidence” suggesting that Liberty's continued withholding of depreciation lacked a reasonable basis. The district court observed that, by the terms of the policy, Liberty was not obligated to pay depreciation until repair or replacement was completed — and the homeowners had not pointed to evidence that the repairs had been completed or that they had notified Liberty that the repairs had been completed. Absent such evidence, it was not unreasonable for Liberty to withhold payment for any deductions for depreciation, the district court concluded.

Accordingly, the district court rejected the bad faith claim asserted against Liberty.

The case is Barnwell v. Liberty Mutual Ins. Co.

Related: Time is of the essence: Repairing, replacing damaged property

Steven A. Meyerowitz, Esq., is the director of FC&S Legal, the editor-in-chief of the Insurance Coverage Law Report, and the founder and president of Meyerowitz Communications Inc. Email him at


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