Slowinski Atkins, LLP defeats bad faith claim against insurer arising out of denial of coverage for cleanup costs

Slowinski Atkins, LLP obtained dismissal of a bad faith claim asserted against a New Jersey insurer related to a denial of coverage for cleanup costs for contamination from a leaking aboveground storage tank displaced from a neighboring property during Hurricane Sandy. The AST caused contamination to the policyholder’s property, landscaping and the interior of the home. The plaintiff contended that the insurer acted in bad faith in starting the remediation but then denying coverage and failing to complete the job and leaving the property in disarray, failing to replace landscaping and paver stones or cleaning oil from the interior of the home. However, because the court ultimately ruled in favor of the insurer that there was no coverage under the policy there could be no bad faith claim. In order to establish a bad faith claim a plaintiff must show the absence of a reasonable basis for denying coverage and also that the insurer had knowledge or exhibited a reckless disregard for the lack of a reasonable basis when it denied the claim. Thus, a bad faith claim will fail whenever it is “fairly debatable” even if a claim is denied and it is later found that coverage exists. Slowinski Atkins, LLP successfully argued that coverage was properly denied and thus the bad faith claim was dismissed.